Tariffs Are Hitting U.S. Jobs More Than Prices

New evidence from labor data and official studies points to a clear pattern: the recent tariff wave is squeezing U.S. jobs more than shoppers’ prices. Factory payrolls have weakened even as overall inflation has cooled at times or proved uneven, suggesting companies are absorbing costs, switching suppliers, or delaying pass-through to consumers.

What’s New

U.S. manufacturing employment declined again in December 2025, extending a months-long slide that began last spring, according to federal data reported by Reuters. Factory jobs have fallen for eight straight months, leaving the sector down more than 70,000 positions since April 2025. The broader economy added just 50,000 jobs in December, and the unemployment rate edged down to 4.4%, the Associated Press reported, underscoring a cooler hiring backdrop even as layoffs remain relatively low.

Why Prices Look Resilient

Tariffs typically lift prices by taxing imports. Yet several forces have muted the hit to shopping carts so far. Businesses stocked up ahead of policy changes, re-routed supply chains, and trimmed margins to keep customers. Inflation also cooled notably in early 2025 before the latest duties took hold, giving retailers some cushion.

Historical analysis from the U.S. International Trade Commission helps explain the split: during earlier rounds of steel, aluminum and China tariffs, importers bore nearly the full tariff cost as import prices rose one-for-one with the duties. That dynamic raised input costs but didn’t always translate into broad consumer-price spikes—especially when firms found substitutes or accepted lower margins. At the same time, the ITC found downstream industries faced higher input prices and slightly lower output, hinting at employment pressure even when sticker shock at the register was limited.

Where Jobs Feel The Strain

Manufacturing is especially exposed. Research from Federal Reserve economists examining the 2018–2019 tariff cycle found that protection for some industries was outweighed by higher input costs and foreign retaliation, leading to relative declines in factory employment and output. Those mechanisms rhyme with today’s slowdown in hiring across goods-producing sectors. Downstream production fell 0.6% on average under prior metal tariffs, the ITC reported—small on paper but meaningful across large supply chains.

What To Watch

Legal and market crosscurrents could shape the next phase. The Supreme Court is weighing challenges to aspects of the tariff regime, and any ruling on refund obligations could ripple through budgets and business plans. Meanwhile, price effects remain concentrated: metal-heavy categories, for instance, have seen sharper increases, while overall inflation has been tempered by cheaper energy, cooling rents, and competitive pressure. In short, jobs appear to be carrying more of the adjustment burden than everyday prices—at least for now.

Sources

• US factory headcount falling despite Trump's promised manufacturing boom — Reuters (January 9, 2026)
• Sluggish hiring closes out a frustrating year for job seekers though unemployment slips to 4.4% — Associated Press (January 9, 2026)
• Certain Effects of Section 232 and 301 Tariffs Reduced Imports and Increased Prices and Production in Many U.S. Industries — U.S. International Trade Commission (March 15, 2023)
• Inflation cooled sharply in March ahead of tariffs, according to CPI — The Washington Post (April 10, 2025)
• Bessent says US Treasury can easily cover any tariff refunds — Reuters (January 10, 2026)