The US manufacturing industry is not what it used to be. Walk into a modern facility, and you’re
just as likely to see automated guided vehicles, real-time data dashboards, and engineers analyzing performance metrics as you are to see traditional assembly lines. The conversation has shifted. It’s no longer just about output. It’s about agility, technology, cash flow, and workforce sustainability.

The latest manufacturing outlook from CLA frames the year ahead around five major forces: tax, tariffs, technology, talent, and transition. Strip away the accounting language, and what you’re left with is something simple. Manufacturers are trying to stay competitive in a world that feels more complex every year.

Let’s start with taxes, because for many manufacturers, that’s where the immediate opportunity
lies. Recent tax adjustments have reopened doors that were partially closed over the last several
years. Enhanced expense rules and changes to research and development deductions can significantly improve liquidity. That matters because manufacturing is capital intensive. Equipment is expensive. Automation is expensive. Expansion is expensive. If a company can accelerate deductions or better capture R&D credits, it frees up cash that can go straight back into operations.

Many manufacturers underestimate how much of their everyday activity qualifies as R&D. Process improvements, tooling modifications, software integration, and quality testing often count. This is not just about inventing a new product. It is about improving how things are made. Smart tax planning is no longer a back-office exercise. It is strategic. And in a margin-tight environment, strategy makes the difference between treading water and investing for growth.

Margins are under pressure from another direction as well: trade policy. Tariffs continue to influence sourcing decisions, pricing strategies, and long-term supply chain design. Tariff collections reached roughly $30 billion in a single month in 2025, a reminder of how much money is moving through this system. Yet despite protectionist measures, the US merchandise trade deficit still climbed to a record $1.2 trillion.

Those numbers tell a clear story. Tariffs have not eliminated global trade dependence, but they have increased cost volatility.

Manufacturers feel this directly. When imported components become more expensive, companies either absorb the cost or pass it along. Neither option is ideal. As a result, many firms are rethinking their supply chains altogether. Some are reshoring portions of production. Others are diversifying suppliers across multiple regions to reduce risk. A growing number are creating internal tariff response teams to model scenarios and anticipate policy shifts. The goal is not perfection. It is resilience.

While trade policy creates friction, technology offers leverage. The conversation around automation and artificial intelligence has shifted from “should we?” to “how fast can we?”

According to industry surveys, 95% of manufacturers have either invested in or plan to invest in AI technologies within five years. That level of adoption signals something important. AI is no longer
experimental. It is becoming foundational.

Interestingly, the most common applications are not flashy humanoid robots. Manufacturers are prioritizing AI for quality control, predictive maintenance, cybersecurity, and process optimization. These applications produce measurable returns. They reduce scrap. They prevent downtime. They improve throughput. In many cases, they pay for themselves faster than heavy capital robotics projects.

There are early signs that the investment is helping. U.S. manufacturing output rose 0.6% in one recent month, the strongest gain in nearly a year, with durable goods production up 0.8%. Production overall has grown roughly 2% year over year, modest but steady.

Those are not explosive numbers, but they show stability in a sector often portrayed as declining. Stability matters. It builds confidence. It supports reinvestment.

Still, technology alone is not a silver bullet. One of the more revealing insights from industry research is that only about 44% of manufacturing data is actually used effectively. Companies are collecting enormous amounts of information, but many lack the systems or expertise to turn it into actionable decisions. Data without direction is just noise. The manufacturers pulling ahead are the ones aligning digital investments with clear operational goals.

Then there is the workforce issue, which remains one of the industry’s most stubborn challenges.

Manufacturing once represented over 33% of U.S. employment in 1960. Today it accounts for roughly 12.7 million jobs, a much smaller share of the overall workforce. The issue is not only the total number of jobs. It is the skills gap. Modern manufacturing requires technicians who understand robotics, software interfaces, analytics, and advanced machinery. Those skills are in high demand across many industries.

The result is a persistent labor shortage. Positions remain open longer. Retirement waves are thinning experienced ranks. Companies are responding with higher wages, apprenticeship programs, partnerships with technical schools, and cross-training initiatives. Some are redesigning workflows to make roles more attractive to younger workers. Others are investing in automation specifically to offset labor constraints.

But automation and labor are not opposites. They are complementary. Every new automated system requires people to install it, maintain it, program it, and interpret its outputs. A machine
can assemble a component. It cannot design the production strategy or troubleshoot complex integration issues without human input. The manufacturers who understand this balance are
building teams that blend mechanical knowledge with digital literacy.

Finally, there is transition planning. This may sound less urgent than tariffs or AI, but it is just as important. Many manufacturing companies are family-owned or closely held. Leadership transitions are approaching. Succession planning, valuation strategy, and ownership structure are not abstract concerns. They determine whether a business thrives through generational change or loses momentum.

Transition planning also intersects with broader strategic decisions. A company investing heavily in technology and workforce development may position itself for a higher valuation in a sale. Another may decide to remain independent but restructure leadership roles to bring in outside expertise. In either case, planning reduces uncertainty.

Put all these forces together, and a clear picture emerges. Manufacturing is not collapsing, nor is it experiencing a dramatic renaissance. It is evolving. Growth is steady but modest. Risk remains present but manageable. Companies that actively manage tax strategy, rethink supply chains, invest wisely in technology, develop talent pipelines, and prepare for leadership transition are positioning themselves to outperform peers.