Manufacturers Adapt Pricing Strategies Amid Rising Tariff Costs

Manufacturers Adjust Strategies as Tariffs Impact Costs As manufacturers navigate through a complex landscape of tariffs and rising input costs, many are reconsidering their pricing strategies to mitigate the financial strain. According to a recent report issued by the Institute for Supply Management (ISM), manufacturers are not only grappling with increased costs but are also planning to adjust their sales prices in response. Cost Increases and Price Adjustments Data from ISM’s December 2025 Supply Chain Planning Forecast reveals that a significant portion of manufacturers are set to pass on these cost increases to consumers. Specifically, 32% of manufacturing leaders surveyed indicated they would transfer the entire tariff-related cost increase into sales prices. Additionally, 42% indicated they might blend price hikes with absorbing some costs into their margins. Notably, only 6% reported that tariffs would not affect their costs at all. Reshoring: A Less Common Strategy In contrast, the strategy of reshoring production to avoid tariffs appears to be less favored among manufacturers. The survey showed that only 36% are actively considering moving their production back to the United States. This contrasts with the expectation that tariffs would incentivize domestic production. Susan Spence, chair of ISM’s Manufacturing PMI, emphasized the increasing importance of tariffs and trade policies to manufacturers, a sentiment echoed across various industry surveys. She noted that manufacturers have delayed significant decisions regarding capital expenditures and hiring, awaiting clearer signals on trade policies. Currently, with the Supreme Court reviewing the legality of these tariffs, there is a sense that a resolution may soon emerge. Looking Ahead: Cost Management and Potential Growth Spence expressed cautious optimism, stating, “The fact that the tariff decisions are now in the highest court of the land...I think folks are trying to be optimistic that the chaos is possibly going to be over.” With anticipated clarity on future tariffs, manufacturers are beginning to finalize their supply chain strategies and address the rising costs associated with import duties. Spence confirmed that “the manufacturing panelists by and large have decided, we’re just going to have to pass it on,” indicating a strong trend toward adjusting prices to account for increased material costs. The survey has reported that approximately 86% of manufacturers plan to pass on at least some of their cost increases, with raw material price increases anticipated to average 5.4% for 2025 and a further rise of 4.4% projected for 2026. Capital Expenditures: Challenges Ahead Despite some signs of improvement, manufacturers continue to face challenges. Around 64% do not plan to reshore production to evade tariff costs, highlighting that many still find it more economical to maintain offshore operations or explore alternative trade partnerships in less affected regions. The year 2025 has proven challenging for the manufacturing sector, with a contraction observed for nine consecutive months as of November. However, ISM’s forecast suggests a potential turnaround in 2026, with manufacturing revenues expected to rise by 4.4%. Over half of the respondents anticipate revenue growth compared to 2025. Nevertheless, Spence described the outlook as one of "slight optimism" rather than robust confidence. The impact of the One Big Beautiful Bill Act, which introduced a corporate tax rate of 21% and allowed deductions for machinery investments, has also been minimal. When surveyed, 59% of manufacturers indicated that the provisions had no effect on their planned capital spending, and 20% noted a reduction in expenditures. Spence pointed out that ongoing economic uncertainty continues to inhibit strong confidence in capital investments. For more on the implications of tariffs and economic conditions affecting manufacturing, consider reading: Tariffs remain heart of uncertainty: PMI