By Shawn DuBravac, IPC Chief Economist and Philip Stoten, Industry Journalist

The global electronics manufacturing industry finds itself at another crossroads following what the White House called "Liberation Day" - a sweeping announcement of new tariffs that has sent shockwaves through international supply chains. What began as concerns about potential tariffs on specific materials has exploded into a comprehensive restructuring of global trade relationships, with implications that reach far beyond immediate price increases.

Unexpected Tariff Landscape

One of the more surprising elements of the new tariff structure is a 46% tariff on Vietnamese goods, higher than China's 34%. Vietnam, previously viewed as a safe haven for companies diversifying away from China, now faces significant barriers to the U.S. market.

"What's not unique to our industry but unique to the current environment is the dour sentiment among executives trying to figure out the environment," notes Shawn DuBravac, Chief Economist of IPC. "Uncertainty is much higher now because there's still a lot of unknowns when it comes to translating what was released by the White House into what actually needs to be implemented within supply chains."

The laptop market offers a stark illustration of this disruption. Approximately 27% of laptops entering the U.S. come from Vietnam – a significant shift from just five years ago as companies diversified away from China, which still supplies about 66% of U.S. laptop imports. With new tariffs potentially increasing laptop prices by up to 48%, manufacturers face difficult choices.

"It's hard to imagine that consumers are ready to absorb that price increase," Shawn explains, "and at the same time, I don't think that companies can absorb that full amount, given how tight margins are on some of these product categories. We will likely see prices go up and, as a result, we'll likely see demand come down for a number of these products."

Complex Supply Chain Impacts

Even products assembled in the United States will face price pressures. Components from Taiwan, now subject to a 32% tariff on larger semiconductors, and from China, with a 34% tariff on many lower-cost components, will inevitably drive up costs across the board.

DuBravac points out a secondary effect: "Tariffs generally allow domestic producers to raise their prices to a point where they're able to take advantage of those higher import prices. So it isn't just that tariffs exclude imports and make it easier for domestic companies to compete, but it also creates an environment where domestic companies tend to raise their prices."

This dynamic has already been observed in the steel industry, where domestic producers have raised prices to improve profitability in response to import tariffs.

Mexico and Canada: The Winners?

While most countries face new barriers, Mexico and Canada appear to have emerged as the big winners in the tariff reshuffling. Products qualifying under the USMCA (United States-Mexico-Canada Agreement) remain exempt from the new tariffs.

"If you qualify for USMCA, then you are still able to import products with zero additional tariffs," DuBravac says. "I think a lot of companies are working to get any products that weren't certified to make sure that they are certified USMCA so they can qualify."

Another nuance is that tariffs only apply to non-U.S. content. If 20% of a product's value originates in the U.S., that portion can be excluded from tariff calculations – a complexity that adds to implementation challenges.

Industry Response and Economic Outlook

The IPC's latest data shows companies responding to these challenges in various ways. Approximately 31% of manufacturers are investing in automation to counter tariff effects, while 60% are attempting to renegotiate supplier contracts to push costs upstream. On the workforce front, 18% have announced hiring freezes, with another 36% considering similar measures.

These responses, multiplied across industries, point to broader economic concerns. "Definitely, the probability of a recession this year, in 2025, continues to rise," DuBravac warns. "What's unique is that it's all being driven by policy decisions that can be reversed, so there's still the opportunity to avoid a recession, but it would probably require the reversal of some policies."

Consumers, already cutting back on spending before these announcements, may initially rush to purchase items before prices increase, followed by a significant pullback. "You've seen the savings rate decline quite significantly, and they're essentially spending everything that they had available to them for the most part, and so that can only go so far before that's been exhausted," DuBravac explains.

Global Realignment

The European Union finds itself reassessing its relationship with the United States while simultaneously increasing investments in defense and infrastructure. Recently, the German government announced a $900 billion package, with half dedicated to defense spending.

"Europe is looking at what type of trade relationship they should be investing in and what other countries they might be trying to develop relationships with," DuBravac notes. "If the relationship with the US is soured and they're going to see less business with the US, where could they offset some of that decline?"

Despite these challenges, North American electronics manufacturing shows resilience in the short term. Both PCB and EMS sectors report healthy book-to-bill ratios, though this may reflect orders being pulled forward in anticipation of tariff impacts.

Looking Forward

The situation remains fluid, with many executives viewing these tariffs as potentially the opening position in broader trade negotiations rather than the final outcome. This uncertainty complicates planning and investment decisions.

As the electronics industry navigates this complex landscape, organizations like IPC are expanding their global presence to provide region-specific support. The bifurcation of global trade means that issues affecting different regions require tailored approaches to government affairs, research, and market intelligence.

In a world where tariffs aren't just about tariffs – but rather about broader geopolitical realignments – staying informed and nimble may be the industry's best defense against an increasingly unpredictable trade environment.

Philip Stoten and Shawn DuBravac are co-hosts of “EMS & The Economist” a video and podcast series available on YouTube or wherever you get your podcasts but searching ‘EMS@C-Level’. This episode is live at https://youtu.be/kUlZiWKqKD0

United States

Incoming economic data remain broadly stable but are showing signs of emerging weakness which increases our concerns for the outlook. U.S. factory output was up 0.7% year-on-year in February, boosted by an 8.5% surge in motor vehicle production that had seen two straight months of declines. However, U.S. manufacturing activity showed renewed weakness in March. Tariff threats have begun to weigh on factories. The manufacturing PMI fell to 49.0 (from 50.3 in February), indicating a return to contraction and input prices are rising at the fastest rate since mid-2022. U.S. consumers have also become more cautious amid economic uncertainty. Headline retail sales managed a +0.2% month-over-month uptick in February (and were 3.1% higher than a year ago), but this was largely due to necessities and online shopping. Sales at electronics and appliance stores actually fell 0.3% in February, indicating softness in consumer tech spending. Uncertainty has dented consumer sentiment, which sank to its lowest in about 2½ years in March. 

Europe

But while the U.S. growth trajectory is slowing, Eurozone’s industrial downturn is showing signs of bottoming out. In March, the HCOB Eurozone manufacturing PMI climbed to 48.6, its highest reading since mid-2022 (though still below 50). Importantly, the survey’s output index crossed into expansion for the first time in two years, at 50.5, indicating that manufacturing production has finally stabilized and even inched up. Actual data support this trend: Eurozone industrial output was essentially flat in January compared to a year earlier, after contracting through much of 2024. This stabilization has been helped by improving conditions in key industries and relief from the energy crunch that plagued Europe in late 2022. Additionally, European producers saw a boost in orders as overseas customers (notably in the U.S.) rushed to buy European goods before new tariffs hit. This front-loading lifted factory backlogs in Europe in March, though it may prove temporary. Germany, Europe’s largest manufacturing base, has benefited from an upcoming “spending splurge” on infrastructure and defense that is bolstering confidence. Overall, while Eurozone manufacturing remains in a mild contraction, the pace of decline has slowed markedly and optimism is tentatively returning – the future output expectation index in March stayed high at around 60, above long-run averages. Though improving conditions could bring other pressures: unemployment in the euro area hit a record low of 6.1%, and wage growth has picked up as workers seek compensation for past inflation. 

China

China’s manufacturing sector strengthened in the last month. The official manufacturing PMI edged up to 50.5 in March – the highest in a year – signaling modest expansion. Domestic demand has been a key driver: new orders hit a 12-month high, while new export orders, though still soft, improved and nearly reached the breakeven 50 level. Factories also saw a temporary lift from foreign customers front-loading orders in anticipation of U.S. tariffs. Industrial output in the first two months of 2025 rose by 5.9% year-on-year. Notably, high-tech manufacturing grew 9.1% in that period, outpacing overall industry as electronics and equipment makers increased production. Beijing’s supportive policies – such as renewed fiscal stimulus for infrastructure and manufacturing – have helped counter external pressures. Nonetheless, officials remain cautious: despite the uptick in manufacturing, China faces headwinds from a cooling property sector and the U.S. trade war. Producer price inflation has been subdued or negative (output prices actually fell in March despite rising orders), suggesting manufacturers have limited pricing power and are operating in a competitive, cost-sensitive environment. 

Rising Cost of Raw Materials

The cost of raw materials crucial to electronics has been climbing recently, adding pressure on manufacturers’ margins. Copper prices have soared in the first quarter of 2025, reaching record highs. By late March, copper was trading around $5.24 per pound on futures markets – roughly 30% higher than at the start of the year. The spike is driven by a combination of robust demand and geopolitical factors. On the demand side, China’s post-pandemic economic stimulus (including infrastructure and green energy projects) is boosting purchases of copper. On the supply side, the U.S. has threatened new tariffs on metal imports, prompting buyers to stockpile copper in advance. This confluence of factors has tightened the copper market. Besides copper, other key inputs show mixed trends: aluminum has also seen price increases due to new U.S. import tariffs, and the price of gold remains high by historical standards. 

Supply Chain Resilience and Strategic Shifts

In the past month, the global economic landscape has presented a mixed picture for electronics manufacturers. On one hand, manufacturing output and supply chain conditions have improved in several regions: factories in China are humming at their fastest pace in a year, and even Europe’s long-suffering producers are starting to see growth “green shoots.” Key component shortages have eased, and logistics are more reliable than a year ago. On the other hand, demand patterns and policy shifts have injected new uncertainties. The U.S. market is now weighed down by hesitant consumers and a volley of new tariffs that threaten to raise costs across the electronics supply chain. Europe’s consumers remain reticent, keeping sales growth modest. And while China’s domestic demand is a bright spot, the escalating U.S.–China trade conflict casts a shadow over the global trade environment that electronics firms depend on.  

For electronics manufacturers, the most relevant factors boil down to managing risks and seizing opportunities in this environment. Supply chain resilience is more critical than ever – the past month’s developments have shown that companies with flexible sourcing and diversified production bases can better withstand shocks. Many firms are revisiting their supply chain strategies, accelerating moves to build inventory ahead of tariff deadlines or to shift production to tariff-friendly locations. Cost management is another focus: with input prices like copper on the rise, manufacturers are investing in efficiency and considering selective price increases on products, all while trying to remain competitive in a price-sensitive market. Take a look at the most recent IPC Sentiment report for more on how electronics manufacturers might respond to tariff risks. The last month has demonstrated that the era of smooth globalization may be waning, and electronics manufacturers will need to learn to thrive in a world of persistent uncertainty.