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Upper Midwest manufacturing companies had high hopes for 2025. The Federal Reserve Bank of Minneapolis’ 

 of firms last year reported high optimism despite two consecutive years of decreased activity. 

Those hopes fell flat. For the third year in a row, manufacturing is down in the region. 

Firms across the Ninth District of the Federal Reserve —  which includes Minnesota, Montana, both Dakotas and parts of Wisconsin and Michigan — were asked questions about demand, staffing, production, investment and profits in 2025. The survey included responses from 351 companies. 

“They were pretty bullish, even though 2024 had actually been kind of an even worse year, at least per the results of the survey,” said Joe Mahon, regional outreach director at the Minneapolis Fed. “They ended up having another negative year in terms of sales, in terms of production, in terms of their investment and a bunch of other metrics that we track. But yet their outlook for the year ahead is positive again.”

Mahon said the survey results mirror trends across the country. According to data from the U.S. Bureau of Labor Statistics, manufacturing employment 

In addition to multiple choice questions about growth or contraction, the survey has a spot for comments. Mahon said respondents were critical of tariffs, which they said are driving up costs.  

“The takeaway from this is the biggest impact of tariffs has been on the cost of doing business,  and on both the pricing that they pay for inputs, but also on the prices that they're charging to their customers,” Mahon said. “They're passing a lot of that tariff cost pressure onto their customers.”

Exports of Minnesota agricultural, mining and manufactured goods were down 14 percent in the third quarter of 2025 compared to one year prior, according to data released Thursday from the Minnesota Department of Employment and Economic Development.

“Federally-imposed tariffs and strained international relations with our traditional partners also continue to impact Minnesota's trade with our biggest exports markets," Commissioner Matt Varilek said in 

Even though many manufacturing firms aren’t selling products internationally, Mahon said many are buying their inputs from other countries. 

“Manufacturing … is more and more globally integrated, and so if you start to levy a tax every time something crosses a border, that's just going to add to the price,” he said.

Despite the sore streak, manufacturers are again optimistic for the coming year. Mahon said some firms that he spoke to had better numbers toward the end of 2025 and are banking on that momentum to continue until they’re at least as successful as they were last year.

“But also I just think … entrepreneurs tend to be fairly optimistic by nature,” he said. That's the kind of thing that would make you start your own business, is you probably have a fairly optimistic outlook. So, there might be just kind of an optimistic bias among the group.”

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Companies say tariffs are raising costs and prices, but they’re still optimistic for 2026.

Upper Midwest manufacturing down for third year in a row

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