As President Donald Trump implemented additional tariffs last year, numerous economists promptly cautioned that both prices and unemployment would experience an uptick. With the majority of the 2025 economic results now available, it appears that those forecasters may receive partial credit for their predictions. Despite notable increases in prices for specific imports such as beef, coffee, and tomatoes last year, overall price changes remained relatively stable. The job market presents a contrasting scenario.
The average monthly job growth observed last year represented the lowest figures in decades, excluding periods of recession. Furthermore, the unemployment rate experienced an uptick of 0.4 percentage points, reaching 4.4% for the year 2025, as indicated by the December jobs report published on Friday. Despite the job market showing signs of tightening as it approached 2025, the implementation of Trump’s extensive tariffs and the numerous adjustments that followed have not provided any relief. Amidst the uncertainty surrounding Trump’s forthcoming actions, businesses have either halted their hiring initiatives or, in certain instances, reduced their workforce.
“There’s no compelling reason to be out there hiring en masse,” stated Sean Snaith. “That represents a logical reaction in the face of such uncertainty.” Tariffs have altered the calculations businesses make regarding profitability. “Companies are experiencing elevated prices, which is adversely affecting profitability; furthermore, regarding new investments, there is a reluctance due to tariffs rendering previously profitable investments unprofitable,” stated Dean Baker. Consumers are delaying their purchases as a result of the ongoing fluctuations in tariff levels. The Federal Reserve Bank of Richmond highlighted in the central bank’s recent Beige Book, a collection of business anecdotes, that multiple manufacturing contacts “said that their customers reduced new orders due to uncertainty about tariffs.”
Moreover, it is not solely the customers who find themselves in a state of confusion. Trump’s unpredictable trade policy has resulted in businesses experiencing a significant degree of paralysis. Generally, they have been absorbing increased tariffs without transferring the higher costs to consumers. This has contributed to the stabilization of inflation rates. The situation may evolve, contingent upon the Supreme Court’s decision in a pivotal tariff case that has the potential to nullify Trump’s most consequential tariffs. Should that occur, firms may potentially receive substantial reimbursements for the tariff expenses they have previously incurred, although the resolution of that process may require considerable time. Ultimately, the relatively subdued price increases and the deceleration in hiring, while they may appear distinct, can be attributed to a common factor: uncertainty.