Seven Takeaways: Focus on Manufacturing Breakfast

Taxes, tariffs, and trade drove the agenda of the 2025 Focus on Manufacturing Breakfast hosted by The Wisconsin Manufacturers & Commerce Foundation and The Milwaukee Business Journal. Given the timeliness, it was no surprise the event was moved to the main ballroom at the Pfister Hotel due to record attendance.

John Murphy of the U.S. Chamber of Commerce keynoted followed by an industry panel moderated by Timothy Gibbons of The Milwaukee Business Journal, where Hank Kohl, CEO of MPE, Inc., and Jim Meudt, President of ATI Forged Products, shared insights. Leaders from CLA were among the hundreds of attendees and rounded up highlights from the discussion.

The current economic and manufacturing landscape

First up, John Murphy put into perspective the current landscape for global grade with a series of facts.

• Steel and aluminum — The United States consumes far more steel and aluminum than we produce. About 80% of steel is imported from Canada and Mexico, while 82% of U.S. aluminum comes from Canada, where it's cheap to make electricity. In the 1940s to support the war effort, the U.S. built a massive aluminum production facility in Quebec which is a key supplier to this day.
• China’s cost position — China produces far more than it will ever consume. In China, direct material costs 60% of what they cost in the U.S. and labor costs are 40% lower compared to the U.S. There are many critical minerals and medical goods flowing from China that aren’t made elsewhere in the world.
• Growth is slowing — Growth from 1950 to 2010 was 3.4%. Growth from 2011 to 2023 was 2.2%, and growth from 2024 and beyond is forecasted at 1.8%.
• U.S. dependency on trade — The United States exports about 50% of what we make, and our buyers include Canada, Mexico and China. About 40 million American jobs in the depend on trade, and locally 700,000 jobs in Wisconsin are dependent on trade. China is the largest market in the world for U.S. farmers and ranchers.

Top seven takeaways

1. Less flex in the economy this round

The economy inherited by the first Donald Trump administration is far different than the one inherited by the second. There is far less room for the economy to flex than in years past. The cost of capital is much higher now than it was in 2016. In today’s inflationary environment, Americans are not in the position they were in 2016 to handle increases. With 3% unemployment, it’s really zero for practical purposes.

Tariffs would disproportionately impact states in the Midwest with a larger manufacturing and agricultural base. Using history as our guide, most if not all tariffs will be passed along to consumers. In 2016 tariff cycle, inflation was low and consumers absorbed the costs. Since 2016, prices in some key consumer categories have doubled, and consumers are far less capable of absorbing any further increases. Polls overwhelmingly show consumers want leaders to focus more on lowering prices and less on new tariffs.

We’re watching a “tariff trilemma” play out where goals of 1) protecting domestic industries, 2) raising revenue, and 3) improving negotiating leverage are at odds (and competing) with each other.

Assemblies related to automotive industry cross-borders six to seven times in a process called pyramiding. Unlike other countries, there's no allowance for duty drawback. An additional 25% on Canadian and Mexican goods is forecasted to drive up the price of a car by $3,000 which could put a new car out of reach for many Americans. Furthermore, 25% tariffs could drive up the cost of gas 75 cents per gallon, drive up the cost of food $5 billion, and drive up the cost of building materials $38 billion.

2. Biggest concern for manufacturing leaders: Stability

All leaders agreed that until clarity is achieved (whether the tariff numbers go up, down, or stay the same), investments related to new capacity are on hold. “We need to know what the rules are so we can assemble our four-year plan. Until we can tamp down uncertainty, we can’t plan,” a panelist said. There are currently three strategies to deal with tariffs: pass on to customers, buy ahead, and pivot to find new sources. As noted earlier, only so much more can be passed along, however manufacturers agreed they generally have no other option but to pass along increases.

3. USMCA is Moot?

With looming 25% tariffs for both America’s northern and southern neighbors, many are questioning if the United States-Mexico-Canada Agreement (USMCA) for practical purposes still exists. On July 1, 2026, a review (vs. renegotiation) will be required of the USMCA. Negotiators must decide to continue the current agreement or if no agreement can be achieved, how to wind it down over a 10-year period.

In the meantime, the Trump administration has signaled it will further scrutinize rules of origin on China-made goods to confirm the stops (and transformation levels goods must achieve) each time they cross borders before entering the U.S.

4. Practicality of new capacity

Building new capacity takes time. It can take up to four, five, and even six years before investments can be up and running. “We cannot wish mineral deposits into existence here,” a panelist said.

5. Education is behind

Panelists agreed on the need to get serious about education. Manufacturing is about 10-to-15 years behind, with the biggest impact on direct labor that cannot handle the complexities of technology and automation. Schools are not exposing students to the technologies found in manufacturing today. It usually takes around three to four years until a new hire is fully productive.

Within the next 15+ years, 30% of the workforce will be retiring. The key takeaway: there’s no slack in the economy. Demographic tightness is here to stay.

6. Practical immigration reform is critical

The universal consensus among panelists: “we need the workers, period.” No one questions the need to address the border situation, however a seamless immigration policy is needed due to a contracting population. There’s a strong desire to pivot from moving everybody out to building a healthy pipeline of workers, especially skilled workers ideal for manufacturing.

7. Tax cuts and reforms

All contributors agreed extending the 2017 Tax Cuts and Jobs Act is critical, and the R&D tax credit as well as expensing must be addressed. If the tax cuts are not extended, there will likely be a significant impact to the whole economy. As noted above, the economy has far less room to flex like it did in 2016. The ability for the market to absorb increases is gone; not extending the tax increases will likely contract the economy. Costs have doubled and consumers can't handle more.

Economic optimism

As the program concluded, panelists were asked to comment on what they are optimistic about.

• Long term demand — Combined, Airbus and Boeing require 15,000 new planes over the next few years. Backlog is a bright spot.
• Foreign direct investment — The U.S. will likely continue to be a magnet for foreign direct investment due to general stability of the economy, rule of law, and skilled workforce.

Manufacturing wish list

What is on executives’ wish list to fuel growth?

• Lower regulation
• Lower taxes
• Better educational alignment
• Streamlining permits for housing and infrastructure
• Lower energy costs

How are you navigating uncertainty?

As you consider the impact of uncertainty for your company, we’d love an opportunity to brainstorm with you. We’ll round up a team of manufacturing professionals with deep experience in your niche to explore options.