Manufacturers reported that higher production costs in 2025 led to price increases for customers, with about 67% saying tariffs caused the price hikes.
The findings came from a joint research effort by the Federal Reserve Bank of Minneapolis and the Minnesota Department of Employment and Economic Development (DEED). The survey covered more than 350 manufacturers across the Ninth District, which includes Minnesota, Montana, North Dakota, South Dakota and portions of Michigan and Wisconsin.
Manufacturing activity contracted for a third consecutive year, the study found. Although respondents reported gains in orders, production and employment compared to 2024, all three remained in net negative territory. Investment also declined.
Joe Mahon, director of regional outreach at the Fed, explained that tariffs mostly drove up pricing and business costs, with a smaller impact on operations. About half of the manufacturers reported higher sales prices, and roughly 77% said the cost of imported materials went up. Companies added that the volume of imported components declined as a result of tariffs.
However, manufacturers remain optimistic about their firms in 2026, expecting increases in orders, production, selling prices and productivity—despite anticipating weaker state economies and higher inflation.
