Earlier this year, Conexus Indiana launched the President & CEO Network, bringing together executives of small and mid-sized advanced manufacturing and logistics (AML) companies, which make up more than 80% of the industry, for candid, peer-to-peer conversation.
Four themes surfaced consistently across those conversations, regardless of industry sector, company size or location in Indiana. This series examines each theme in turn, with direct insights from participating Presidents and CEOs.
The first theme: tariffs, material costs and pricing volatility
What we are hearing most often:
- Costs are climbing consistently. Metals, tooling, freight and electronics are all moving, and rarely in the same direction at the same time.
- The tariff structure itself has become a cost. Rates layered by product, country and classification code create a navigation burden that hits smaller manufacturers hardest, since few have a dedicated trade compliance function.
- Quoting has become a risk-management exercise. One member cut its standard quote window from 30 days to 10 to hedge against mid-quote price escalation. Government and grant-funded contracts, which often require firm, long-term pricing, are the hardest to manage under these conditions.
- Refund recovery is murky. Members who imported through dealers or brokers rather than as the importer of record are finding it difficult to determine who is entitled to a refund, or how to claim one. Meanwhile, enforcement is intensifying, with more inspections and steeper penalty exposure for misclassification.
Across conversations about tariffs, material costs and pricing volatility, one theme surfaced more consistently than any other. AML leaders explained that while increased cost of materials, tariffs, and freight create business challenges, it is actually the uncertainty of what costs will be next quarter that creates the most significant challenges for businesses.
Specifically, members say they can plan for almost any condition if they know the parameters. It is the volatility, not any single price level, that stalls quoting, contracting and capital decisions.
Examples of material cost volatility for Indiana manufacturers
One Indiana precision manufacturer has watched a key input go from $20 a pound to $200 a pound in the span of a year. Another manufacturer described aluminum costs up roughly 30% since December, with steel tubing now bought “hand-to-mouth” from a shrinking pool of three to four suppliers. A third flagged that the memory chip market has effectively seized up, with no reliable delivery dates or firm pricing available.
It is not only raw materials. One Elkhart-area manufacturer noted that delivery fees from its utility provider now nearly match the cost of the natural gas itself, a quiet but real addition to the freight and energy surcharges piling on almost every invoice. Freight fuel surcharges, members agree, tend to go up and rarely come back down.
Which Indiana manufacturers are most exposed to tariffs
Some members are more exposed than others. One central Indiana manufacturer is especially exposed because a handful of countries, China chief among them, control the global refining market for the specific minerals its products depend on. For that company, tariff policy is not an abstract cost line, but a structural risk to sourcing itself.
Automotive suppliers in the network are feeling a related but distinct pressure. Several members with heavy concentration in automotive, in some cases 80% to 90% of revenue, are managing tariff volatility on top of a slower structural shift away from combustion vehicles. For them, the response has increasingly been diversification into aerospace, defense and renewable energy—sectors less exposed to the same trade dynamics.
Where AML leaders are finding traction
The conversations were not all about headwinds. Indiana’s AML community is skilled at navigating change, and many are already finding real footing. A couple of clear patterns emerged in conversations about what mitigating strategies are working:
- Some have stopped trying to compete on commodity cost altogether. One member has consistently won quotes against competitors in India, Turkey, and the United Kingdom, not on price, but on capability, specialization and speed. When the conversation is not solely centered on cost, tariff swings matter less.
- Pricing discipline is paying off. Members who folded surcharges into baseline pricing early, shortened quote windows and renegotiated terms with overseas suppliers have absorbed less of the volatility than those who waited.
- Trade tools are being put to work. Foreign trade zones, bonded warehouses and duty-drawback programs came up repeatedly as underused options worth a serious look, especially for members moving significant volume through customs.
The bottom line
Indiana AML leaders agree that tariff policy is not going away as a planning variable and most members are no longer waiting for clarity before acting. The companies gaining ground are the ones treating pricing, sourcing and trade compliance as active disciplines rather than one-time adjustments.
Next in the series: what Indiana’s manufacturing leaders are saying about the labor market, and why the constraint is not about pay alone.
Interested in meeting with a network of your Indiana AML peers for open discussion and collaboration? Learn more about Conexus Indiana’s Advanced Industries Council and President & CEO Network.