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Tariffs Are Putting Factories in a Funk, But Your Portfolio Does Not Have to Join Them

Author

Noah Zelvis
December 03, 2025

U.S. factories just notched a ninth straight month of slowing, with tariffs hiking costs, orders slowing, and bosses freezing hiring instead of adding shifts.

That sounds gloomy, but it also sets up a slow, boring backdrop where the right mid-cap names can quietly benefit from supply chains being rewired, production getting automated, and customers hunting for cheaper, smarter ways to make and move stuff.

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The main factory scorecard from ISM fell again in November, logging a reading of 48.2. Anything under 50 means the sector is shrinking, and this makes nine straight months in the red.

The people who run the survey are not sugar-coating it. Their summary is basically It is tariffs. It has been tariffs. It is still tariffs.

Since April, the White House has been cranking up duties on imported materials.

That makes it more expensive for U.S. producers to get the metals, chemicals, and parts they actually need, and nobody knows what the tariff rate will be six months from now. 

The result is manufacturers delay hiring, stretch existing workers, and push big capex decisions to “later.”

In the latest survey, two-thirds of respondents said they are managing headcount instead of adding bodies.

The pain is not evenly spread. Apparel, textiles, paper, chemicals, and transportation equipment are taking the biggest hits.

In transportation, some companies are throwing up their hands and moving more production overseas rather than fight a moving-target tariff regime.

Meanwhile, a separate factory gauge from S&P Global still shows slight growth, but with a nasty side dish of rising inventories and softer export demand.

Factories are making stuff, they are just not clearing it as quickly as they would like.

The one semi-bright spot: economists see a slow, boring recovery next year as tariff uncertainty eases a bit, rates drift lower, and tax incentives nudge companies to invest again.

No one is calling for a boom. The base case is more like things suck less, not America 2.0 factory supercycle.

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Actionable Stuff

  • Dial back the hero trades. This is not the time to bet on a miracle factory comeback in one quarter. Think steady grinders, not turnaround fairy tales.

  • Prefer tariff dodgers. Companies that can shift sourcing, redesign products, or pass along modest price hikes are safer than those stuck with one expensive supplier.

  • Follow the rewire. Supply chains are moving. Names plugged into reshoring, automation, or logistics efficiency can win even while legacy factories sulk.

  • Stage into positions. Start small, add if the data stops getting worse, and keep some cash handy for the next ugly headline.

  • Borrowers: keep it boring. If you are running a business, lock in sane rates on equipment and working capital, not “bet the factory” leverage.

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Top Picks

BorgWarner (NYSE: BWA)

If tariffs are beating up transportation equipment, BorgWarner is one of the smarter ways to lean into the eventual rebound without trying to guess which car brand wins.

It lives in the guts of vehicles: powertrains, driveline components, electrification parts.

When automakers tweak production to dodge tariffs, they still need someone to supply the parts that make the wheels spin.

BorgWarner has already been shifting more of its mix toward hybrid and EV components, which helps it stay relevant even as the auto world slowly electrifies.

That gives it multiple ways to win: when global auto builds recover from the tariff funk and when governments keep nudging buyers toward cleaner vehicles.

You are not betting on one name on the dealership lot here.

You are owning the toolkit that sits behind many brands, with management already used to juggling around regional trade drama.

Eastman Chemical (NYSE: EMN)

Tariffs on inputs hit chemicals early and hard.

That sounds awful until you remember that the survivors tend to be the players with pricing power and the ability to re-route supply quickly.

Eastman is in that camp, making specialty chemicals and materials that show up in everything from packaging to coatings to auto interiors.

In a sloggy environment, end customers still need these products, they just push harder on price and timing.

Eastman can respond by tweaking formulations, shifting feedstocks, and repricing where it has niche value.

It is way less dependent on any single customer or product than a basic commodity producer.

When uncertainty around tariffs starts to fade and companies feel more comfortable placing longer-term orders, Eastman’s volumes and margins can both get a lift.

Until then, you have a business that has seen trade drama before and knows how to duck and weave..

Lincoln Electric (NASDAQ: LECO)

If you want a simple way to picture Lincoln Electric, think “everything that melts metal together.” Welding gear, consumables, and automation systems are its core.

Whenever someone builds, repairs, reshapes, or reshored a factory, there is a good chance a Lincoln tool is nearby.

Right now, some customers are dragging their feet on big projects because of tariff uncertainty, which can push out orders. But the structural story is still there.

Over time, more companies will automate repetitive welding tasks, modernize old plants, and bring critical manufacturing closer to home.

Lincoln sits right in that trend, and its consumables business adds a steady stream of repeat sales even when big-ticket equipment pauses.

You do not need tariffs to magically disappear to like this story.

You just need the long, slow grind of reshoring, maintenance, and automation to keep inching forward, which it is very likely to do..

XPO, Inc. (NYSE: XPO)

Tariffs mess with what goes into containers, but they do not stop those containers from moving.

XPO is a logistics and less-than-truckload specialist that helps customers ship freight efficiently, even when trade flows are choppy.

If manufacturers are juggling suppliers, shifting routes, or adjusting inventory, XPO is one of the players helping them stitch the new patterns together.

While some factory customers are soft, others are rerouting and consolidating loads, which can actually create more opportunity for a nimble carrier.

XPO has been leaning into tech, better pricing tools, and network optimization to squeeze more profit out of every mile.

In a world where every input dollar hurts, saving on freight suddenly becomes a higher priority for customers.

You are effectively betting that the world will keep moving stuff around, even if tariffs keep changing the “from” and “to” on the label.

XPO’s job is to make that shuffle cheaper and smoother, which does not go out of style.

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Bottom Line

U.S. manufacturing is not in freefall, it is in a long, annoying tariff hangover.

Factory bosses are cautious, order books are thinner, and nobody wants to commit to a huge expansion until the trade picture and rate path look less chaotic.

Your edge is accepting that reality and positioning for a slow, boring recovery instead of a movie-style comeback.

Own mid caps that dodge tariffs, help customers rewire supply chains, or sell the tools and chemicals that factories need no matter what.

Start small, add on dips, and let time, not headlines, do the heavy lifting.

That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next.

Best Regards,
—Noah Zelvis
Macro Notes