Outlook for U.S. industrial automation remains uncertain amid new tariffs

From February 2024 to January 2025, machinery production in the US improved, though momentum may have stalled due to tariff uncertainty.

Entering 2025, the U.S. manufacturing economy showed signs of emerging from a period of cautious investment. Following the U.S. presidential election, inflation appeared to moderate, and interest rate cuts were anticipated. Before the implementation of tariffs under President Trump, moderate growth was expected for U.S. industrial automation markets in 2025. However, the introduction of new tariffs may extend the period of uncertainty. As a result, expectations for a market recovery following a downturn in 2024 are now less certain.

U.S. manufacturing had good momentum heading into 2025 but that has likely changed

2024 saw a decline in industrial automation markets. Globally, motion control and low voltage motor drive revenues decreased by -7% and -5% respectively, following higher growth rates between 2021 and 2023. The decline was primarily due to inventory adjustments by channel partners and customers after elevated purchasing levels in 2021 and 2022. In the U.S., a contraction in machinery production also contributed to reduced demand for automation products.

The graph above illustrates the decline in machinery production in 2024. For industrial automation suppliers, 2024 experienced significant revenue declines. However, a closer look at the month-by-month data shows signs of recovery starting to emerge in the U.S.

From February 2024 through January 2025, machinery production in the U.S. showed steady gains. While March data is not available yet, progress may have slowed due to uncertainty associated with recent tariff policy changes.

Similarly, the Institute for Supply Management’s Manufacturing Purchasing Manager’s Index (PMI) fell below 50 in March 2025, indicating a contraction in the manufacturing economy after two months of expansion. This suggests that tariff-related uncertainty may be affecting U.S. manufacturing activity.

Uncertainty over tariff longevity is plaguing manufacturers’ ability to strategize and stifling capital investment

In discussions with machinery manufacturers, a frequent concern has been uncertainty regarding Trump’s trade policy, including questions about the duration and scope of tariffs. This uncertainty makes it difficult for manufacturers to develop long-term plans and has led some budget holders to delay investment decisions. As a result, capital investment may decrease, potentially affecting industrial production.

This uncertainty is represented below in a series produced by National Bureau of Economic Research called the Economic Policy Uncertainty Index (EPU).

In a paper documenting the development of its Economic Policy Uncertainty Index, the National Bureau of Economic Research analyzed how increased uncertainty affects industrial production. The analysis found that a 90-point rise in the EPU Index was associated with a 1.2% decline in industrial production from baseline levels. The impact may be greater if uncertainty increases further or fluctuates significantly.

Over January and February 2025, the EPU index increased 72 points, and it is likely that it continued to rise in March and April. With uncertainty increasing, industrial production may be negatively impacted. Although this does not necessarily imply a full-year contraction, it could limit the potential for manufacturing growth in 2025.

If the Trump administration adopted a more measured approach to trade policy, it could help support growth in 2025. Trade tensions rising, and the administration has shown no indication of adjusting its approach without major concessions. As a result, by the time tariff-related uncertainty diminishes, the opportunity to regain the early-year growth in U.S. manufacturing may have passed.

Edited by Puja Mitra, WTWH Media, for Control Engineering, from an Interact Analysis news release.