The U.S. manufacturing industry could feel the greatest impact of the new tariffs President Trump has proposed or enacted on goods imported from trading partners around the world, according to an analysis by the Washington Center for Equitable Growth. Of the top 25 subsectors in the U.S. economy that are most likely to be affected by tariffs, 19 are in manufacturing, according to the report.
Keep in mind that the analysis was executed before trade deals were announced with Japan and the European Union after July 21.
Some industries, however, may experience a revival as their products become more competitive in domestic markets compared with tariffed imports, the Washington Center for Equitable Growth noted. But retaliatory duties enacted on U.S. exports could harm American workers if demand for goods diminishes. In addition, tariffs on imported raw goods used by domestic industries could be harmful, the analysis warned.
Manufacturing is likely to be the most vulnerable industrial category to the new tariff regime, regardless of the commodity or country specifics, said the report. While some subsectors may be less affected than others, the overall reliance on imported goods puts the manufacturing sector at greater risk from intermediate tariff costs than other industries. The report estimates that the duties could increase costs for manufacturers by between 2% and 4.5%.
Subsectors that may not be as exposed include the movie and sound recording industry, insurance carriers, as well as the petroleum and coal products industry. While the first two import an unusually large amount of inputs, they are primarily goods not subject to duties. Meanwhile, the majority of coal and petroleum imported inputs are sourced from countries with a lower tariff rate than the higher reciprocal rates imposed on China and other countries.
The construction industry is less exposed to tariffs than manufacturing subsectors, but remains substantially more vulnerable than other industries, due to imports of raw materials often sourced from China. The repair and maintenance industry, including auto repair shops, commercial and household equipment repair, is highly exposed to tariffs. Mining and fossil fuel extraction are less exposed than manufacturing, but are more vulnerable than other industries.
These three groups, along with manufacturing, are upstream in the U.S. economy, meaning their products are often used by other industries further down a supply chain. Tariffs that impact these sectors will translate into additional costs to domestic producers in addition to the duties they must pay directly on their own imported inputs, said the report.
“In the case of construction, additional costs of imported materials will burden the building of transportation infrastructure, as well as commercial and industrial facilities,” the Washington Center for Equitable Growth wrote. “It also means residential construction will become more expensive, and projects will slow or halt, constraining the supply of new housing and potentially putting upward pressure on housing prices.”
Manufacturing and construction also support a large number of U.S. workers – about eight million and 13 million, respectively. Increased costs could cause wage stagnation or layoffs in these sectors. Seasonally adjusted employment in highly tariff-exposed industries is already beginning to decline.
The report also examined the potential geographic impact of tariffs, finding that Midwestern states, including Michigan, Wisconsin and Indiana, will likely face higher costs compared to other states.
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