Economic and Material Handling Outlook in a World of Rising Trade Risks
Article from MHI Solutions Magazine
Material handling businesses entered 2025 with strong tailwinds. However, risks have risen significantly in recent months, and the entire industry is being swept into an economic storm driven by escalating tariff risks. While tariffs are usually inflationary, tariff risks are recessionary and deflationary, because they can weigh on growth and consumption, reducing growth and adding downward price pressures.
The evolving geopolitical landscape of Cold War Two has made tariffs a primary tool for U.S. economic security and leverage, resulting in growing uncertainty across global supply chains. This volatility is amplifying procurement challenges, pricing instability and operational inefficiencies. Adding to these concerns, slowing economic growth and rising downside risks to the broader economic outlook make future planning increasingly difficult. Meanwhile, uncertainty surrounding Federal Reserve policy decisions further complicates the business environment, as fluctuating interest rates influence borrowing costs, capital investment and overall economic momentum. This is true for businesses across the economy, including for material handling industries.
Key Risks and Challenges
One of the most pressing threats to businesses stems from disruptions to supply chains from U.S. trade and tariff policies. As tariffs increase on essential materials such as steel, aluminum, semiconductors and lithium‑ion batteries, manufacturers are facing rising production costs. This unnerving dilemma is forcing businesses to either absorb the additional expenses or pass them on to customers, which is why business and consumer confidence have come under significant pressure. At the same time that uncertainty presents material risks to the economic and business outlooks, retaliatory tariffs from key trading partners risk restricting access to crucial components, forcing companies to seek alternative suppliers. These adjustments often come with higher costs and longer lead times, intensifying the strain on operational efficiency.
