Tariffs and Tax Cuts Gutted Texas Factories, New Data Confirms

The Dallas Fed Texas Manufacturing Index has cratered to -35.8 in April 2025, a gut-wrenching low not seen since the depths of the 2020 pandemic. This isn’t just a number. It’s a siren blaring that the heart of American industry, particularly in a powerhouse state like Texas, is faltering. New orders have collapsed, shipments are drying up, and manufacturers are slashing jobs and hours. For workers, communities, and families who depend on these industries, the stakes couldn’t be higher.

This freefall demands our attention because Texas isn’t an outlier; it’s a bellwether. The state’s sprawling factories and supply chains are woven into the national economy, and their struggles ripple far beyond its borders. The index’s 19.5-point drop from March reveals a toxic mix of soaring raw material costs, supply chain chaos, and a broader economic malaise that’s strangling growth. We’re staring at a crisis that exposes the fragility of an economy left vulnerable by years of misguided priorities.

Advocates for workers and economic justice see this as a wake-up call. For too long, policymakers have leaned on quick fixes like tax cuts for corporations or deregulation, hoping market magic would restore manufacturing’s glory. But the evidence is clear: those strategies have failed. The collapse in Texas underscores the urgent need for bold, worker-centered policies that rebuild industries, protect jobs, and prioritize resilience over short-term profits.

What’s at play here isn’t just economics; it’s a moral reckoning. When factories slow and workers lose hours, entire communities fray. The question is whether we’ll act with the courage to confront this crisis or cling to the same tired ideas that got us here.

The Texas manufacturing slump didn’t come out of nowhere. A perfect storm of factors has converged to kneecap the sector. New orders plummeted by 20 points, signaling that demand is evaporating. Raw material prices have spiked to their highest since mid-2022, driven by tariff hikes and supply chain snarls that show no sign of easing. Manufacturers, already battered by high borrowing costs from the Federal Reserve’s prolonged tight-money policies, are now grappling with an uncertainty index that’s climbing to alarming levels.

Let’s talk about tariffs. The Trump administration’s renewed push for aggressive trade barriers, framed as a defense of American jobs, has backfired spectacularly. Instead of spurring domestic production, these tariffs have jacked up input costs, disrupted supply chains, and spooked businesses into delaying investments. The result? A trade deficit that’s ballooning as companies rush to import goods before new levies hit, all while American workers bear the brunt of the fallout.

Then there’s the Federal Reserve. Its high interest rates, sustained through 2023 and 2024 to tame inflation, have choked off investment in manufacturing. Even with recent rate cuts totaling 100 basis points, the relief is too little, too late. Manufacturers are still reeling from a capital investment drought, with production levels at multi-year lows. The Fed’s cautious approach, prioritizing inflation over growth, has left industries like Texas manufacturing gasping for air.

But the deeper culprit is a decades-long neglect of workers and communities. Automation and offshoring have gutted manufacturing jobs since the 1970s, shrinking employment from 20 million to under 13 million today. The promise of globalization—cheaper goods, broader prosperity—never materialized for the factory towns left behind. Now, with a projected shortfall of 1.9 million manufacturing workers by 2033, the sector’s labor crisis is a glaring symptom of underinvestment in training and education.

Supporters of the current administration’s economic playbook argue that tariffs, tax cuts, and deregulation will bring manufacturing roaring back. They point to the need for national security and supply chain independence, claiming that reshoring industries is worth the higher costs. But this argument falls apart under scrutiny. Tariffs haven’t revived factories; they’ve inflated prices and disrupted the very supply chains they’re meant to protect. Tax breaks for corporations, like the proposed 15% rate for manufacturers, overwhelmingly enrich executives and shareholders while doing little for workers’ wages or job security.

The idea that deregulation alone can spark a manufacturing renaissance is equally flawed. Rolling back environmental and labor protections doesn’t create sustainable growth; it poisons communities and erodes worker rights. The evidence is stark: after decades of market-driven policies, manufacturing’s share of GDP has dwindled, and job growth has stalled for over two years. Betting on the same trickle-down logic that’s failed for generations is not just shortsighted—it’s a betrayal of the workers who keep this country running.

There’s a better way, and it starts with putting workers and communities at the heart of economic policy. The Biden administration’s investments in clean energy and infrastructure, through laws like the Inflation Reduction Act and CHIPS and Science Act, show what’s possible when government steps up. These initiatives have poured billions into domestic manufacturing, creating jobs in cutting-edge sectors like semiconductors and renewable energy. Expanding these efforts, with a focus on training programs to close the skills gap, can ensure that workers aren’t left behind in the transition to advanced manufacturing.

Fair trade policies are another critical piece. Rewriting agreements to prioritize labor rights and environmental standards, as championed by leaders like Elizabeth Warren and Bernie Sanders, would level the playing field for American workers. Unlike protectionist tariffs, which punish consumers and businesses alike, smart trade deals can protect jobs without triggering price spikes. Pairing this with robust social safety nets—think universal healthcare and expanded unemployment benefits—would give workers the security to weather economic shifts.

Finally, we need to double down on public investment in education and workforce development. The manufacturing sector’s looming 1.9 million worker shortfall isn’t just a statistic; it’s a crisis of opportunity. By funding apprenticeships, community college programs, and reskilling initiatives, we can equip a new generation for high-paying, high-skill jobs. This isn’t about nostalgia for the factory floors of the 1950s—it’s about building a future where technology and human ingenuity create shared prosperity.

The collapse of the Texas manufacturing index is a warning we can’t afford to ignore. With recession risks climbing—forecasters now peg the odds at nearly 50%—and consumer confidence crumbling, the window for action is narrowing. Every day we delay, more workers lose hours, more factories idle, and more communities slip closer to the edge. This isn’t just about saving an industry; it’s about honoring the dignity of work and the promise of a better future.

We have the tools to turn this around: public investment, fair trade, and a relentless focus on workers. The question is whether we have the will. Let’s choose courage over complacency, action over excuses, and a vision of prosperity that lifts every American. The time to act is now.