As President Donald Trump ramped up new tariffs last year, many economists were quick to warn that prices and unemployment would rise. With most of the economic results for 2025, it appears these forecasters are getting partial credit.
Although prices for some imports like beef, coffee and tomatoes rose significantly last year, overall price increases were little changed. The same cannot be said of the job market.
Last year, average monthly job growth was the weakest in decades outside of recession years. Additionally, the unemployment rate increased by 0.4 percentage points to 4.4% in 2025, according to the December jobs report released Friday.
Even though the labor market had already tightened by 2025, Trump’s massive tariffs and his many subsequent adjustments didn’t help.
With little clarity on Trump’s next move, companies have suspended hiring plans — or, in some cases, laid off workers.
“There is no compelling reason to hire en masse,” said Sean Snaith, an economist at the University of Central Florida. “It’s a rational response to this kind of uncertainty.”
Tariffs have also changed businesses’ calculations about what is and isn’t profitable.
“Businesses are seeing higher prices, which is lowering their profitability; and in terms of new investments, they are hesitant because the tariffs are making many investments that have been profitable unprofitable,” said Dean Baker, senior economist at the Center for Economic and Policy Research.
Customers are also postponing purchases due to the back and forth on pricing tiers. For example, the Federal Reserve Bank of Richmond noted in its recent Beige Book, a compilation of economic anecdotes, that several contacts in the manufacturing sector “said their customers were cutting back on new orders because of uncertainty over tariffs.”
And it’s not just customers who are confused. Trump’s erratic trade policies have also left businesses in a state of paralysis. For the most part, they absorbed higher rates without passing on the higher bills to consumers. This helped to contain inflation.
That could change, however, depending on the Supreme Court’s ruling in a landmark tariff case that could invalidate Trump’s largest levies. If that happens, businesses could even get massive refunds for tariff costs they’ve already paid, although that process could take a long time to sort out.
Ultimately, relatively moderate price increases and slower hiring, while they may seem different, boil down to the same thing: uncertainty.
