WIPFLI 2026 Manufacturing Industry Outlook

Let’s get the bad news out of the way: 2026 will be another tough year for the manufacturing industry. Tariffs and economic uncertainty will continue to present challenges for manufacturers and inhibit growth.

But the next 12 months also won’t be a repeat of 2025. During what will be a slow year, you have an opportunity to focus on what you can control — like operational efficiency, data collection and sales — to come out the other side running a more capable, effective business.

Keep reading to learn more about the major trends that will shape manufacturing in 2026 and how you can meet the moment.

What are the key trends and challenges that will affect manufacturing in 2026?

In 2026, the industry outlook is volatile. Expect growth to be essentially flat, weighed down by uncertainty, tariffs and other trade challenges and an economy that is sluggish overall. Much also depends on the upcoming USMCA review in July of 2026, which could either boost the North American markets or handcuff them.

Here are some more details on what to watch for over the next 12 months:

• Weak economy: Over 90% of economic growth in the first half of 2025 was in the AI industry. Most other sectors, manufacturing included, are flat or dropping. It’s tough to project any significant change for manufacturing here in 2026, especially with interest rates remaining higher than average.
• Tariffs: The Trump administration’s tariff policy roiled the manufacturing world in 2025, a trend that will continue in 2026. While the Supreme Court is reviewing and may rule against the president’s tariff authority under the International Emergency Economic Powers Act (IEEPA), the White House is likely to react by reimposing tariffs under a different statute rather than withdrawing them entirely. Large manufacturers like General Motors are now planning for tariffs to be in place for at least the next decade.
• High costs: Due to tariffs, rising wages and other economic pressures, virtually every line item in manufacturers’ budgets has gone up. Around labor, specifically, many companies are still hiring like they’re in growth mode, despite the fact that growth isn’t actually happening. This is unsustainable.
• Limited capital investments: To be blunt, companies will be limited in terms of making capital investments over the next 12 months. The cost of goods, equipment and services will force manufacturers to carefully prioritize.
• Tax opportunities: The tax and budget bill that passed over the summer creates additional tax opportunities for manufacturing, specifically via domestic R&D expensing, 100% bonus depreciation and the new qualified production property tax incentive. Tax incentives can be an area for firms to recoup money lost elsewhere, although equipment that may qualify for an incentive is also likely to be more expensive due to tariffs.
• Technology and automation: Manufacturers should be looking to technology and automation to help solve some of their challenges. The question is, can they afford it? Middle-market firms exploring AI and automation tech are also often finding that they need to get their data in order first.
• USMCA review: This is the big dog to watch for. There have been rumblings that the White House may seek to negotiate separate deals with Mexico and Canada rather than pursue another trilateral agreement. Regardless of the structure, manufacturers are counting on an outcome that leads to reduced trade barriers across North America, as the opposite result would further suppress growth.

How can manufacturing adapt to meet the challenges facing the industry in 2026?

2026 won’t be all bad for manufacturing. In fact, it will also be a year of tremendous possibility — for firms that are willing to admit that business conditions have fundamentally changed and adapt to meet the new reality.

Here are some essential actions to consider as you enter 2026:

1. Figure out where you can take action

Manufacturing leaders were understandably cautious in 2025. But it’s time to get out of wait-and-see mode and into action.

There is so much going on in the world right now that is beyond your control. Inside your business, however, there is much that you can do.

Read this article in full here.