Beyond Tariffs: A Smarter Path to Strengthening American Manufacturing

By Mark Gannon

Over time and around the world, policymakers have used tariffs in an attempt to protect domestic industries from foreign competition. The idea is straightforward: raise the cost of imported goods to make your country’s products more competitive. But in practice, tariffs have offered only a temporary boost — at best. In many sectors, they amount to a short-term lifeline rather than a long-term solution.

The result is that U.S. manufacturers remain structurally underinvested — particularly when it comes to modernizing equipment, automating processes, and developing next-generation workforce capabilities. While tariffs can buffer profit margins, they do not drive reinvention. They delay failure rather than build strength.

If the goal is to secure America’s industrial future, we need to stop applying band-aids and start delivering blood flow. The best way to do that isn’t more protectionism — it’s more productivity, enabled through smart capital investment.

Tariffs Keep Companies Afloat. They Don’t Help Them Swim.

Consider the case of U.S. Steel — a company once symbolic of American industrial dominance. For years, it has benefited from import tariffs designed to shield it from global pricing pressures, particularly from Chinese and South Korean producers. Yet the company continues to struggle with aging mills, bloated costs, and a shrinking global share.

The problem isn’t lack of demand. It’s lack of capital and capability. Tariffs didn’t fix the core issue: an inability to modernize fast enough to compete.

And U.S. Steel isn’t an outlier. Across sectors like heavy machinery, building components, fluid systems, and precision parts manufacturing, the story is similar. Too many firms are running 1980s-era equipment with 2020s-era challenges. The result? Quality risks, rising maintenance costs, workforce gaps, and missed innovation cycles.

Reframing the Conversation: From Protection to Productivity

If we agree that the endgame is a stronger, more self-sufficient manufacturing base, then we need to shift the conversation from tariffs to investment incentives.

Here’s one policy lever that could catalyze a national upgrade: a 200% tax deduction on capital equipment purchases for qualified domestic manufacturers.

Think about that for a moment. Not just full expensing — which already exists under Section 179 and bonus depreciation rules — but a double deduction. Buy a $500,000 machine? You can write off $1 million. That’s a game-changer for mid-sized firms hesitant to commit scarce cash or take on debt.

It’s not about writing blank checks. It’s about creating an incentive structure that rewards long-term thinking, innovation, and domestic capability-building — not dependency on outdated machinery or cheap labor overseas.

Why Equipment Modernization Works

Equipment modernization has a ripple effect far beyond the walls of a single plant. Here’s what happens when companies upgrade their production capacity:

1. Operational Efficiency Improves

Modern machines mean faster cycle times, less downtime, tighter tolerances, and lower scrap rates. That directly translates to better margins, shorter lead times, and more reliable order fulfillment — all things procurement leaders care deeply about.

2. Labor Productivity Increases

New equipment is almost always more automated, safer, and ergonomically sound. That reduces physical strain, increases output per employee, and opens the door to higher-value tasks. A plant with 20-year-old machines might struggle to attract younger workers. A plant with collaborative robots, CNC systems, or smart diagnostics sends a different message.

3. Supplier Relationships Strengthen

Modernization makes you a better partner — more predictable, more scalable, and more transparent. That improves your ability to negotiate, collaborate, and co-develop with both upstream and downstream suppliers.

4. New Business Becomes Viable

When companies add capabilities — faster machining, higher cleanliness standards, tighter tolerances — they can pursue new markets. Whether it’s aerospace components, medical device housings, or energy-efficient systems, modernization opens doors to higher-margin opportunities.

The Broader Economic Impact

A capital investment surge wouldn’t just benefit OEMs. It would generate demand across the entire manufacturing ecosystem, including:

• Machine tool builders and distributors
• Electrical and mechanical contractors
• Industrial automation integrators
• Custom tooling and fixturing shops
• Transportation and rigging firms
• Technical training providers

Even when equipment is manufactured overseas (as some of it inevitably will be), it still needs to be installed, configured, maintained, and staffed by American workers.

This kind of multiplier effect is exactly what tariffs don’t provide. Tariffs shift cost burdens; investment incentives shift capability curves.

How Procurement Leaders Benefit

This is where it gets particularly relevant for supply chain and procurement executives.

Capital investment at your suppliers means:

• Improved On-Time Delivery (OTD) — new machines break down less
• Better Quality — tighter process control = fewer defects
• Lower Total Cost of Ownership — fewer disruptions, less emergency expediting
• Reduced Sole-Supplier Risk — modern facilities are easier to transfer work into or dual-source

In other words, modernization is a risk mitigation strategy and a value creation strategy.

If you’re responsible for strategic sourcing, working with suppliers who reinvest in themselves creates supply chain resilience. And when more U.S.-based suppliers have modern capabilities, your sourcing options expand — making reshoring or regionalization more viable.

Addressing the Equity Objection

Some will argue that large manufacturers already have the means to invest. Why subsidize them further?

But the reality is that most U.S. manufacturers are small to mid-sized. They’re not sitting on billions in free cash flow or enjoying 18-month lead times on customer orders. Many are operating on 3–5% margins in highly cyclical industries.

These are the companies most impacted by supply chain shocks — and the ones most likely to delay capital spending. A 200% deduction could be the confidence signal they need to move forward with equipment upgrades they’ve been postponing for years.

Tariffs vs. Smart Incentives: A Strategic Comparison

A Cultural and Strategic Shift

Beyond economics, equipment modernization sends a cultural signal. When workers see new CNCs being installed, when teams are trained on digital tools, when the environment improves — it creates belief. It tells employees (and customers): This company is here to stay.

From a leadership standpoint, capital investment also forces discipline. When you spend half a million dollars on a new machine, you make sure your processes, people, and product mix justify it. That type of accountability is healthy.

Conclusion: Help That Actually Helps

Trade hawks often point out that foreign governments support their manufacturers — through financing, tax credits, or policy advantages. They’re not wrong.

But rather than mimic their protectionist strategies, the U.S. can take a more constructive approach: reward manufacturers that bet on themselves.

Capital investment isn’t a bailout. It’s a bet — on productivity, innovation, and workforce development. And it’s a bet worth making.