Manufacturing Employment Data Confirm the Concentrated Benefits—and Dispersed Costs—of Trump’s Tariffs

Clark Packard and Alfredo Carrillo Obregon

The latest Bureau of Labor Statistics jobs report offers a stark reminder that US manufacturing continues to struggle. Manufacturing employment fell again in December 2025, marking the third consecutive year with net annual job growth. This persistent decline comes despite the Trump administration’s stated goal of revitalizing domestic manufacturing, and data increasingly suggest that the administration’s own policies—particularly, its erratic use of tariffs—are a significant part of the problem.

To be clear, US manufacturing employment did not enter 2025 on a high. After rebounding sharply from the pandemic-induced recession from April 2020 to late 2022, US manufacturing employment entered a period of persistent decline. The sector posted net job losses in six months of 2024, shedding 105,000 workers from the previous year. Following a slight rebound in the first quarter of 2025, the sector then registered net job losses in each of the last eight months of the year (Figure 1). By December 2025, the sector employed nearly 70,000 fewer workers than a year earlier (Figure 2).

Of course, these data alone cannot identify the precise causes of this prolonged contraction in US manufacturing employment. Multiple factors—including higher prices, tighter monetary policy, changes in demand and consumer preferences, and longer-term structural shifts—all likely play a factor. Still, recent industry surveys and manufacturer testimonies suggest that tariff-driven cost increases and uncertainty were meaningful contributors in 2025. Once again, a familiar pattern has emerged: protection for a politically favored industry imposes direct costs on a much larger set of downstream firms that depend on affordable inputs to compete.

Survey evidence reinforces this conclusion. For instance, the December 2025 ISM Manufacturing Purchasing Manager’s Index, a widely watched measure of the US factory activity based on a monthly survey of supply chain executives, fell to 47.9—the lowest reading of the year and the sector’s tenth consecutive month of contraction. (Above 50 indicates expansion; below 50 indicates contraction.) In fact, the reading was the lowest of 2025. The PMI’s sub-indices tracking orders and prices, as well as testimonies offered by the surveyed executives, repeatedly point to higher input costs and trade policy uncertainty driven by the administration’s tariff regime as key headwinds.

This is hardly surprising. US manufacturing is deeply integrated into global supply chains, with imported intermediate inputs and capital equipment accounting for over half of US imports. Broad-based tariffs, therefore, function as a tax on domestic production. This is especially true for steel, aluminum, and copper, which are crucial inputs for a wide range of manufactured products. Unsurprisingly, US prices for these metals increased relative to foreign prices in 2025. As Figure 3 illustrates, the steel tariffs in particular have exacerbated a long-standing gap between US and international steel prices.

The employment data reveal who benefits and who pays. Manufacturing subsectors tied to primary metal production were among the few to add jobs in 2025. In contrast, far larger downstream sectors that rely on these metals—including machinery, computers, and transportation equipment—experienced some of the steepest job losses.[1] (See Figure 1). This asymmetry underscores a central flaw of protectionist policy: it delivers concentrated benefits to a narrow set of producers while imposing diffuse but far higher costs on the broader manufacturing sector.

As we documented in a recent paper, this is not a new phenomenon. Indeed, it’s entirely consistent with the six-decade history of US steel protectionism.

Furthermore, trade policy uncertainty impairs companies’ ability to confidently plan ahead. With 2025 registering the highest measured levels of trade policy uncertainty on record (Figure 5), it’s unsurprising that both the ISM and the Association for Supply Chain Management (ASCM) report continued hesitancy among manufacturing firms to invest and hire. 

Beyond higher input costs and uncertainty, the growing complexity of the US tariff system is also harming US manufacturers. As the ASCM’s Abe Eshkenzai recently noted, navigating this complexity has become an “administrative burden” that siphons resources away from actual production. Time (and money) spent validating tariff codes and tracking rule changes—not to mention paying import-related customs fees—is time not spent selling more products or investing in additional capacity. But with firms facing thousands of dollars in fines for non-compliance, they have little choice but to navigate the labyrinth of import regulations.

US manufacturing remains a vital and competitive sector, but tariffs are an impediment to industrial success. The steel industry’s experience is instructive. As documented in our comprehensive Cato analysis, more than 60 years of steel protectionism have failed to revive the industry while harming downstream manufacturers. The 2025 data are just the latest chapter in this dismal record.

For the sake of American manufacturing, policymakers should finally learn the lesson and remove the tariffs. But given the administration’s recent rhetoric, longstanding judicial deference to certain presidential tariff authorities, and the political economy that keeps steel protection entrenched, we won’t hold our breath.