Trump's tariffs might be doing more damage to US economy than we thought
President Donald Trump's sweeping reciprocal tariffs may have slowed job growth in the U.S. in 2025, an analysis by the Federal Reserve Bank of Kansas City suggests. The economists noted that employment growth slowed from 170,000 per month in 2024 to only 75,000 per month through August 2025, and part of that was domestic businesses scaling back to cope with the effects of the tariffs. However, the bank noted that among other reasons behind the slowed growth were increased adoption of artificial intelligence, an aging population, and reduced immigration.
"Overall, our findings suggest — at least thus far — domestic firms might have added fewer jobs in response to tariffs, similar to the employment effects of the 2018 tariffs," the economists wrote in their report, according to Fox Business. In the bank's analysis, a sector's exposure to imports was used as a proxy to see how vulnerable the businesses were to tariffs. While all sectors added fewer jobs than in the previous two to three years, the data suggest that higher exposure led to the largest reduction in job growth.
"Therefore, tariffs have likely reduced employment growth, though there is considerable uncertainty around the exact effect, and we cannot rule out that tariffs had no direct effect on employment growth," the economists added. The analysis also estimated how many jobs the U.S. economy could have added without the tariffs suppressing hiring. Kansas City Fed economists estimate that employers could have added 19,000 more jobs each month, on average, from January 2025 to August 2025 if the tariff effects were completely absent. However, the economists noted that there was uncertainty in this estimate as well. The analysis also suggests that if the size of the labor force remained constant, the tariffs may have increased the unemployment rate by 0.1 percentage points.
As per the latest data from the Bureau of Labor Statistics, the unemployment rate rose to 4.4% in December, after November had an initially reported 4.6% rate, which was later revised to 4.5% after routine population adjustment. Despite the adjustment, the number came around the highest unemployment rate in the country since September 2021, as per Fox.
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