What Tariffs, CHIPS and AI Mean for Middle-Market Manufacturers in 2027

Summary: Published for National Manufacturing Day, this blog covers the biggest trends middle-market manufacturers and distributors are watching heading into 2027, from the maturing Creating Helpful Incentives to Produce Semiconductors and Science Act (CHIPS Act) to shifting tariff policy. Moore Colson partner Christopher D. Fagan breaks down five key trends, including semiconductor production milestones, margin pressure from tariffs and the data center demand pulling chip production forward. Learn what manufacturers and distributors need to know to stay resilient and prepared in the year ahead.

Friday, October 2, 2026, marks National Manufacturing Day, the annual celebration of the people and businesses powering American manufacturing. This year, that means grappling with a tariff landscape that keeps shifting, a semiconductor buildout that is finally producing real output, and margin pressure that is reshaping how manufacturers and distributors plan ahead. Here are five of the biggest trends influencing middle-market manufacturing as 2026 comes to a close.

The CHIPS Act: Real Commitments, Real Progress

The Creating Helpful Incentives to Produce Semiconductors and Science Act (CHIPS Act) was designed to bring semiconductor manufacturing back to the U.S., and it has generated real commitments. Intel is building two facilities in Arizona and Ohio backed by $7.9 billion in grants. Taiwan Semiconductor is putting $6.6 billion into an Arizona plant. Samsung is building a $4.7 billion facility in Texas.

Those are serious investments, and this year, that commitment has started showing up in real output. Intel’s Ohio facility has reached high-volume production on its newest process node, and Taiwan Semiconductor’s and Samsung’s plants have also begun producing advanced chips at scale. The lag time between government appropriations, financing and actual production is still significant, and it hasn’t closed evenly. Intel’s second Ohio fab has slipped toward 2030, a reminder that these timelines rarely hold as originally announced.

The commitment is real. It’s no longer just a promise.

Tariffs: Why Margins Are Shrinking Even When Revenue Is Not

This is the issue we hear about most from clients, and it is worth explaining clearly because the math is counterintuitive.

The picture also got more complicated in February, when the U.S. Supreme Court struck down a major set of tariffs that had been imposed under emergency powers authority. The administration leaned on other legal authorities instead, and the average effective tariff rate now sits around 11%, several times higher than where it started under the current administration.

Many manufacturers and distributors are sourcing goods, either raw materials or components, from overseas. When tariffs go up, and depending on the product, that can mean anywhere from the high single digits to 25% or more on specific inputs like steel and aluminum, somebody has to absorb that cost. You would assume it gets passed along to the end customer. In most cases, it’s not.

Large conglomerates are pushing back hard. They do not feel like tariffs represent settled policy, and they use that as leverage. They know once they give up that pricing, they will never get it back even if tariff policies retreat. The result is that manufacturers and their overseas suppliers are sharing the burden, and the middlemen are taking it on the chin.

What does that look like in practice? Revenues may go up or stay flat, but earnings go down. That is not the recipe for an attractive asset in the mergers and acquisitions (M&A) market. Deal activity in manufacturing and distribution has slowed as a result, and it’s tough for these businesses right now.

There is a labor dimension here as well. Shops with union employees struggle to bring on more efficient forms of robotics and automation because their contracts either prohibit it or work to prohibit it. That dynamic is more prevalent in the Northeast and Midwest than in the Southeast, but it adds to the headwinds.

Trade tensions with Canada escalated sharply in August, when the administration announced plans to double tariffs on Canadian vehicles to 50% and add new tariffs on auto parts, effective January 1, 2027. For manufacturers with cross-border supply chains, particularly in the Northeast and Midwest, that relationship is one more variable to watch heading into 2027.

Trade Deals: Why Full Follow-Through Is Rare

There has been optimism around recent trade deal commitments, and some of it is warranted. But history is worth keeping in mind.

In a prior U.S.-China trade agreement, China committed to buying a specific volume of U.S. agricultural products and never actually reached that level of volume. What you tend to see is countries making large commitments to get tariff relief and then slow-playing them. By the time administrations change, some of those commitments quietly expire without being fulfilled.

These commitments are generally good, but it takes time for them to be deployed. It is safe to say that not 100% of what gets announced under trade deals will materialize, for one reason or another.

What to Watch Heading Into 2027

Two factors have shaped the manufacturing outlook this year, and both remain in play for 2027: tariff policy and energy costs.

On tariffs, the situation remains unsettled. The practical takeaway for manufacturers is straightforward: do not plan around tariffs going away soon. How and when policy stabilizes will depend on factors that are difficult to predict right now.

On energy, oil prices are worth watching closely. If we get back to a point where we were in 2020, 2021 and 2022, when fuel was very expensive, it created a freight burden that was inflationary on products. A combined freight and tariff burden would be detrimental for the manufacturing industry. It will create a short-term squeeze on margins, and that is a real risk to factor into your planning for 2027.

Data Centers: A Reason for Optimism

Data centers are being built at a rapid rate and they require a lot of chips. Right now there is more need than there is supply.

In the Atlanta market alone, there are several large parcels of land in the process of being sold for data centers, and the numbers reflect just how much these developers are willing to pay. That is real and it is happening right before our eyes. Extrapolate that nationwide and there is a massive push for this infrastructure. That demand could pull domestic semiconductor production forward ahead of the original CHIPS Act projections.

The appropriation is just the first part. The hard stuff comes after that. But the data center boom may be exactly the accelerant these projects need.

The Bottom Line

There is real uncertainty in manufacturing right now, and the prudent approach is to plan accordingly. The manufacturers managing through it best are the ones who have maintained financial flexibility, diversified where they source materials and are not making large capital bets while the policy picture is still shifting.

The manufacturing sector has navigated disruption before, and it will again. The companies that come out ahead will be the ones that use this period to build resilience, stay close to their numbers and position themselves to move decisively when conditions stabilize. The opportunities are there. It’s a matter of being ready to act on them.

If you have questions or would like to talk through what these trends mean for your business, Moore Colson Manufacturing Team is here to help.

About the Author

Christopher D. Fagan, CPA, is a Partner and the Transaction Advisory Practice Area Leader at Moore Colson. He advises private equity platforms and founder-owned businesses on acquisitions and ownership transitions.