The tariffs of 2025: A tale of jobs lost, not shopping carts emptied. While many predicted soaring prices, the reality is more nuanced. Economists had a mixed bag of predictions, and the economic data from 2025 reveals a complex picture. Let's dive in!
While some import prices, like those for beef, coffee, and tomatoes, did increase, overall price hikes remained relatively stable. But here's where it gets controversial... the job market tells a different story.
Last year witnessed the lowest average monthly job growth in decades, excluding recession years. Furthermore, the unemployment rate climbed by 0.4 percentage points to 4.4% throughout 2025, according to the December jobs report.
Even though the job market was already tightening before 2025, the extensive tariffs implemented by President Trump and subsequent adjustments haven't helped.
With uncertainty surrounding future moves, businesses have either paused hiring plans or, in some instances, laid off workers. Sean Snaith, an economist at the University of Central Florida, noted, "There’s no compelling reason to be out there hiring en masse." This is a rational response in the face of such uncertainty.
Tariffs have also reshaped businesses' calculations regarding profitability. Dean Baker, a senior economist at the Center for Economic and Policy Research, explained that companies are experiencing higher prices, which is depressing profitability. Consequently, they're hesitant about new investments because tariffs render many previously profitable ventures unprofitable.
Customers are also delaying purchases due to the fluctuating tariff levels. The Federal Reserve Bank of Richmond's recent Beige Book highlighted that several manufacturing contacts reported that their customers decreased new orders due to tariff uncertainty.
And this is the part most people miss... Trump's unpredictable trade policy has left businesses in a state of paralysis. For the most part, they've been absorbing the higher tariffs without passing the increased costs onto consumers, which has helped keep inflation in check.
That could change, though, depending on how the Supreme Court rules in a landmark tariff case that could invalidate Trump’s most significant levies. If that happens, companies could even get massive refunds for the tariff costs they’ve already paid, although that process could take a lot of time to sort out.
Ultimately, the relatively muted price increases and the slower hiring, though they might look different, come down to the same thing: uncertainty. What are your thoughts on this? Do you agree that the impact on jobs is more significant than the impact on consumer prices? Share your opinions in the comments below!
