“If there’s one thing that’s certain in business, it’s uncertainty." – Stephen Covey

Economic uncertainty is at an all-time high. A glance at the Federal Reserve Bank of St. Louis’ “Global Economic Policy Uncertainty Index" shows, remarkably, that today’s level of uncertainty is higher than at the peak of the pandemic and more than twice that observed during the Great Recession. How are manufacturers navigating this?

Not easily. A new study by Manufacturers Alliance and global consultancy Roland Berger – based on a survey of 150 manufacturing leaders of mid-cap U.S.-based companies and dozens of interviews – shows the most relevant trends in today’s manufacturing environment are being impacted by perceived geopolitical risks. Instead of a much-hoped-for post-pandemic return to predictability, we’ve entered a period of increased tensions between the United States and China, disrupted alliances with long-time trading partners, and a schism in global supply flow that for decades grew longer and more complex.

As a consequence, some of the biggest trends we’ve seen over the past five years are being disrupted. Here’s what we found:

Geopolitical headwinds. Over the past few years, manufacturing leaders have grappled with the entire range of geopolitical issues, from market volatility, tariffs, and regulations to natural disasters, cyber threats and restrictive immigration. Their concerns are pronounced, and they do not expect relief any time soon. In fact, our survey found three-fourths are highly concerned about the impact geopolitical risk will have on the sector over the next five years.

When asked which geopolitical risks had the biggest impact on their ability (or inability, as the case may be) to plan for the future, two-thirds pointed to international market volatility, more than half identified shifting international trade policies, and roughly half indicated increased cybersecurity threats from abroad. The disruption is taking its toll: 90% say that geopolitical risk is stalling their strategic development, as companies play a wait-and-see game on public policy.

Localization of production. To de-risk their operations in an era of global instability, manufacturers are focused on optimizing their geographic footprint to align their products with their end markets. Over the past few years there has been a significant uptick in the share of manufacturers who say localization – that is, producing in a region, for a region – is “highly relevant" to their operations, rising from 61% in 2023 to 74% in 2025. Companies that consider themselves industry leaders are more than twice as likely to prioritize localization up front.

Modes of localization are shifting as well. More manufacturers are repurposing their operations, collaborating and even sharing space with other companies and relocating only final product integration. This reflects a shift toward what can be termed “capex-light" localization strategies over big ticket investments.

There have also been substantial changes in country priorities over the past few years. Fewer manufacturers are now planning to relocate to Mexico than just two years ago, and China is also becoming less attractive as a production location. When asked which countries would be most attractive for their geographical footprint in 2030, China ranked sixth after the United States, UK, Japan, Mexico and Germany, falling from the number two position in 2023.

Increased digitalization. Virtually all manufacturers say that current geopolitical conditions will have an impact on their digitalization strategy – in most cases, increasing the pace at which they adopt new technologies. This reflects the snowballing effects of fluctuating trade policies and tariffs, localization, and more restrictive immigration. As geopolitical risks increase, nearly two-thirds of manufacturers say they are more motivated to mitigate that risk through digital strategies. Among participants who identified their company as industry leaders in digitalization, the ratio becomes even more pronounced with three-fourths reaching for digital solutions to mitigate geopolitical concerns.

In a climate of uncertainty and rapidly fluctuating policy, digitalization is also playing an important role in hastening risk analysis. As the landscape changes rapidly, manufacturers need platforms and people capable of doing rapid analysis of the changing situation. As one top executive explained, companies need people who know the right questions to ask, understand what kind of data is needed to answer those questions, ensure that data is always clean, and quickly perform the risk analysis.

Increased customization. One of the benefits of intensified digitalization is enhanced technical capabilities on shopfloors, including moving from standardized product platforms to customization. Nearly three-quarters of manufacturers expect to focus more on customization over the next five years in favor of market-specific, custom-made product development. The four factors driving customization are competitive differentiation, customer preferences, trade agreements and restrictions, and an evolving regulatory environment.

This goes hand-in-hand with the push for localization. As companies reassess their

geographic footprint due to geopolitical uncertainty, they gain the opportunity to get closer to specific preferences of customers in a country or region.

Talent shortages. The number one challenge for manufacturers for years has been finding qualified individuals to run existing operations. Today two-thirds of manufacturers say the deficit of skilled workers is affecting their operations, and 83% believe that geopolitical risk will make the skills shortage worse over the next five years. Part of this is due to stricter domestic immigration policies in the U.S., which the vast majority of manufacturers believe will make the labor shortage worse over the next five years.

The good news is that digitalization and automation, complemented by AI, are considered increasingly durable solutions to the talent shortage. This is especially important as more firms relocate to places such as the United States where skilled talent is in high demand. But many also see a wave of reshoring to the United States presenting a major challenge even after adding more automation – as one leader observed, someone has to maintain the robots.

They say necessity is the mother of invention. The volatility and uncertainty in this modern era of global trade and commerce has pushed American manufacturers to re-evaluate their strategic approaches and even to reinvent themselves. Although the near-term specifics of new trade, fiscal and regulatory policies remain uncertain, the long-term trajectory is clear: The heyday of globalization as envisioned in the post-Cold War period is behind us, and the world is transitioning to something new and as yet undefined.