Tariffs won’t bring manufacturing back to US: Supply chain survey

If China is going to lose some manufacturing as a result of President Trump’s tariffs, the U.S. manufacturing sector won’t be the main beneficiary, according to a new CNBC Supply Chain Survey. The Trump administration says a reshoring boom is coming, but most companies tell CNBC that the costs could as much as double to bring supply chains back and instead a new search for low-tariff regimes around the world will commence.

Nearly three-quarters of those surveyed (74%) said cost was the top reason for saying they would not be reshoring production, followed by the challenge of finding skilled labor (21%). The Trump administration has promised tax cuts for companies that bring back manufacturing but the survey found taxes lower in the ranking of costs that impact manufacturing site decision making.

Despite some recent high-profile announcements from the tech sector, including Nvidia’s plans for a supercomputer plant in the U.S. and Apple’s commitment to invest $500 billion in the country, most companies cite costs as prohibitive. The tech sector received a reprieve on Friday night from new tariffs on China and other global manufacturing nations, but the Trump administration is moving ahead with a national security investigation that targets critical technology for future tariffs.

The majority of respondents taking the survey estimate that the price tag of building a new domestic supply chain would at least be double current costs (18%), and would likely be more than twice as expensive (47%). Instead of moving supply chains back to the United States, 61% said it would be more cost-effective to relocate supply chains to lower-tariffed countries.

In addition to the tariffs, consumer demand and raw material prices, as well as the “current administration’s inability to provide a consistent strategy,” were cited as key supply chain concerns.

A majority of respondents (61%) said they feel like the Trump Administration “is bullying corporate America.”

A total of 380 respondents from companies in the supply chain and business organizations were included in the survey, conducted from April 14-18. The survey was sent to members of the U.S. Chamber of Commerce, National Association of Manufacturers, National Retail Federation, American Apparel and Footwear Association, Footwear Distributors and Retailers of America, the Council of Supply Chain Management Professionals, OL USA, SEKO Logistics, and ITS Logistics.

Among respondents indicating interest in reestablishing U.S. supply chain, they expect a process that would take many years, with 74% expecting a three-to-five-year timeline, if not longer: 41% said at least three to five years; 33% said longer than five years.

Automation will dominate over human workers

If manufacturing is coming back to the U.S., automation will be a major component of the economic model, with 81% of respondents saying it will be used more than human workers.

“The U.S. labor market is a concern when considering movement back to the U.S.,” said Mark Baxa, CEO of supply chain trade group CSCMP.

In the current environment, layoffs are an immediate concern, with respondents almost evenly split between those who are planning headcount reductions (47%) and those who say they do not have current layoff plans (53%). A majority of respondents expect job cuts within the next nine months, and 38% within two to three months.

A Fed survey released on Monday found a surge in fears about layoffs.

Right now, the most widespread reaction to the Trump tariffs is the cancellation of orders (89%) based on an expectation that consumers will pull back on spending, which 75% of respondents said they are forecasting. For products that are coming in under the new tariff rates, 61% of those who participated in the survey said they would raise prices.

“The immediate impact is order cancellations and the risk of consumer spending pullback is noteworthy,” Baxa said.

Survey respondents expect the hardest-hit products as a result of a pullback in consumer spending to be discretionary products (44%), furniture (19%), and luxury (19%).

“As of now, we have seen a heavy cancellation or pause rate for freight originating from China, but are seeing increased volumes and front loading from other countries in Asia that had their reciprocal tariffs paused for 90 days,” said Paul Brashier, vice president of global supply chain at ITS Logistics.

Recession warning from supply chain

Sixty-three percent of respondents warn of a recession impacting the U.S. economy this year as a result of Trump’s tariffs policy, with roughly half (51%) of those expecting it to hit in Q2.

“Supply chains that support millions of U.S. jobs, power U.S. manufacturers, and provide affordable choices for U.S. consumers are now experiencing early signs of damage due to these destructive tariffs,” said Steve Lamar, CEO of the American Apparel & Footwear Association. “Higher prices, job losses, product shortages, and bankruptcies will be only some of the adversity the U.S. economy weathers while the President pursues this ill-advised tariff policy.”

He previously told CNBC that the damage to businesses across the economy may soon be “irreversible.”

Trump’s National Economic Council Director, Kevin Hassett, said on Monday that more than 10 countries have made “amazing” trade deal offers to the United States and he “100%” guaranteed there is no recession coming.

Multiple surveys taking the pulse of CEOs show widespread expectations that a recession may have already started or is soon to come.

BlackRock CEO Larry Fink said that based on conversations he has had with CEOs across the economy, the U.S. is either very close to or already in a recession now.

Smaller businesses and startups say the tariffs will be catastrophic and place U.S. jobs at risk.

“Small consumer companies that started with an innovative idea do not have the capital to invest in building factories,” said Bruce Kaminstein, member of NY Angels and founder and former CEO of cleaning products company Casabella. “They were forced to go overseas because of a lack of production facilities here in the U.S. Factories in China welcomed our business and helped us bring our products to market,” he said.

This time of year is when retailers are ordering their back-to-school and holiday items, and while importers have been pulling back on orders from between 5% to 30%, according to the survey, the majority of respondents say the back-to-school and holiday orders specifically have not been affected. But the majority of respondents (75%) indicate they will be raising the price of those high-demand seasonal goods. They’re also suggesting that companies are preparing for a cautious consumer. There is a greater focus on lower-priced goods for the holidays (67%), and more promotional items (21%). Aspirational luxury (7%) and luxury (5%) ranked last among holiday season order planning.