It has been a full year since former US President Donald Trump rolled out a significant new set of import taxes, and the economic consequences are now coming into sharp focus. Contrary to initial fears, the impact has been lopsided, with the labour market bearing a much heavier brunt than consumer prices.
Jobs vs. Prices: A Diverging Story
When the tariffs were first announced, many experts predicted a twin blow of rising inflation and increasing unemployment. Fresh data from 2025, however, reveals a more nuanced picture. While the cost of specific imported items like beef, coffee, and tomatoes climbed sharply, the overall pace of price increases across the economy stayed relatively stable.
The story for American workers, however, is markedly different. As reported by CNN, the labour market weakened significantly. Average monthly job growth in 2025 slumped to its lowest level in decades, excluding periods of actual recession. The official December jobs report, released recently, showed the unemployment rate climbing by 0.4 percentage points over the year to reach 4.4%.
Uncertainty Freezes Hiring and Investment
Although hiring had begun to slow before 2025, Trump's broad tariffs and their frequent adjustments intensified the pressure. Faced with unpredictable shifts in future trade policy, numerous businesses put recruitment on hold, and some even started cutting staff.
"There’s no compelling reason to be out there hiring en masse," explained University of Central Florida economist Sean Snaith. "That is a rational response when you’re dealing with this kind of uncertainty."
This uncertainty has also warped corporate decisions on spending and profits. Dean Baker, a senior economist at the Center for Economic and Policy Research, told CNN that companies are facing squeezed profitability from higher costs and are hesitant to make new investments because tariffs can turn previously profitable ventures into money-losers.
Consumers and Companies in a Holding Pattern
The ripple effects extend to demand. Customers are postponing purchases as tariff levels change, creating a softness in the market. The Federal Reserve Bank of Richmond's latest Beige Book noted that several manufacturing contacts reported customers cutting back on new orders due to tariff uncertainty.
Confusion reigns not just for consumers but for businesses too. Trump's unpredictable trade moves have left many firms unsure how to react. Interestingly, CNN reported that many have so far chosen to absorb the higher costs from tariffs instead of passing them fully to consumers, a move that has helped prevent a wider inflationary spike.
The current economic balance could be upended by a major Supreme Court case that may overturn Trump's most significant tariffs. If the levies are struck down, companies could be in line for substantial refunds on duties already paid, though untangling those claims is likely to be a lengthy process.
