Why Tariffs Have Hit Americans' Jobs Harder Than Their Shopping Carts
As President Donald Trump's tariff strategy intensified last year, economists predicted a surge in prices and unemployment. With the 2025 economic data now in, these forecasters are proving partially right.
While prices for imports like beef, coffee, and tomatoes rose significantly, overall price hikes remained modest. However, the job market took a hit.
The average monthly job growth in 2025 was the lowest in decades, excluding recession years. The unemployment rate rose by 0.4 percentage points to 4.4% over the year, according to the December jobs report. This report highlighted a concerning trend in the job market, which had already been tightening up before 2025.
Trump's sweeping tariffs and subsequent adjustments haven't helped the situation. With ongoing uncertainty about Trump's trade policies, businesses are hesitant to expand hiring or invest in new projects.
"There's no compelling reason to hire en masse right now," said University of Central Florida economist Sean Snaith. "Uncertainty is a rational response."
Tariffs have also altered businesses' profitability calculations. Higher prices are squeezing profits, and companies are cautious about new investments due to the unpredictability of tariffs.
"Companies are facing higher prices, which depress profitability, and they're hesitant about new investments because tariffs make many profitable ventures unprofitable," explained Dean Baker, a senior economist at the Center for Economic and Policy Research.
Customers are also holding back on purchases due to the constant tariff changes. The Federal Reserve Bank of Richmond's Beige Book noted that manufacturing contacts reported reduced new orders from customers due to tariff uncertainty.
Trump's erratic trade policy has left businesses in a state of flux. Most have absorbed higher tariffs without passing them on to consumers, helping to control inflation. However, this could change if the Supreme Court invalidates Trump's significant levies in a landmark case.
In conclusion, the muted price increases and slower hiring are ultimately a result of uncertainty. This uncertainty has a significant impact on both the economy and individual businesses, highlighting the complex and far-reaching consequences of trade policies.
