Pay BillIn Summary:
The U.S. manufacturing sector continues to show steady momentum as we move into the second half of 2026, with six consecutive months of expansion, even as manufacturers navigate tariff uncertainty, workforce challenges, and a changing tax environment. This article highlights key trends affecting the industry, including potential tariff refund opportunities, new tax incentives under the One Big Beautiful Bill Act (OBBBA), and strategic considerations that can help manufacturers strengthen operations and position their businesses for long-term growth.
Written by Ryan Carter, CPA, BMSS Senior Manager
As U.S. manufacturers move into the second half of 2026, the manufacturing industry continues to navigate a business environment that presents both opportunities and challenges. After ten consecutive months of contraction, the manufacturing sector has now recorded six straight months of expansion, with the ISM Manufacturing PMI reaching 53.3 in June. This sustained growth indicates that manufacturing activity continues to strengthen, even as businesses face ongoing tariff uncertainty, workforce pressures, and an evolving tax landscape that requires careful planning.
Manufacturing Growth Continues Despite Economic Challenges
Recent manufacturing data offers encouraging signs for companies across the industry. The ISM Manufacturing PMI has remained above 50, the benchmark for expansion, for six consecutive months, while 14 of 17 manufacturing subsectors reported growth in June. Industries including primary metals, fabricated metal products, computer and electronic products, and transportation equipment all contributed to the sector’s continued momentum, demonstrating that growth is occurring across a broad range of manufacturing operations.
Despite these positive indicators, manufacturers should remain cautious. Factory job cuts in June approached levels not seen since the end of the global financial crisis in 2009, excluding the workforce reductions experienced during the COVID-19 pandemic. At the same time, the U.S. economy expanded at a modest annualized rate of 1.6% during the first quarter, reinforcing the importance of strategic planning, operational efficiency, and sound financial management as manufacturers prepare for the remainder of the year.
Tariffs Continue to Impact Manufacturing Operations
Tariff policy remains one of the most significant sources of uncertainty for U.S. manufacturers. The administration’s use of multiple statutory authorities, including the International Emergency Economic Powers Act (IEEPA), Section 301, and Section 232, has created a complex and frequently changing compliance environment that affects supply chains, purchasing decisions, and long-term capital investments.
One recent development deserves immediate attention from importers. Companies that paid certain IEEPA-related tariffs may now qualify for refunds following a U.S. Supreme Court ruling that determined the administration exceeded its authority under the 1977 law. U.S. Customs and Border Protection (CBP) is processing refund requests through its CAPE system, and as of mid-May, the agency had finalized more than $35 billion in refunds across millions of shipments. Businesses that served as the Importer of Record on eligible entries should review their qualifications as soon as possible because documentation requirements are specific and filing deadlines are important.
Beyond potential refunds, many manufacturers continue to overlook valuable long-term tariff mitigation strategies such as duty drawback, foreign-trade zones (FTZs), and customs valuation planning. When incorporated into a comprehensive tax and operational strategy, these tools can deliver significant and lasting value when integrated into a broader tax and operations strategy.
OBBBA Tax Incentives Create Planning Opportunities for Manufacturers
The One Big Beautiful Bill Act (OBBBA) introduced several tax provisions that may significantly benefit manufacturers. The restoration of immediate domestic research and experimentation (R&E) expensing under Section 174A, the reinstatement of 100% bonus depreciation under Section 168(k), Qualified Production Property (QPP) under IRC Section 168(n), and the continuation of key energy credits all present opportunities for manufacturers to reduce tax liability while freeing capital for future investments.
Although many businesses are aware of these provisions, few have updated their tax planning strategies to maximize the available benefits. As the second half of 2026 progresses, manufacturers should evaluate these incentives alongside their capital investment, equipment purchases, facility improvements, and long-term growth plans to ensure they are making informed financial decisions.
Manufacturing Advisory and Tax Services from BMSS
Manufacturers continue to face changing economic conditions, supply chain challenges, tax law updates, and evolving regulatory requirements. Successfully navigating these issues requires more than compliance. It requires strategic guidance from professionals who understand the manufacturing industry and its unique operational and financial demands.
BMSS serves more than 250 manufacturing and distribution clients, ranging from startups to companies with revenues exceeding $600 million. Our team works closely with manufacturers to address tariff refund opportunities, maximize available tax incentives under OBBBA, improve financial performance, strengthen operational efficiency, and develop strategies that support long-term growth.
If your manufacturing business is evaluating tariff refund eligibility, planning capital investments, reviewing tax strategies, or preparing for future growth, contact your BMSS professional by visiting our website or call (833) CPA-BMSS to connect with our manufacturing specialists.
