Wong Flags Wage, Hiring Risks After US Tariff Decision

The recent announcement by President Donald Trump of sweeping new tariffs has sent shockwaves through the global economy, with significant implications for the US labor market. The tariffs, which include a 10% baseline tariff on all imports and "discounted reciprocal tariffs" on key trading partners like China, Japan, and the European Union, are expected to have profound effects on wage growth and hiring trends. As the dust settles on these new trade policies, economists and industry experts are warning of potential risks to the labor market, particularly in sectors heavily reliant on international trade.



The immediate impact of the tariffs is likely to be felt in the manufacturing and industrial sectors, which are already grappling with increased input costs due to tariffs on steel and aluminum. These sectors, which employ millions of workers across the US, are now facing the prospect of reduced hiring and potential layoffs as companies struggle to absorb the higher costs. "The strength of the consumer is coming down to the jobs market," said Sarah House, an economist at Wells Fargo. "And it’s increasingly perilous."

The technology sector, which has a high exposure to overseas profits, is also likely to be affected. Companies with flexible supply chains may be able to redirect procurement to domestic suppliers or non-tariffed countries, but those with specialized input requirements or capital-intensive production processes may struggle. This could lead to reduced hiring and potential layoffs in the tech sector, which has been a significant driver of job growth in recent years.

The long-term economic consequences of the tariffs are also a cause for concern. The tariffs are expected to raise prices for consumers and businesses, leading to higher inflation and reduced GDP growth. Morgan Stanley Research has estimated that the tariffs could add as much as 1.0–2.5 percentage points to inflation, making it difficult for the Federal Reserve to respond aggressively to counteract economic weakness. The odds of a US recession are now up to 40% from 25%, and "stagflation" (in which growth slows as inflation persists) is up to 30%.

The tariffs are also expected to reduce after-tax income by an average of 1.9 percent and amount to an average tax increase of more than $1,900 per US household in 2025. This reduction in disposable income could lead to decreased consumer spending, further impacting hiring trends and wage growth across various sectors. "If the economy isn’t growing as fast, or it isn’t growing at all, you don’t need as many workers," said House.

In response to the tariffs, some countries have already indicated that they will reduce the tariffs they apply to US imports, while others are preparing for further countermeasures to protect their interests and businesses. The European Commission President Ursula von der Leyen said, "We are already finalizing the first package of countermeasures in response to tariffs on steel, and we are now preparing for further countermeasures to protect our interests and our businesses if negotiations fail."

As the global trade war escalates, investors and industry experts are urging caution. "The risk of recession increases every day that these high tariffs are in force," said Kristina Hooper, Chief Global Market Strategist at Invesco. "We anticipate significant volatility and downward pressure on risk assets in the near term."

In conclusion, the newly imposed tariffs by President Trump are expected to have significant impacts on the US labor market, particularly in terms of wage growth and hiring trends. The sectors most likely to be affected include manufacturing, industrial, and technology, which are heavily reliant on international trade. The long-term economic consequences of the tariffs are also a cause for concern, with increased inflation, reduced GDP growth, and an increased risk of recession. As the global trade war continues to unfold, investors and industry experts are urging caution and calling for a "wait and see" approach.