Impact of Trump’s trade policies on manufacturing

The impact of President Trump’s trade policies on manufacturing is shaping up to be a major factor in the industry’s future. Trump has prioritized making U.S. manufacturing more competitive on the global stage, pushing for policies that favor American producers while imposing tariffs on key trading partners. As manufacturers analyze the potential effects, it’s clear that trade policy will continue to play a pivotal role in shaping supply chains, costs and global competitiveness.

Looking at Trump’s first term and his 2024 campaign messaging, manufacturers should prepare for a combination of deregulation and tariff-driven trade strategy. These policies are designed to strengthen domestic industries by reducing regulatory burdens and discouraging reliance on foreign imports.

However, the impact of Trump’s trade policies on manufacturing varies across sectors, as higher tariffs could raise costs for materials, tooling and global supply chains, even while benefiting domestic competitors.

For U.S.-based manufacturers, the impact of Trump’s trade policies on manufacturing means both opportunities and challenges. Companies directly competing with foreign manufacturers, such as tool shops, may see a boost from protectionist policies.

On the other hand, industries that rely on imported materials or global suppliers must prepare for potential price increases and supply chain disruptions. As these trade shifts unfold, manufacturers should assess their sourcing strategies, pricing structures and overall market positioning.

Here’s what U.S.-based manufacturers should keep in mind.

Tax regulations

Trump and members of Congress have already begun negotiations to extend many of the tax-lowering provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which will expire at the end of 2025 without further legislative action.

The manufacturing community is expected to benefit from the extension of those provisions, which include lower tax rates, immediate R&D expenditures expensing and reinstatement of 100% bonus depreciation.

Trade and tariffs

Throughout the presidential campaign, Trump touted the use of tariffs to accomplish trade policy goals and compel other nations to assist the U.S. with the enforcement of immigration policies and border security.

Many tariffs from the first Trump administration remain in effect, including tariffs on Chinese goods and on steel and aluminum imported from most countries. We can expect more changes coming from the office of the United States Trade Representative (USTR) under Trump’s leadership.

The threat of tariffs is not limited to China and other South-Pacific nations.

New tariffs have been suggested for some of our closest trading partners, including Canada, Mexico and Europe. To complicate the issue, the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA, is set to be renegotiated in 2025, with the first revision to be presented in 2026. Tariff discussions among North American members are sure to impact those negotiations.

Manufacturers should also anticipate potential retaliatory tariffs from impacted trading partners. When American-issued and retaliatory tariffs are considered in the context of market geographies and state-level regulations, the overall impact on individual companies could be positive, negative or mixed. The impacts may be especially complicated for companies doing business in U.S. states along America’s northern and southern borders.

New cybersecurity protocols for defense contractors

In October 2024, the Department of Defense (DoD) issued final regulations around the Cybersecurity Maturity Model Certification (CMMC), a process that began during Trump’s first administration. The CMMC rules require private-sector companies doing contracted work for the DoD to implement cybersecurity standards at progressively advanced levels, depending on the type and sensitivity of unclassified DoD information in the company’s possession.

There are three levels of required compliance, with Level 1 calling for 15 different security controls, Level 2 requiring an additional 110 safeguards and the third level (“Expert”) requiring an additional 24 security controls.

Manufacturers working directly with the DOD and/or their suppliers will need to determine whether their information security protocols and protections are sufficient and remedy any deficiencies to continue to work on government contracts or bid on new work. The regulations took effect on December 16, 2024, and CMMC requirements are expected to be included in new DOD contracts starting in mid-2025.

New R&D tax credit form

Beginning in tax year 2024, manufacturers will see changes to Form 6765, the tax form used to claim the federal R&D tax credit. Those immediate changes include new line items for officer wages and more detailed reporting requirements for research activities. However, the 2025 requirement for project-based accounting is a more significant shift, requiring manufacturers to track R&D activities at a more granular level.

While the R&D tax credit provides for additional tax savings and opportunities to improve cash flow, they also increase the complexity of tax filing for businesses. In hopes of simplifying the process, the Treasury Department requested feedback on the form.

End of Chevron deference means more regulatory uncertainty

As new leaders take the helm at various federal agencies, 2025 may provide the first practical test of a Supreme Court ruling issued in June 2024 (Loper Bright Enterprises v. Raimondo), which reversed a 1984 decision commonly referred to as “Chevron deference.”

In its 2024 decision, the court revoked the latitude previously given to government agencies to interpret and implement laws, seeking to curb possible overextension of government authority. In this new and uncertain environment, regulations are likely to be applied much more narrowly, and it may also be easier to challenge agency regulations in court.

OMB’s temporary pause on federal financial assistance programs

The Office of Management and Budget (OMB) issued a significant memorandum on January 27, 2025, directing federal agencies to temporarily pause activities related to federal financial assistance programs.

This directive affects a broad spectrum of federal funding mechanisms, including grants, loans and other forms of financial assistance that collectively represent more than $3 trillion in federal spending.

Manufacturing and distribution businesses may face delays in federal programs supporting advanced manufacturing, workforce development and export assistance.

What’s next?

The convergence of these policy changes creates opportunities and challenges for U.S. manufacturers. On the tax front, the potential extension of TCJA provisions could provide benefits, particularly through bonus depreciation and R&D incentives. However, manufacturers need to prepare for more complex documentation requirements, especially regarding R&D tax credits.

When it comes to trade policy, tariffs may protect certain domestic industries, but they also affect global supply chains and input costs. Manufacturers should consider:

• Diversifying supplier networks to reduce dependency on single countries or regions.
• Evaluating the impact of potential retaliatory tariffs on export markets.
• Assessing opportunities to reshore or nearshore certain operations.
• Preparing for USMCA renegotiations and potential changes to North American trade relationships.

The cybersecurity requirements for defense contractors signal a broader trend toward increased focus on digital security. Even manufacturers not directly involved in defense contracts should consider these standards as potential benchmarks for future industrywide requirements.

Looking ahead, manufacturers should focus on:

• Reviewing tax strategies in light of pending TCJA changes.
• Strengthening documentation processes for R&D activities.
• Evaluating supply chain resilience against potential trade disruptions.
• Assessing cybersecurity protocols against evolving standards.
• Building relationships with legal experts to navigate the post-Chevron regulatory landscape.

How Wipfli can help

Our manufacturing industry experience and solutions help companies optimize their operations today while preparing for tomorrow. From tax planning to cybersecurity compliance, we focus on practical solutions that position manufacturers for the coming renaissance. Learn more about our manufacturing services. Visit our 2025 regulatory, policy and tax changes for the latest updates to administration policies impacting your industry.