We’ve been witnessing the unfolding saga of Trump’s tariffs since the beginning of April, triggering significant volatility (rather crashes!) in stock markets. The goal of these tariffs is to promote the "America First" agenda, boost manufacturing reshoring, and create more jobs. But in reality, how will things actually play out? Let’s delve a little deeper.
According to a new CNBC Supply Chain Survey, while President Trump’s tariffs may push manufacturing out of China, the United States is unlikely to get it back. Despite the White House promises of a “reshoring” boom, the high cost of bringing manufacturing back home will probably deter most companies. Instead, businesses are eyeing alternatives, such as lower-tariff nations, to relocate production.
Cost and Labor Concerns Hinder Reshoring Efforts
The survey found that 74% of companies cite higher costs as the biggest barrier to reshoring manufacturing. The second-biggest concern is the lack of skilled labor (21%). Although the Trump administration is offering tax incentives to bring jobs back, taxes ranked low on the list of site selection concerns.
Even with announcements from major tech firms like NVIDIA NVDA and Apple AAPL to expand U.S. operations, most companies say the expense is still too high. On average, 65% estimate the cost of reshoring would be double or more than double their current operations.
Will Automation Replace Humans?
The survey revealed that 81% believe automation will play a bigger role than human labor in any future U.S. manufacturing strategy. Skilled labor shortages remain a significant concern for reshoring efforts, while layoffs are another looming issue.
However. artificial intelligence (AI) should continue to boom amid rising automation efforts. Roundhill Generative AI & Technology ETF CHAT, Global X Artificial Intelligence & Technology ETF AIQ and Global X Robotics & Artificial Intelligence ETF BOTZ are in sweet spots.
Impact of Order Cancellations and Price Hikes
The most immediate reaction to the tariffs has been order cancellations—reported by 89% of survey participants—due to expectations of restrained consumer spending. The most vulnerable product categories are discretionary items (44%), furniture (19%) and luxury goods (19%). SPDR S&P Retail ETF XRT could be hurt in this scenario.
Small Businesses Hit Hardest
Startups and small companies are especially susceptible. Many small firms went overseas due to the lack of U.S. production options—and are in crunch for enough capital to reshore. With consumer sentiments falling lately, there is little chance for a respite in small-cap ETFs like iShares Russell 2000 ETF IWM. The ETF lost 8.1% over the past month (as of April 14, 2025).
Recession Concerns Loom Large, But Is the Fear Exaggerated?
About 63% of respondents believe the U.S. will enter a recession in 2025 as a result of the tariff policy, with 51% predicting it will hit in Q2. We believe that the fear of a near-term recession is probably overblown, given thechances of tariff exemptions, trade deals, front-loading of orders and Fed rate cuts. Much of the back-to-school season in 2025 should be pretty much price-locked.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Apple Inc. (AAPL): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report iShares Russell 2000 ETF (IWM): ETF Research Reports SPDR S&P Retail ETF (XRT): ETF Research Reports Global X Robotics & Artificial Intelligence ETF (BOTZ): ETF Research Reports Global X Artificial Intelligence & Technology ETF (AIQ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
