Industrial Supply Distributors NAICS 423840

Apr 8, 2025 - Tariffs Impacting Industrial Manufacturing

• The Trump administration’s on-again, off-again tariff strategy is sending ripples through the industrial sector, significantly impacting production costs, supply chains, and overall competitiveness in the machinery and industrial equipment sector, Manufacturing.Net reports. The implementation of an additional 10% tariff on Chinese imports, suspension of de minimis exemptions for Chinese shipments, and newly announced (and since delayed) 25% tariffs on goods from Mexico and Canada, are causing confusion and requiring manufacturers to quickly adapt to mitigate potential cost spikes and avoid supply disruptions. Manufacturers looking to reshore operations to avoid tariffs and shorten their supply chains are an opportunity for domestic industrial supply distributors. However, rising recessionary fears could cause existing and potential customers to delay or cancel new orders. In March, Goldman Sachs raised the probability of a US recession to 35% from 20%, amid tariff turmoil and economic uncertainty.
• The US manufacturing sector – a driver of demand for industrial supplies – began 2025 on a long-awaited positive note, with economic activity in the sector expanding in January following 26 consecutive months of contraction, according to the latest Manufacturing ISM Report On Business, which surveys US supply executives. “Demand clearly improved, while output expanded and inputs remained accommodative,” the Institute for Supply Management's (ISM) Timothy R. Fiore, chair’s ISM’s Business Survey Committee, said. The Manufacturing PMI registered 50.9% (above 50 indicates expansion) in January, 1.7% higher compared to the seasonally adjusted 49.2% recorded in December. Per ISM’s January report, demand and production improved, and employment expanded. The eight manufacturing industries reporting growth in January (in order) were: Textile Mills; Primary Metals; Petroleum & Coal Products; Chemical Products; Machinery; Transportation Equipment; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. Eight industries reported contraction including Nonmetallic Mineral Products and Wood Products.

• Activity in the US manufacturing sector contracted in November for the eighth consecutive month and the 24th time in the last 25 months, as reported by US supply executives in the latest Manufacturing ISM Report On Business. The Manufacturing PMI registered 48.4% in November, 1.9% higher compared to the 46.5% recorded in October. The Supplier Deliveries Index signaled faster deliveries, registering 48.7%, 3.3% lower than the 52% recorded in October. (Supplier Deliveries is the only ISM Report On Business index that is inverse; meaning a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) Meanwhile, the Inventories Index registered 48.1%, up 5.5% compared to October. Demand remained weak in November as companies planned for 2025 in the aftermath of the election. Tariffs, threatened by President-elect Trump, may spur reshoring benefitting industry supply distributors.
• Employment by industrial supply distributors was relatively flat in January compared to a year ago, while average industry wages rose 6.4% over the same period to $30.07 per hour, remaining above the $30 mark breached in November 2024, according to the latest US Bureau of Labor Statistics data. Sales for machinery and equipment wholesalers declined 1.4% year over year in February but rose 1.2% versus January, according to the Census Bureau. Industry inventories rose 1.4% YoY in February and inched up 0.2% compared to the previous month. Meanwhile, producer prices remain near record highs, per the BLS.