Tariffs Are Painful, Reshoring Slow, Ingenuity Ascendant

Running a small manufacturing company is a challenge on any given day, but in 2025 Jim Sorge has been firing on all cylinders and then some. Sorge is president of Glenro, a family-owned manufacturing company in Maysville, Kentucky, that makes heat-processing equipment.

Every current business condition appears stacked against Glenro. Raw materials face tariffs, critical resources come from China and exports to Europe face new trade barriers. But in 2025, the company is more than holding its own, with international sales up 30% in this anti-global-trade environment. The keys are flexibility and creativity.

“Frankly, this compared to COVID is nothing,” says Sorge, whose raw material costs soared up to 300% during the pandemic.

According to a 2025 benchmarking survey by advisory firm Wipfli, small-to-medium-sized manufacturers are reporting “largely negative” effects of tariff and trade policy on their business, with revenue down between 10% and 40%. The survey’s respondents are plastics processors, metal formers, die casters, tool builders and contract machinists. They say their biggest concern is raw material tariffs, followed by inflation, recession risk and rising costs.

The world expected tariffs when President Donald Trump was elected for the second time, but few predicted what ensued: individual tariffs on every country, deals by country that have been slow to materialize and surprise announcements of tariff increases and rollbacks.

“You’re planning against Jell-O,” says Eric Lussier, an operations veteran of several large manufacturers who now runs lean consulting firm Next Level Partners. “It’s kind of amorphous because there’s not good fiscal discipline in policy right now that seems to be changing regularly.”

As “Liberation Day” hits the six-month mark, reshoring announcements have been plentiful, while reshoring itself has been nonexistent to negative and U.S. manufacturers are in general hurting. But lest we forget—business ingenuity is alive and well.

Reshoring Isn’t Happening

If reshoring had a report card, a tough teacher would give it a big, fat “F” for the semester. From May to August of 2025, manufacturing dropped 47,000 jobs. Imports to the U.S. were up 5.9% in July 2025 compared to July 2024, with exports from the U.S. rising only 0.3%, according to the most recent available U.S. International Trade Data. Year-to-date, the U.S. trade deficit increased $154.3 billion, or 30.9% from the same period in 2024.

Harry Moser, president of the Reshoring Initiative, sees the performance as more of the “needs improvement” variety, however.

“It’s a gradual shift,” Moser says. As of late September, according to Reshoring Initiative tracking, 34 large manufacturers, from Pfizer to Apple, announced projects to bring new manufacturing facilities to the United States.

But Moser doesn’t expect real movement on those projects or any new announcements until tariffs show stability and are “at a reasonable level”—which he considers 10% to 15% for developed countries and 25% to 50% for China, roughly corresponding with how much cheaper it is to manufacture in those countries vs. the U.S.

“Companies that would be starting to dig and build, they’re holding off,” Moser says. “And I’d say largely not so much because of tariffs but because of the chaotic or uncertain way in which Trump did the tariffs with his Liberation Day and his 30-40-50%—different numbers on every country.”

If all 34 projects happen, Moser sees about 200,000 manufacturing jobs being created. But at the same time, other manufacturing jobs are being offshored.

“200,000 [reshored jobs] is probably consistent with total manufacturing employment staying about the same,” says Moser. “To make reshoring happen, you have to get that number up to 300,000 or 400,000.”

A KPMG October 2025 tariff survey of 300 leaders of large U.S. companies found that while 63% of leaders are considering reshoring, only 10% have acted. The top two reasons cited: higher labor and operating expenses in the U.S. and the Catch-22 conundrum that the hit from tariffs is causing businesses to postpone major investments.

“It’s clear that if tariffs are high enough, eventually companies will reshore because it’s cheaper to make it here,” says Moser. “But the problem is the pain you have to go through to get there. And [Trump] has increased the pain by making the whole process very unpredictable and chaotic and therefore uncertain.”

The new tariffs can’t take all the blame, though. Reshoring slowed to around 1% in 2024, after an approximately 30% increase between 2020 and 2022, according to the 2025 Reshoring Index. Shay Luo, a partner at Kearney advisory firm, says that companies that received funding from the CHIPS Act during Biden’s presidency  “took much, much longer to pay for the plant and get the license, hire the right labor and make the production work.” Slowing customer demand killed the incentive to make good on projects and uncertainty around the presidential election—and now uncertainty around tariffs—slowed the timeline.

Still Waiting, Still Not Seeing

U.S. imports across the board experienced an average 18% tariff as of Oct. 18, 2025, the highest rate since 1934 and up from 2.4% in early January, according to the Budget Lab at Yale University. But that percentage will inevitably fluctuate as it has all year. Various tariffs on imported wood products and lumber went into effect on Oct. 14, and tariffs on heavy trucks/components (25%) and buses (10%) are scheduled to go into effect Nov. 1.

The uncertainty makes 2025 a “wait-and-see year,” says Wipfli’s Laurie Harbour. But the problem, she says, is that 2022, 2023 (supply-chain challenges) and 2024 (awaiting the results of the presidential election) were also wait-and-see years.

Harbour’s clients in the automotive components space are feeling the pain, with capacity utilization at 53% in the Wipfli benchmarking survey—10% lower than forecasted and 15% down from last year. A higher percentage of manufacturers in the survey—one third—qualified as “questionably bankable” compared to 2024.

“They’ve had poor profits, and they’ve struggled. And more than anybody, they have to keep their labor because of how skilled [their workers] are,” says Harbour. “It’s going to squeeze profits. And I suspect that when we get through 2025, you’re going to see a lot of companies with less profit than they had before because these values are down: We’re keeping people and costs are increasing.”

For toolmakers, compounding the capacity problem is the fact that automakers are slowing down their product launches with the Trump administration’s shift away from EVs.

“Between 2015 and 2020, we turned our focus to product development on all these electric vehicles,” says Harbour. “Right now, [automakers] have taken a pause maybe to re-engineer these vehicles as a hybrid or delay to change some of the content or engineering. And so that has made toolmakers not have as much option for work because there’s just not as many programs. And in this calendar year, General Motors and Ford in North America are launching like one product apiece.”

Smaller shops are also having to divert one or two people to deal with what Harbour calls the “transactional waste” from policy change—“the paperwork and making sure it’s done right.

“Knowing where your steel is melted and poured, knowing where it came from, knowing what the weight of that is, so you can put the correct amount in the customs paperwork—it’s a lot of double- and triple-checking, and that’s been wasteful for these companies,” she says. “The government is absolutely looking for tariff fraud, and so [manufacturers] have been told to make sure they’re not doing anything inappropriate on their customs.”

Manufacturer Strategies: Labor. Lean.

Sorge and his leadership team have been reading “Anti-Fragile: Things That Gain from Disorder” by Nassim Taleb. “The premise of that book is that a fragile system will break under stress—if it’s COVID, war in Ukraine, tariffs, whatever it is—the stress will break the system,” says Sorge. “An anti-fragile system is one that learns from stress, and at the end of it, gains from that volatility.”

They’ve been applying that principle to their business. “For us, our inventory systems weren’t as good as they could be,” says Sorge. “What should we be doing here to make the system strong?”

One of Sorge’s first preemptive moves, in December 2025, was to stock up on quartz, a material essential to Glenro’s manufacturing that is mined in China. That turned out to be a smart move as quartz tariffs rose from 25% to 55% this year. His metals costs have risen 9%. Some materials are seeing lagging impact as U.S.-based backstock is still available. Glenro is also seeing cost increases in imported subsystems and delays for specialty controls, sensors and components.

Anticipating delayed customer orders, Glenro launched a la carte engineering services for customers not ready to pull the trigger on machine purchases.

Sorge has also been tapping into Kentucky’s STEP grants for manufacturers to attend foreign trade shows in Europe and Mexico, lining up site visits during his and an engineer’s stay to talk about the business environment with vendors and tackle customers’ problems. For instance, Glenro’s machines have specialty components that come from a European supplier. These are typically modified for the customer at the Kentucky plant, then shipped back to Europe. Now they’ve pivoted to modifying the component at the customer’s site to save on tariffs and shipping, as everything stays in the Eurozone.

For their Canadian customers, Glenro began offering on-site processing of U.S.-sourced materials in Kentucky to avoid shipment back to Canada for processing and then back to the U.S. to customers. “Bring it into our plant. We’ll convert it for you,” says Sorge of his strategy. “We have the same equipment. You know us. For this particular run, you know it’s going to ship in the U.S. Maybe we can figure out something to make it more economically viable.”

He and his team also cleared out unused stock, improved labeling of each warehouse area and bin location, gave control of stock organizing and bin minimum/maximum levels to the floor workers and are currently in the process of changing their ERP.

Lussier of Next Level Partners says he’s been focusing with clients on the longer-term strategic piece around tariff policy that focuses on the resilience of the organization and being adaptable. “I can’t really control what the weather’s going to be like, but I can work on designing my ship to become more agile and resilient through design.”

Lean is a big part of that strategy. “Everything we’re doing is working on reducing turnaround time, and the lean focus reduces the waste, helps you build flexibility. It really gets down to problem-solving,” he says.

The things you can control: your internal processes and procedures, your strategies and tactics tied into lean thinking. “So you’re trying to navigate the uncertainty but not be consumed by it,” he says. Lean principles still apply: “the idea of creating flow, serving your customers well, reducing waste, working on building resiliency and focusing on problem-solving.”

He recommends clients “map your process, map the supply chain, look at where the risk is, look at the cost, look at the benefits, look at the total landed cost. And then once you can get everybody agreeing, then you build the strategies and tactics around it.”

Staying Focused

On site visits, Harbour is seeing her clients letting their operational efficiency slack as their orders decline. That’s a big concern.

“We have to stay focused on accountability and discipline, keeping good systems and processes in place,” she says. “On changing tools quickly and driving uptime on machines” even when business is slow. “And then, of course, you’ve got to continue to sell. You’ve got to fill the top of the funnel and bring in more work to fill in these processes. We just can’t allow waste to creep in because then we lose sight of what we’re good at.”

In some cases, it’s past time to let people go. “We are absolutely advising people to right-size their business where it’s appropriate,” she says. “I’m not asking you to get rid of the skilled trade that you know you’re going to need, but when you look at your direct labor and your indirect labor supporting it, do you have the right amount of people? How do you right-size?”

Keep your A players but take a hard look at your B players, Harbour advises. Who on your team has the potential to become an A player, and “who won’t be able to continue to grow in their career and maybe should go on to another career?”

Use the uncertainty as an opportunity to bring out the best in your people, adds Lussier. “When that external environment just feels so erratic, you’ve got to have a North Star that you’re tying it into, and to me that’s ‘take care of your customers.’

“Have those conversations. Talk about the realities of the business and the uncertainty, but then use process improvement. Engage your people in improving the work, and trust their resiliency to problem-solve, to use their intellect and experience to make things better.”

Now is the time to act. “We have to now stop waiting and seeing and make decisions that we control,” Harbour says. “We control our labor. We control how we run our plant. We control the uptime in our facilities. I don’t control tariff and trade. I need to understand it, but I don’t control it.”