Manufacturing demand is surging: U.S. durable goods orders rose 8.2% in 2025, signaling strong forward manufacturing activity.
Manufacturing sector is expanding again: The ISM Manufacturing PMI reached 52.7 in March 2026, marking three consecutive months of expansion.
Output has turned upward: U.S. industrial production reached its highest level since 2019, with manufacturing output now growing 2% higher in 2025 after years of contraction.
Productivity is strengthening: Manufacturing labor productivity rose 1.9% in 2025, the largest annual gain since 2010, signaling improved efficiency and economies of scale.
Tariffs are not driving inflation: Tariff-sensitive goods prices rose just 1.0% YoY, while inflation is concentrated in non-tradable sectors like housing, energy, and healthcare.
One year after Liberation Day, the U.S. manufacturing sector is showing some significant early signs of resurgence. The industrial base is not yet fully rebuilt, and the recovery remains uneven across sectors, but the early signs are encouraging. Orders have strengthened, output has turned upward, productivity has improved, and hiring has shown signs of life. More important, these gains suggest that when policy starts favoring domestic production over chronic import dependence, American manufacturing can respond. The task now is to turn early momentum into lasting industrial recovery.
Orders, Output, and Productivity Are Moving Up
The impact of tariffs can first be seen in demand as shown in Figure 1. U.S. durable goods new orders rose from $3.453 trillion in 2024 to $3.735 trillion in 2025 [1]. That is a substantial 8.2% increase in a category that tracks future manufacturing activity and capital demand. A sector in genuine retreat does not produce that kind of orders backdrop. Instead, demand for U.S. manufactured goods remains strong enough to support expansion if domestic capacity is allowed to meet it.
FIGURE 1
This demand is also translating directly into current manufacturing activity. The Institute for Supply Management March 2026 report shows that manufacturing expanded for the third consecutive month. The Manufacturing PMI registered 52.7 percent, up from 52.4 percent in February [2]. A reading above 50 means expansion. Three straight months above that line reflects increasing evidence that U.S. manufacturing is moving in the right direction after years of stagnation. This momentum is already visible in core industrial sectors: primary metals output rose by $3.3 billion (4.3%) from Q4 2024 to Q3 2025, while motor vehicle output surged by $13.3 billion (7.0%) [3].
Manufacturing output data confirms the same trend. The Federal Reserve reports total industrial production reached 102.6 percent of its 2017 average in February 2026 [4]. This is 2.4 percent above the 2024 average and the highest overall level since 2019. Manufacturing output specifically has also turned decisively upward through 2025 and into early 2026, breaking from the contraction that defined the post-COVID period. After declining at roughly -1 percent annually in 2023–2024, U.S. manufacturing production has reversed course and is now growing at approximately 2 percent in 2025 [5].
FIGURE 2
Manufacturing productivity improved as well. According to the Bureau of Labor Statistics, labor productivity rose 1.9 percent in 2025 [6]. This is the largest annual increase since 2010, a critical signal of industrial strength. A real manufacturing recovery is not just about producing more, but producing more efficiently. Rising productivity reflects improving economies of scale and stronger use of labor and capital that will allow U.S. industry to increase production while keeping costs down. When productivity increases alongside rising orders and output, it signals a genuine strengthening of the manufacturing base.
Manufacturing productivity gains help explain why tariff-driven inflation has failed to materialize. As firms produce more efficiently, they absorb cost pressures rather than pass them through to consumers. The data reflect this clearly. In the February 2026 BLS CPI release, the category most exposed to tariff-sensitive goods (commodities less food and energy) rose just 1 percent over the prior 12 months [7]. By contrast, the strongest price pressures came from sectors with little to no tariff exposure, including shelter (3 percent), medical care (3.4 percent), electricity (4.8 percent), and utility gas service (10.9 percent). Inflation is being driven elsewhere, not by tariffs.
The labor picture remains mixed, but early signs are turning positive. Manufacturing added 15,000 jobs in March [8], a potential first step toward stabilization. Critics still point to continued job losses over the past year, but that misses the overarching trend: manufacturing job losses are slowing. From April 2025 through March 2026, the U.S. lost 75,000 jobs—less than half the 170,000 manufacturing jobs lost in the prior 12-month period before tariffs [8].
However, it is still too early to draw firm conclusions from jobs data. Employment lags investment by years, not months, as new factories, capacity expansions, and reshoring efforts take time to translate into hiring. At roughly one year removed from the earliest 2025 tariffs, the labor data does not yet reflect their full impact. The earliest signals of change appear in demand and production—and those indicators are now clearly improving.
The Recovery Has Begun, but the Industrial Gap Remains
All these trends mark a clear turning point in U.S. manufacturing. Orders strengthen first. Activity stops contracting. Output begins to rise. And productivity improves as capacity is used more effectively. None of this means the industrial base is fully healed. The U.S. industrial base has suffered from decades of offshoring. However, it does show that the industrial base still responds when policy stops subsidizing import penetration at every turn.
This shift is also reflected in the CPA Domestic Market Share Index (DMSI). Section 232–covered industries, including primary metals and motor vehicles, are showing some of the clearest gains in domestic market share. By contrast, sectors such as computers and electronics remain structurally weak, as domestic capacity still lags demand. Tariffs work fastest where industrial capacity still exists. They work more slowly where decades of offshoring hollowed it out. But that recovery gap only reinforces the need for a comprehensive trade and industrial strategy to rebuild capacity in critical industries where we’ve fallen behind.
The anti-tariff case has always relied on the argument that any serious trade enforcement would immediately choke manufacturing investment and raise input costs without offsetting gains. One year after Liberation Day, that argument is fundamentally weaker. Orders are higher than they were at the start of 2025. Manufacturing has expanded for three straight months. Industrial production is at its highest level since 2019. Productivity improved at the fastest annual rate in over fifteen years. The U.S. manufacturing sector is finally getting some oxygen.
Section 232 Must Anchor U.S. Industrial Strategy
Congress and the Trump administration must draw the correct lesson from these results. Tariffs are producing measurable gains. They must now be deepened, targeted, and made durable within a clear industrial strategy for the next decade.
First, Section 232 must remain the central strategic instrument. Industries tied to national resilience, industrial depth, and military readiness cannot be left exposed to price-distorting import surges. The United States must rebuild what decades of offshoring dismantled. Evidence from metals and autos shows that production and domestic market share respond quickly to well-designed, industry-specific tariffs.
Second, Section 232 coverage must expand alongside targeted industrial support where import dependence remains severe. Rising demand paired with insufficient domestic supply is not a justification for more imports, it is a signal to invest and expand capacity at home.
Third, Washington must stop judging manufacturing policy by monthly employment data alone. Jobs matter, but they lag. Orders, production, productivity, and domestic market share respond first. Lasting employment gains follow only after the capacity base is rebuilt.
Conclusion
One year after Liberation Day, the direction is clear. U.S. manufacturing has begun to recover. The industrial base is responding to tariffs, but the country is still climbing out of a deep industrial deficit created by decades of offshoring. Expanded, long-term, industry-specific Section 232 support is now required to rebuild the industrial capacity needed for lasting economic strength and national security.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
One Year After Liberation Day: U.S. Manufacturing Shows Real Signs of Recovery
KEY POINTS
One year after Liberation Day, the U.S. manufacturing sector is showing some significant early signs of resurgence. The industrial base is not yet fully rebuilt, and the recovery remains uneven across sectors, but the early signs are encouraging. Orders have strengthened, output has turned upward, productivity has improved, and hiring has shown signs of life. More important, these gains suggest that when policy starts favoring domestic production over chronic import dependence, American manufacturing can respond. The task now is to turn early momentum into lasting industrial recovery.
Orders, Output, and Productivity Are Moving Up
The impact of tariffs can first be seen in demand as shown in Figure 1. U.S. durable goods new orders rose from $3.453 trillion in 2024 to $3.735 trillion in 2025 [1]. That is a substantial 8.2% increase in a category that tracks future manufacturing activity and capital demand. A sector in genuine retreat does not produce that kind of orders backdrop. Instead, demand for U.S. manufactured goods remains strong enough to support expansion if domestic capacity is allowed to meet it.
FIGURE 1
This demand is also translating directly into current manufacturing activity. The Institute for Supply Management March 2026 report shows that manufacturing expanded for the third consecutive month. The Manufacturing PMI registered 52.7 percent, up from 52.4 percent in February [2]. A reading above 50 means expansion. Three straight months above that line reflects increasing evidence that U.S. manufacturing is moving in the right direction after years of stagnation. This momentum is already visible in core industrial sectors: primary metals output rose by $3.3 billion (4.3%) from Q4 2024 to Q3 2025, while motor vehicle output surged by $13.3 billion (7.0%) [3].
Manufacturing output data confirms the same trend. The Federal Reserve reports total industrial production reached 102.6 percent of its 2017 average in February 2026 [4]. This is 2.4 percent above the 2024 average and the highest overall level since 2019. Manufacturing output specifically has also turned decisively upward through 2025 and into early 2026, breaking from the contraction that defined the post-COVID period. After declining at roughly -1 percent annually in 2023–2024, U.S. manufacturing production has reversed course and is now growing at approximately 2 percent in 2025 [5].
FIGURE 2
Manufacturing productivity improved as well. According to the Bureau of Labor Statistics, labor productivity rose 1.9 percent in 2025 [6]. This is the largest annual increase since 2010, a critical signal of industrial strength. A real manufacturing recovery is not just about producing more, but producing more efficiently. Rising productivity reflects improving economies of scale and stronger use of labor and capital that will allow U.S. industry to increase production while keeping costs down. When productivity increases alongside rising orders and output, it signals a genuine strengthening of the manufacturing base.
Manufacturing productivity gains help explain why tariff-driven inflation has failed to materialize. As firms produce more efficiently, they absorb cost pressures rather than pass them through to consumers. The data reflect this clearly. In the February 2026 BLS CPI release, the category most exposed to tariff-sensitive goods (commodities less food and energy) rose just 1 percent over the prior 12 months [7]. By contrast, the strongest price pressures came from sectors with little to no tariff exposure, including shelter (3 percent), medical care (3.4 percent), electricity (4.8 percent), and utility gas service (10.9 percent). Inflation is being driven elsewhere, not by tariffs.
The labor picture remains mixed, but early signs are turning positive. Manufacturing added 15,000 jobs in March [8], a potential first step toward stabilization. Critics still point to continued job losses over the past year, but that misses the overarching trend: manufacturing job losses are slowing. From April 2025 through March 2026, the U.S. lost 75,000 jobs—less than half the 170,000 manufacturing jobs lost in the prior 12-month period before tariffs [8].
However, it is still too early to draw firm conclusions from jobs data. Employment lags investment by years, not months, as new factories, capacity expansions, and reshoring efforts take time to translate into hiring. At roughly one year removed from the earliest 2025 tariffs, the labor data does not yet reflect their full impact. The earliest signals of change appear in demand and production—and those indicators are now clearly improving.
The Recovery Has Begun, but the Industrial Gap Remains
All these trends mark a clear turning point in U.S. manufacturing. Orders strengthen first. Activity stops contracting. Output begins to rise. And productivity improves as capacity is used more effectively. None of this means the industrial base is fully healed. The U.S. industrial base has suffered from decades of offshoring. However, it does show that the industrial base still responds when policy stops subsidizing import penetration at every turn.
This shift is also reflected in the CPA Domestic Market Share Index (DMSI). Section 232–covered industries, including primary metals and motor vehicles, are showing some of the clearest gains in domestic market share. By contrast, sectors such as computers and electronics remain structurally weak, as domestic capacity still lags demand. Tariffs work fastest where industrial capacity still exists. They work more slowly where decades of offshoring hollowed it out. But that recovery gap only reinforces the need for a comprehensive trade and industrial strategy to rebuild capacity in critical industries where we’ve fallen behind.
The anti-tariff case has always relied on the argument that any serious trade enforcement would immediately choke manufacturing investment and raise input costs without offsetting gains. One year after Liberation Day, that argument is fundamentally weaker. Orders are higher than they were at the start of 2025. Manufacturing has expanded for three straight months. Industrial production is at its highest level since 2019. Productivity improved at the fastest annual rate in over fifteen years. The U.S. manufacturing sector is finally getting some oxygen.
Section 232 Must Anchor U.S. Industrial Strategy
Congress and the Trump administration must draw the correct lesson from these results. Tariffs are producing measurable gains. They must now be deepened, targeted, and made durable within a clear industrial strategy for the next decade.
First, Section 232 must remain the central strategic instrument. Industries tied to national resilience, industrial depth, and military readiness cannot be left exposed to price-distorting import surges. The United States must rebuild what decades of offshoring dismantled. Evidence from metals and autos shows that production and domestic market share respond quickly to well-designed, industry-specific tariffs.
Second, Section 232 coverage must expand alongside targeted industrial support where import dependence remains severe. Rising demand paired with insufficient domestic supply is not a justification for more imports, it is a signal to invest and expand capacity at home.
Third, Washington must stop judging manufacturing policy by monthly employment data alone. Jobs matter, but they lag. Orders, production, productivity, and domestic market share respond first. Lasting employment gains follow only after the capacity base is rebuilt.
Conclusion
One year after Liberation Day, the direction is clear. U.S. manufacturing has begun to recover. The industrial base is responding to tariffs, but the country is still climbing out of a deep industrial deficit created by decades of offshoring. Expanded, long-term, industry-specific Section 232 support is now required to rebuild the industrial capacity needed for lasting economic strength and national security.
References
[1] Federal Reserve Bank of St. Louis (FRED), Manufacturers’ New Orders: Durable Goods (DGORDER), accessed April 2026. https://fred.stlouisfed.org/series/DGORDER
[2] Institute for Supply Management (ISM), Manufacturing PMI Report on Business, March 2026, accessed April 2026. https://www.ismworld.org/supply-management-news-and-reports/reports/ism-pmi-reports/pmi/march/
[3] U.S. Bureau of Economic Analysis (BEA), Gross Output by Industry, accessed April 2026. https://apps.bea.gov/iTable/?reqid=1603&step=2&Categories=GDPxInd&isURI=1#eyJhcHBpZCI6MTYwMywic3RlcHMiOlsxLDIsNF0sImRhdGEiOltbImNhdGVnb3JpZXMiLCJHRFB4SW5kIl0sWyJUYWJsZV9MaXN0IiwiVEdPMTA1Il1dfQ==
[4] Federal Reserve Bank of St. Louis (FRED), Industrial Production Index (INDPRO), accessed April 2026. https://fred.stlouisfed.org/series/INDPRO
[5] Federal Reserve Bank of St. Louis (FRED), Industrial Production: Manufacturing (IPMANSICS), accessed April 2026. https://fred.stlouisfed.org/series/IPMANSICS
[6] U.S. Bureau of Labor Statistics (BLS), Productivity and Costs, Fourth Quarter and Annual 2025, accessed April 2026. https://www.bls.gov/news.release/pdf/prod2.pdf
[7] U.S. Bureau of Labor Statistics (BLS), Consumer Price Index Summary, February 2026, accessed April 2026. https://www.bls.gov/news.release/cpi.nr0.htm
[8] Federal Reserve Bank of St. Louis (FRED), All Employees: Manufacturing (MANEMP), accessed April 2026. https://fred.stlouisfed.org/series/MANEMP
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CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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