A recent report by Goldman Sachs has analyzed the impact of President Donald Trump's tariffs on the U.S. labor market. The study, led by economist Jan Hatzius, suggests that while tariffs could lead to an increase in manufacturing jobs, the overall effect on employment across the economy is expected to be negative.
Goldman Sachs reviewed various historical and academic studies concerning the effects of tariffs. They noted that tariffs can be beneficial for nascent industries or those with high demand elasticity, but the broad-based tariffs implemented by the Trump administration do not align with these characteristics. The report estimates that the planned increase in the effective U.S. tariff rate by 15 percentage points could create approximately 100,000 new jobs in protected manufacturing sectors. However, this potential growth is overshadowed by an anticipated loss of around 500,000 jobs in downstream industries due to increased input costs resulting from the tariffs.
The economists assert that the net effect of these tariffs could result in a reduction of approximately 400,000 jobs in the U.S. economy, even after considering the positive impact on manufacturing employment. The analysis highlights that tariffs are essentially taxes on imports, which importers typically pass on to consumers, leading to higher prices.
While the report acknowledges instances in history where targeted tariffs have successfully bolstered domestic manufacturing, it emphasizes that the current tariffs lack the specificity needed to achieve similar outcomes. The broad application of these tariffs is likely to create more challenges than benefits, suggesting a negative overall impact on employment levels. Goldman Sachs also expressed uncertainty regarding the long-term consequences of such significant tariff increases, forecasting a 45% probability of a recession in the near future.