Liberation Day, as President Donald Trump called April 2, 2025, marked a major reshaping of U.S. economic policy and the contours of the global trading system. The aggressive program of tariffs announced in the Rose Garden that day, and the wide-ranging negotiations it triggered with trade partners, ended abruptly the era of globalization in which trade barriers consistently fell and nations disclaimed any concern for where production occurred. Trump was determined to reindustrialize our economy and eliminate our trade deficit, and tariffs were the centerpiece of his plan.
Economists predicted disaster. The idea of a global 10% tariff alone was “horrifying” and “lunacy,” according to Adam Posen, president of the Peterson Institute for International Economics. It would “put[] millions of people out of work.” Inflation would surge, we were told, the stock market would plummet, other nations would retaliate. Tariffs would not just fail to boost manufacturing, they would actively weaken it by creating uncertainty and raising input costs.
In the months since, economists have carefully parsed each statistical report for signs of impending doom. Commentators eagerly tweet each negative reading as proof of free trade’s wisdom and protectionism’s folly. But that’s not how economic analysis is supposed to work. Rather, efforts to discern a policy’s effect must start with a baseline: how were things looking before the policy took effect, and how would we have expected them to look without it?
Equally important, the results of implementation must then be compared to expectations. If the policy is working as proponents say it should, what would be happening and what would the data show? What if it is working as skeptics feared? Answers to those questions, not random data points plucked from the crowd, provide the basis for evaluating different economic frameworks and concrete policy choices.
This Atlas provides a comprehensive compilation of regularly released statistics bearing on the performance of the industrial economy over the past year. In each case we provide both the long-term trendlines and the rates of change for key periods before Liberation Day and since. The data is organized to mirror the sequence in which economic effects would appear if tariffs were working as intended and the United States were making progress toward reindustrialization.
First would come the direct effect on prices. In the short run, this could be expected to place some drag on growth; these would be real costs, in effect the upfront investment for which there would need to be a strong return. But conditions in the manufacturing sector should then improve, as demand for domestic output increases and production ticks upward. Capital investment would then surge, productivity and growth would rise, and more manufacturing jobs would begin to materialize at higher wages. The trade deficit, which might even have increased if productive foreign investment were helping to drive the expansion of capacity, would narrow as capacity comes online.
If, on the other hand, tariffs were ineffective the upfront costs would be much higher. Inflation would surge, growth would stall, wages and employment would decline. Industrial production would struggle, capital investment would not proceed.
Which of these two narratives have come closer to the observed reality? One year after Liberation Day, this is how American Compass evaluates the progress.
Prices
Supporters say: Prices will increase modestly and stabilize quickly.
Detractors say: Prices will increase substantially and drive an inflationary spiral.
Reality is: The overall rate of increase in consumer prices has generally slowed since Liberation Day and the trend in goods prices mirrors exactly what would be expected in the pro-tariff scenario. Insofar as inflation remains elevated, the rate is driven by rising prices in services, not goods.
The headline CPI figure of 2.6% since Liberation Day and 3.0% in the past three months suggests no increase in inflation compared to 2024. Core CPI, which excludes more volatile categories like food and energy, has been clearly lower since Liberation Day than in the prior year.
Core Goods CPI tells perhaps the most interesting and relevant story, focusing on items that should face the greatest tariff impact: Prices were falling in 2024 and then clearly rose after Liberation Day, but the rate of increase peaked in August 2025 at 1.5% and slowed since, so that the past three months are much closer to a pre-COVID norm. These trends are consistent with prices seeing a small initial impact from tariffs and then leveling off when tariffs stabilize at the higher level. They are not consistent with the claim that the brunt of price increases took time to materialize and is still building.
The price trend in Goods contrasts sharply with the recent trend in Services, where inflation has bounced higher in recent months. The challenges returning the inflation rate back toward the Federal Reserve’s 2% target are being driven by prices in Services, not Goods.
Manufacturing capacity utilization and job openings are two other useful measures of an early uptick in domestic demand and manufacturing activity. While bringing new capacity online takes time, existing facilities typically operate below full utilization and produce more. Manufacturers planning to do so will often begin looking to make additional hires.
The data here are mixed. Utilization has held more or less flat (though, as the longer time series indicates, it seems to more or less always stay flat). But the hiring picture has improved. Whereas job openings were falling steadily from the post-COVID peak through early 2025, that decline halts on Liberation Day and begins to reverse course. The past few months in particular have indicated strong interest in expansion.
As CNBC’s analysis of the February 2026 CPI concluded, the data show “generally receding costs in goods most impacted by tariffs, and rising prices for key services components.”
Manufacturing Sector Conditions
Supporters say: Tariffs should boost demand for domestic output, improving conditions in the manufacturing sector.
Detractors say: Tariffs should raise input costs, weaken the dollar, and slow growth, worsening conditions in the manufacturing sector.
Reality is: Demand is up and conditions have improved.
The second effect of tariffs, transmitted through higher prices on goods and lower confidence in overseas supply chains, should be rising demand for domestic production. The Census Bureau’s M3 Survey of manufacturers’ shipments, inventories, and orders provides a timely, monthly measurement of this activity and the story since Liberation Day has been strongly positive.
The data shown here are for new orders in three categories from the M3 report: all durable goods excluding transportation, nondefense capital goods excluding aircraft (a subset of durable goods), and industrial machinery (a subset of capital goods). Transportation and aircraft are excluded because they tend to fluctuate wildly with major purchase orders for new airplanes.
The chart below shows these new orders, adjusted for inflation using the Core Goods CPI and indexed to 100 in March 2025 (Liberation Day Eve). All three were flat to trending down prior to Liberation Day, all three began to rise steadily thereafter.
Over the baseline period of 2024, the period since Liberation Day, and the past three months in particular, growth in new orders has accelerated. As the category of goods narrows toward those most relevant to reindustrialization, the growth signal also gets much stronger.
Notwithstanding the static capacity utilization, measures of output have turned clearly positive since Liberation Day, reversing long-running declines. The Federal Reserve publishes monthly production indices for the industrial sector overall and manufacturing in particular, indexed to 100 in 2017. Both were flat to down for the decade prior to Liberation Day, but turned positive thereafter.
As compared to a baseline expectation of continued erosion, the sudden return to growth after Liberation Day and the acceleration in recent months is very encouraging.
For the most holistic view of conditions in the manufacturing sector, Purchasing Managers’ Index surveys (PMIs) provide an especially valuable perspective. Both the Institute for Supply Management (ISM) and S&P Global survey a broadly representative sample of purchasing managers at manufacturing firms each month to gauge trends at each stage in the supply chain, from input purchases and employment to orders to output and shipments. These responses are aggregated into Index values, with overall readings above 50 generally indicating expansion.
While both readings remained below 50 for most of the 2022-24 period, they have turned upward since Liberation Day and now sit at their highest levels since at least early 2022.
Both PMIs have been higher since Liberation Day than before, moving above 50 and improving further in the most recent months. “The level of positive sentiment was the highest for eight months amid expectations of new product launches and business expansion plans,” reported S&P Global in its most recent release. ISM found that “economic activity in the manufacturing sector expanded in February for the second straight month,” after having reported that result only once in the 38 months prior.
Investment
Supporters say: Tariffs encourage exporters in other countries to relocate production into the United States and domestic firms to expand. If the market has confidence that the new status quo will persist, it will drive substantial increases in investment.
Detractors say: For all the reasons that tariffs would weaken the sector, they also make it an unattractive place to build. Investment should slow and foreign firms should steer clear altogether.
Reality is: Too soon to tell. Investment has held steady and ticked up in some cases, but a broad-based surge is not yet evident.
While increased activity in the manufacturing sector is encouraging, rebuilding the American industrial base requires intensive capital investment in expanding existing factories and building new ones. Only with that investment can domestic manufacturers deliver major productivity gains, steadily rising output, and higher employment at better wages.
Investment takes time. Firms must assess the changes in policy environment and prices, revise their strategies, and develop detailed plans before the first shovel hits the ground. For the hundreds of billions of dollars in commitments from foreign countries to invest in the United States, deals must be finalized and governments must act before capital can begin flowing. The U.S.-Japan deal provides a good illustration: The framework for $550 billion of investment first announced in July 2025 gave rise to an initial $36 billion of specific planned investments in February 2026, none of which would yet appear in the economic statistics.
Further confounding the data, investment had already begun to surge during the Biden administration in response to the CHIPS and Science Act (for semiconductors) and the Inflation Reduction Act (for green energy). Investment in semiconductor fabs appeared already to have peaked in mid-2024, and Trump administration policies pulled back on IRA incentives. Declines from those highs would create a significant headwind for investment growth. Conversely, the boom in data center construction has driven an enormous increase in capital investment that makes growth appear more impressive, but likewise cannot fairly be attributed to tariffs or the broader effort at reindustrialization.
The best view of investment in the industrial sector comes from the Bureau of Economic Analysis’s quarterly GDP reporting, which provides specific figures for investments in manufacturing structures and industrial equipment. Complementary Census Bureau data separates manufacturing structures for the electronics industry, allowing for the calculation of investment in manufacturing structures excluding electronics (and thus semiconductors). The chart below shows trends in these three data series, as well as for the new orders of industrial machinery mentioned above.
The blue line, for all manufacturing structures, shows a dramatic surge in 2022-23, peaking in early 2024 and then beginning to decline. Excluding semiconductors yields the red line, which begins its own ascent in 2022 and reaches a similar peak, but then holds steady and in fact increases after Liberation Day. Investment in industrial equipment and new orders for industrial machinery show upticks in more recent months.
All this leaves the investment picture mixed. A tariff signal is difficult to discern in manufacturing structures, given the disproportionate activity in semiconductors before President Trump had taken office. Other manufacturing structures show growth, but less after Liberation Day than before. Industrial equipment achieves faster growth after Liberation Day, but has ticked down in the most recent months. New orders of industrial machinery show a very strong upward trend, but this category is much smaller, and may say more about the shift from foreign to domestic sourcing (discussed above) than about net increases in investment.
On one hand, it is far too early to draw conclusions about whether the investment payoff will come. The enormous, credible, but mostly still pending commitments from countries like Japan, Korea, and Taiwan, and from firms in industries from aluminum to semiconductors to pharmaceuticals to critical minerals, suggest that an absence of investment already underway may say little about investment likely to occur. On the other hand, a year is enough time to begin deploying capital—certainly on expansions. Detractors might fairy ask why the signal isn’t stronger.
One likely issue is the instability that has accompanied trade policy, with frequent changes in tariff levels and deal terms, and without the congressional action that would solidify a commitment to greater protectionism. President Trump’s continued interest in a grand bargain with China, perhaps even including substantial Chinese investment into the American economy, also discourages large investments and encourages instead an attitude of wait-and-see.
Investment will be the most important measure to follow in the coming year. If commitments become projects and capital expenditures turn higher, the case for tariff success will remain strong. If the investment fails to materialize, the case will weaken considerably.
Manufacturing Productivity & Economic Growth
Supporters say: Tariffs should create strong incentives to improve manufacturing productivity. They may impose some drag on economic growth in the short run, but their effects on investment should boost growth in the long run.
Detractors say: Tariffs protect inefficient producers from competition and raise the tax burden on the economy. They should discourage productivity gains in manufacturing and lead to an economic slowdown, perhaps even a recession.
Reality is: Manufacturing productivity improved substantially after Liberation Day, posting rarely seen gains. Economic growth also accelerated slightly. Results in Q4 were weaker, due in part to the government shutdown.
The downward trend in manufacturing productivity over the past decade has been one of the bleakest signs for the sector and a constant reminder that its problem is not rapid technological change and high levels of automation, but rather active disinvestment in the face of deindustrialization. But whereas productivity fell in 2024, it rose substantially after Liberation Day.
A look at gross domestic product alongside manufacturing productivity tells an interesting story as well. While GDP had been rising independent of stagnant manufacturing productivity over the prior decade, the two measures rose in tandem in recent months.
As compared to a decline over the prior decade and prior year, manufacturing productivity grew at an annualized rate of 1.6% during the three quarters after Liberation Day—this despite a decline in the fourth quarter. The measure can be volatile from quarter to quarter, so it will be important to see whether productivity rebounds upward again in upcoming readings.
GDP growth likewise improved in the quarters after Liberation Day, confounding predictions of a slowdown or even a recession. The much lower reading in Q4 is attributable in part to the government shutdown.
Employment & Wages
Supporters say: The short term effects of tariffs on employment and wages are likely to be mixed. Rising demand for domestic production should favor increases, while higher input prices could discourage growth. In the long-run, as investment occurs and capacity expands, employment and wages should rise robustly.
Detractors say: Tariffs should harm employment and wages, causing substantial job losses and declining real incomes.
Reality is: Short run labor market outcomes are consistent with the expectations of tariff supporters. The employment declines of recent years slowed, but did not yet reverse. Wage growth remained similar to historical averages, though below the prior year’s levels. Predictions of major adverse effects did not materialize.
Tariff detractors have seized on declines in total manufacturing jobs as proof of the policy’s failure. But those arguments ignore other labor market developments, historical trends, and the plausible timeline on which tariffs should lead to substantial employment gains.
Economy-wide, job growth has been low since Liberation Day, but the unemployment rate has not risen much.
Both the traditional U-3 measure of unemployment and the broader U-6 measure of underemployment show little change since Liberation Day. Both measures performed better after Liberation Day than in 2024 and both have tightened in the past few months.
The labor market has remained fairly tight, even with low job growth, because the civilian labor force has also stopped growing due to aggressive immigration enforcement that ended the influx of illegal immigrants and initiated a period of net out-migration. The blue line (labor force) and red line (employment) leveling off together around the time of Liberation Day likely has little to do with tariffs and much to do with other Trump administration policies.
The yellow line represents manufacturing jobs and begins its decline in 2022. No discernible negative trend emerges after Liberation Day.
In fact, the decline in manufacturing employment slowed substantially after Liberation Day and slowed further in recent months, as employers also began to report increasing job openings. If tariffs have affected jobs thus far, it has been in the direction of beginning to turn manufacturing employment around.
When it comes to wages—overall, in the manufacturing sector, and for non-supervisory workers in the sector—no major pattern emerges, nor would tariff proponents expect one in the first months of resetting the global trading system. The declines in real incomes predicted by detractors are not present.
Trade Deficit
Supporters say: Tariffs can quickly shift bilateral imbalances from high-tariff sources to low-tariff ones. They will help to reduce the total trade deficit more slowly, as new domestic production comes online.
Detractor say: Trade deficits are a function of savings imbalances, so tariffs will do nothing to address them, or can even lead to higher trade deficits as they make exporters less competitive. The deficit would only fall because of declines in overall trade or a broader economic slowdown.
Reality is: Too soon to tell.
In the short run, trade deficit figures may be misleading in either direction. On one hand, “frontrunning,” where importers rush to bring goods into the country before tariffs take effect, can make deficits look much larger pre-tariff and much smaller post-tariff, but this would not signal success. On the other hand, successfully attracting large amounts of foreign investment into the country may push the trade deficit higher initially, even as the activity marks major progress toward long-run balance. Trade figures suffer from other month-to-month volatility as well.
The first impression given by the chart tells the correct story for both the overall deficit and the goods deficit: a lot of noise, little signal in the early stages of resetting the global trading system.
Two points should be made about the trade deficit at this early stage. First, the differentially higher tariffs on China are successfully pushing supply chains out of China. Unlike the global figures, the trade deficit with China shows no sudden widening from frontrunning ahead of Liberation Day. Rather, a trade deficit that had been widening over the course of 2023 and 2024 reverses course and narrows to a smaller imbalance than had been recorded in a long time.
The second important point is that, while the trade deficit’s long-term trend remains to be seen, the detractors have already been proven wrong about the mechanisms by which they predicted failure. Tariffs were supposed to lead to a stronger dollar, negating their impact and making U.S. exports less competitive. Instead, the dollar weakened. Tariffs were supposed to prompt retaliation. Instead, trading partners came to the table and struck deals. Tariffs were going to slow the economy, perhaps trigger a recession. Instead, the economy has performed at least as well after Liberation Day as before.
Conclusion
One year after Liberation Day, success has not yet been achieved. No serious supporter of reversing globalization, rebalancing trade, and rebuilding the American industrial base envisioned declaring “Mission Accomplished” at this stage. But the upfront costs have been much lower than many supporters would have anticipated, the manufacturing sector has gained strength, and most indicators suggest the effort is on track—or at least that it was prior to the start of war in the Middle East.
Conversely, the narrative and predictions offered by tariff detractors have proved entirely wrong. As Harvard University’s Jason Furman observed in the New York Times, “In part it’s because economists, including me, suffer from tariff derangement syndrome.” Much has been written about inflation’s mysterious failure to surge. Unemployment is low, the stock market is up, manufacturers are optimistic. The argument has been reduced to asking why more new jobs have not been created in factories that no one thought would yet be open, which is not a very good argument.
The case for reindustrialization has always been one of accepting necessary short term costs that would lead to much larger long-term benefits: in essence, a case for investment. This contrasts with the bet on globalization’s short term maximization of consumption, which yielded immediate benefits in the form of cheap stuff, even as it eroded the basic prerequisites of strong communities, a growing economy, and a resilient nation.
For the remarkably low costs thus far incurred, even modest gains would offer a strong return on investment. The upside story remains far better.
