From disruption to resilience: Industrial manufacturing’s tariff response
Industrial manufacturing executives respond to evolving US tariff pressures with strategic adaptation and risk management
In September 2025, KPMG LLP surveyed industrial manufacturing executives to assess the evolving impact of US tariffs and the sector’s response.1 The findings reveal continued disruption across supply chains, investments, and workforce planning, and also highlight the sector’s growing sophistication in mitigation strategies.
Tariff impact
Among respondents, the top three import sources remained Mexico (average imports of 20 percent), China (20 percent), and Europe (15 percent). Most executives reported a 6 percent to 15 percent cost increase in imports from Mexico and a 6 percent to 25 percent increase from Europe, while costs from China rose by 16 percent to 40 percent (compared to 16 percent to 25 percent in our May survey, indicating intensifying pressure on sourcing).
Exports were most concentrated in Europe (20 percent), Canada (14 percent), and Mexico (11 percent). Sales to Europe and Canada remained relatively unchanged for 43 percent and 72 percent of respondents, respectively, but 41 percent of those exporting to Mexico saw a decrease in sales of up to 5 percent.
Tariffs have weakened the competitive position of 42 percent of respondents, and 40 percent noted mixed effects across different markets. Nearly half (47 percent) reported that tariffs had impacted 11 percent to 25 percent of their product portfolio. Raw materials (27 percent), equipment and machinery (17 percent), and intermediate goods (17 percent) were the most affected foreign operations.
Gross margins decreased for 42 percent of respondents, while 40 percent saw little change. However, 50 percent anticipate a further drop in gross margins over the next 12 months. Investment strategies are shifting: close to 40 percent of respondents are increasing investment in domestic markets, while 38 percent are proceeding with caution and 30 percent are scaling back plans. Close to half (47 percent) postponed major capital investments for up to 12 months, though 43 percent made no changes.
Workforce impacts include no change in hiring for 32 percent, but nearly half of executives surveyed saw reductions of up to 10 percent. Automation investments resulted in few or no job increases for 43 percent, and 32 percent paused hiring due to economic uncertainty. High labor costs and uncertainty around long-term tariff policy remain primary challenges for reshoring operations.
Mitigation strategies
Industrial manufacturing executives are responding with a blend of short-term and long-term strategies. Among respondents, 55 percent reported some preparedness to respond to new tariffs. Scenario planning, stress testing, and risk modeling (68 percent), along with pricing and cost structure adjustments (58 percent), are key actions.
Pricing adjustments (42 percent) and supply chain reconfiguration (42 percent) are the most common mitigation levers. Of the executives surveyed, 68 percent changed sourcing strategies to reduce tariff exposure. Nearly half (48 percent) reported a balanced approach—combining immediate responses with long-term planning.
Industrial manufacturers are shifting from reacting to challenges to building resilience—making pricing, sourcing, and investment decisions with greater foresight. The advantage now is supply optionality and cost visibility, so the P&L can withstand whatever the tariff regime does next.
Joe Lackner
Principal, Advisory, KPMG LLP
Operational key performance indicators, such as lead time and supplier performance, are used by 75 percent of respondents to evaluate the effectiveness of mitigation strategies. Regulatory and compliance complexities (62 percent), rapidly shifting government policies (52 percent), and uncertain global trade conditions (50 percent) are the top challenges limiting response.
Reshoring remains under consideration: 35 percent are in early-stage discussions and 32 percent are actively evaluating the move. Two-thirds say reshoring to the US is at least somewhat feasible, but half believe it will take one to two years to bring manufacturing back. Higher operating and labor costs are the main hurdles.
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While tariffs continue to reshape the industrial manufacturing landscape, executives are leveraging scenario planning, supply chain reconfiguration, and operational agility to navigate uncertainty. The sector’s evolving response signals a commitment to resilience and competitiveness in a shifting trade environment.
Footnotes
1 This survey follows up on a survey we conducted in May 2025. In September 2025, KPMG LLP again surveyed 300 US-based senior executives in various functions about their views on the US proposed tariffs and their effect on their company and industry. Of the total surveyed executives, 30 represented industrial manufacturing. presented industrial manufacturing.
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