Economically, in early 2025, the manufacturing sector was looking bright with a year of strong growth expected, according to Interact Analysis. The group notes that both the US and China were showing signs of rapid growth, with Europe appearing to shake off the stagnation of recent years.
However, that changed when President Trump changed the rules around tariffs. The continually changing situation has caused Interact Analysis to revise its forecast, and it now predicts that the manufacturing recovery will gain momentum in 2026 rather than 2025.
Tariffs affect regions differently
According to Interact Analysis’ Manufacturing Industry Output (MIO) Tracker, regions across the world are being affected differently by the tariffs the US administration is imposing. Both Europe and the US are expected to see growth squeezed because of the charges, with the MIO growth forecast for the US reduced from a possible 4% to just 0.9% in the wake of tariff & uncertainty effects.
US manufacturing industry growth has been downgraded due to the supply-side exposure the US has to imports for its largest industries. The longer tariffs and uncertainty around them continue, the less likely the newly projected growth will be met.
Meanwhile, the Eurozone’s manufacturing sector is expected to shrink by 2.4% in 2025. This is due to the vulnerability of the bigger players in the industry, which depend on the US as a major export market. This is a similar situation for Switzerland, the UK and Norway, with a challenging year predicted for all three. However, Turkey is predicted to see strong growth in the manufacturing sector, caused almost entirely by inflation.
In contrast, the manufacturing sector in Asia is expected to grow by 2.7% overall, with China expanding by an anticipated 2.9%. Interact Analysis sees long-term growth potential in the APAC regions, including China, so long as they can negotiate balanced trade deals with the US.
Impact on the machinery sector
The global machinery sector is under growing pressure due to the economic uncertainty that comes with unpredictable tariff policies. The reliance the US has on imported machinery parts and components has increased the impact of new trade barriers, which is contributing to a downgrade in expected manufacturing growth. Europe’s machinery exporters, especially Germany and Italy, are getting prepared for decreased demand from the US. However, Asian economies are expected to grow their machinery sectors if stable trade deals are forthcoming.
Commenting on the latest MIO report, Jack Loughney, Lead Analyst for the MIO Tracker at Interact Analysis, said in a statement: “Overall, the growth that was expected in 2025 is not achievable due to the ongoing tariffs policies but there’s hope for some stabilization in 2026. Trump’s tariffs have put a dampener on what was expected to be a good year for global manufacturing and we have now downgraded a majority of our projections as a result of the rapidly changing climate and the continuing threat of a tariff war.”
