Trump’s Tariff Chaos Threatens His Push for Rust Belt Revival

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(Bloomberg) — President Donald Trump’s signature trade policy is threatening to backfire by upending other top priorities: the revival of US manufacturing and the American Rust Belt. 

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In Illinois, Trump’s tariffs prompted a compressor maker to delay a key equipment purchase after an ambitious factory revamp. Rockwell Automation Inc., a Wisconsin-based producer of factory tools, says some manufacturers are putting projects on hold because of uncertainty over costs and future demand. Snap-on Inc. is seeing similar hesitancy among car mechanics.

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The warnings underscore the rising worry that turbulence from Trump’s trade wars will smother the progress US manufacturers have already made revving up American factories. Manufacturing payrolls fell by 8,000 last month, the most this year, according to the Bureau of Labor Statistics. US and Chinese negotiators will resume trade talks Monday in London, as the world’s two largest economies look to resolve disputes over tariffs and technology.

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In the US, perhaps nowhere is the anxiety higher than in the Midwest, which is still home to the nation’s highest concentration of manufacturing employment even after bleeding jobs early this century from the rise of offshoring. 

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“Overall, it is going to be a drag on the US economy,” said Gus Faucher, chief economist for PNC Financial Services Group in Pittsburgh, calling the tariffs a tax that will raise prices. “In particular, it’s going to be a drag on the Midwestern economy.”

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On-again, off-again levies on imported components and machinery — as well as retaliatory duties imposed by other countries — have injected volatility into supply chains, raised costs, hurt exports and chilled investment. 

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US factory activity contracted for a third straight month in May, and every comment in the Institute for Supply Management’s sample of survey responses from manufacturing executives focused on tariffs — including a respondent in the electric equipment, appliance and components business who said the duties have created supply-chain disruptions rivaling those of the pandemic. 

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The Midwestern states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin lost almost 2 million manufacturing jobs between 1998 and 2010 as trade deals and China’s entrance into the World Trade Organization spurred companies to seek lower-cost labor and production outside the US.

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In recent years, though, a cautious optimism had returned. As supply chain shocks from the pandemic pushed companies to bring operations back home, and as Washington offered sweeping incentives for clean energy, EVs and semiconductor production, the Midwest began to stir. 

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Since the start of 2021, the region has added over 100,000 factory jobs, according to federal data. Rust Belt states had outsized investment in factories in the past decade, according to a report by Citi Institute, even as southern states that offer right-to-work laws, lower labor costs, and aggressive incentive packages to lure global manufacturers have also seen a boom.