Tariffs may have cost US economy thousands of jobs monthly, Fed analysis reveals
Kansas City Fed economists estimate economy could have added 19,000 more jobs monthly without tariff effects
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An analysis by the Federal Reserve Bank of Kansas City found that tariffs may have slowed job growth in the U.S. economy in 2025 after higher import taxes were implemented.
Economists at the Kansas City Fed noted that employment growth slowed markedly from 170,000 per month in 2024 to only 75,000 per month through August 2025, a trend that Fed policymakers have monitored closely and which helped prompt three interest rate cuts at the central bank's meetings in September, October and December.
The report notes that tariffs can theoretically increase or decrease the demand for labor in the economy and that the higher tariffs implemented by the Trump administration are occurring alongside other developments affecting the workforce, such as the emergence of artificial intelligence (AI), 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 concluded.
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Tariffs may have suppressed job growth in the U.S. economy, according to the Kansas City Fed's analysis. (Allison Joyce/Bloomberg via Getty Images)
The analysis used a sector's exposure to imports as a proxy for how exposed businesses are in those industries, finding that job growth in those industries was slower than those without higher exposure to tariffs.
The economists found that job growth in nearly all sectors in 2025 was below the 2022-23 average, reflecting the strong post-pandemic recovery in those earlier years as well as the recent slowdown.
They also found that sectors with greater exposure to tariffs faced a greater decline in job growth, which they attributed to direct tariff effects.
SMALL BUSINESSES LEAD NOVEMBER JOB LOSSES AS TARIFF UNCERTAINTY WEIGHS ON HIRING
Tariffs are taxes on imported goods that are paid by the importer, who typically passes some of the higher costs on to consumers through higher prices. (Brandon Bell/Getty Images)
"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 noted.
Additionally, the analysis estimated how many additional jobs might have been added to the economy without direct tariff effects suppressing hiring.
TARIFFS HAVE SURPRISING EFFECT ON UNEMPLOYMENT AND INFLATION PATTERNS, FED ANALYSIS REVEALS
President Donald Trump unveiled significantly higher tariffs in April 2025. (Chip Somodevilla/Getty Images)
The Kansas City Fed economists estimated that the economy could've added 19,000 more jobs each month, on average, from January 2025 to August 2025 without tariff effects, though they noted that there is considerable uncertainty about that estimate.
Based on that average, it suggests that if the size of the labor force were to hold constant, the tariffs may also have increased the unemployment rate by 0.1 percentage points.
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The most recent data from the Bureau of Labor Statistics showed that the unemployment rate rose to 4.4% in December, after November had an initially reported 4.6% rate, the highest since September 2021, which was revised down to 4.5% after a routine population adjustment in the latest report.