On March 4, 2025, President Donald Trump addressed a joint session of Congress at the U.S. Capitol, touching on his vision for tariffs as catalysts for job creation.
He confidently proclaimed, "Tariffs will create jobs like we have never seen before." But not everyone agrees with this optimistic outlook.
Economists are critical, suggesting that the tariffs introduced under Trump’s administration might actually do more harm than good to the job market. Mark Zandi, the chief economist at Moody’s, highlighted this perspective, stating bluntly, "It costs American jobs." He painted a dire picture of broad-based tariffs, calling them a "lose-lose" situation. In Zandi’s view, "There are no winners here in the trade war we’re seemingly being engulfed in."
A Barrage of Tariffs
Since stepping into office, Trump’s administration has been rolling out tariffs like never before. He slapped a 20% additional duty on Chinese imports and hiked tariffs to 25% on goods from Canada’s and Mexico’s, the U.S.’s largest trading allies. While these took effect, some products saw temporary reprieves as the White House pushed back duties on them by a month.
Come Wednesday, tariffs on steel and aluminum will rise to 25%, and whispers of duties on copper, lumber, and reciprocal tariffs for all trade partners loom on the horizon.
The theory behind these protective measures seems straightforward: tariffs should bolster U.S. companies by making foreign goods more costly to import. This price hike theoretically makes American products more competitive, fostering domestic job growth.
There’s evidence that some sectors do benefit. For instance, during Trump’s previous term, a report by the U.S. International Trade Commission found that steel tariffs slashed imports by 24% on average from 2018 to 2021. This bolstered U.S. steel prices and increased domestic production—and by extension, jobs—by around 2%.
Newly minted tariffs set for March 12 are likely to mirror these outcomes, as noted by Shannon O’Neil and Julia Huesa from the Council on Foreign Relations. Rising steel prices could indeed benefit producers and potentially expand the workforce within the steel sector, which currently employs about 140,000 people.
Tariffs Have ‘Collateral Damage’
Although tariffs can cushion faltering U.S. industries, they also come with significant drawbacks. Lydia Cox, an economics professor and trade expert at the University of Wisconsin-Madison, argued this point in a 2022 paper.
She emphasized that while these trade barriers might protect certain sectors, they inflate input costs elsewhere, making other American industries more susceptible to foreign competition. According to economists, these ripple effects hurt the wider economy and can lead to job losses.
Take the steel tariffs, for instance. They raise expenses for industries that rely heavily on steel, such as manufacturing and various steel-intensive sectors like automotive, agricultural equipment, home appliances, construction, and oil drilling.
Bridging history, Cox revisited the fallout of steel tariffs enacted by President George W. Bush in 2002-03. Her research found that these tariffs indirectly led to the loss of 168,000 jobs annually in steel-dependent industries, surpassing the entire workforce in the steel sector.
"Tariffs are a rather blunt policy tool," Cox remarked during a Harvard Kennedy School webinar, noting their tendency to inflict considerable "collateral damage."
Why Tariffs Are a ‘Tax on Exports’
Among the consequences of these trade measures are retaliatory tariffs from other countries, which hike costs for U.S. exporters attempting to sell abroad. This phenomenon was observed during Trump’s first term when tariffs on goods like washing machines, steel, and aluminum affected $290 billion worth of imports by August 2019.
Such levies effectively acted as a 2% export tax after accounting for retaliations from trading partners, as a 2020 Federal Reserve paper found. "A tax on imports is effectively a tax on exports," Erica York, a senior economist at the Tax Foundation, explained in a piece for the Cato Institute.
From past experiences laid bare by economists Larry Summers and Phil Gramm in a Wall Street Journal op-ed, the economic hit from Trump’s first-term tariffs far exceeded the financial gains from newly created jobs. Despite this, President Joe Biden maintained most of these tariffs.
The instigators of these barriers are already feeling the heat as trade partners react. China, for example, retaliated with tariffs on key U.S. agricultural exports, while Canada imposed $21 billion worth of duties on American goods such as orange juice and cosmetics.
President Trump, during his congressional address, acknowledged the potential for temporary economic setbacks due to his tariff measures. "There will be a little disturbance, but we are okay with that," he stated. "It won’t be much."
Even though many economists aren’t yet predicting a recession, there’s a palpable sense of trepidation. Speaking in a recent Fox News appearance, Trump didn’t entirely dismiss the notion of an economic downturn but remained confident that the long-term benefits would outweigh any short-term pain. However, analysts caution that if a recession does emerge, the cushioned sectors might not be immune.
According to White House spokesperson Kush Desai, tariffs are part of a historical playbook aimed at industrial growth, harking back to the era of President William McKinley, praised for his protectionist stance.
‘Disappointing Results’ of Trump-Era Tariff Policies
History provides a context of caution with policies like the Smoot-Hawley Tariff of 1930, which instead of bolstering U.S. agriculture, shrank exports and dampened farmer incomes. Economists describe this policy as a catalyst for the Great Depression.
While comparing a policy nearly a century old with today’s economic climate might seem like a leap, recent protectionist policies appear similarly disappointing, as noted by Michael Strain of the American Enterprise Institute.
Strain’s recent findings show that Trump’s initial tariffs led to a net dip in manufacturing employment by 2.7%, even after a modest 0.4% increase in jobs within protected industries. The trade war of 2018-19, Strain argues, didn’t revive domestic manufacturing but rather caused job losses in the broader sector.
As U.S. employment in manufacturing has been on a downward slide since post-World War II, driven mostly by technological advancements, Strain advocates for policies that prepare workers for the future, instead of clinging to past economic doctrines.
"Trade—much like technology—is disruptive, but trying to freeze our economy in time is hardly a wise solution," he cautioned.
