Trump Tariffs Fuel Inflation, Job Losses, and Economic Uncertainty

The Director of the United States Congress Budget Office has stated that the tariffs imposed by the Trump administration are exacerbating inflation. This perspective contrasts with that of many Wall Street analysts, who have been preparing for tariff-driven price increases but have not yet seen them materialize. The Director noted that the U.S. economy has weakened since January, which is expected to put downward pressure on inflation.

The Director also shared long-term views on the impact of Trump's tariffs, stating that these tariffs are expected to reduce the U.S. budget deficit by 400 billion dollars over the next decade by injecting funds into the federal treasury. This would result in 330 billion dollars in fiscal revenue and 70 billion dollars in avoided debt costs, representing a significant reversal in terms of the deficit.

The future of Trump's tariffs remains uncertain. The Supreme Court is scheduled to hear oral arguments in early November, following an appeal by the Trump administration against a lower court ruling that the president had overstepped his authority. The Director described the outcome of the Supreme Court tariff case as "one of the key sources of uncertainty in the economy." However, according to the latest report from the United States Congress Budget Office, this uncertainty may dissipate over time.

In the United States, industries most affected by trade turmoil have hit the brakes on hiring and even begun layoffs, leading to stagnation in the labor market. The latest August employment report showed that the U.S. economy added only 22,000 jobs that month, with hiring slowing to a trickle. Manufacturing, wholesale retail, and energy sectors, which produce goods affected by tariffs, have experienced a wave of unemployment in recent months.

On September 14, executives from these companies stated that the comprehensive tariff policies of the Trump administration have led to increased costs, making it difficult for them to formulate expansion plans. This is the main reason for the layoffs and hiring slowdown. The sluggish labor market has also changed market expectations. Economists believe that the likelihood of the Federal Reserve cutting interest rates at this week's meeting is increasing. Federal Reserve Chairman Powell had previously stated that a slowdown in job growth could offset the inflationary impact of the Trump administration's comprehensive tariff system.

“These tariffs are a drain on American manufacturers like us, with no benefits,” said the CEO of EarthQuaker Devices, a guitar effects manufacturer in Ohio. “This is a sudden tax that hinders our ability to hire and develop.” She revealed that the company has effectively entered a hiring freeze.

Behind the bleak employment data are the struggles of specific industries. According to data from the Bureau of Labor Statistics, the manufacturing sector lost 12,000 jobs in August, bringing the total number of unemployed since the beginning of the year to 78,000. The mining sector, including oil and natural gas, lost 6,000 jobs in August, while the wholesale trade sector has lost 32,000 jobs this year.

Industrial giant John Deere reported last month that tariffs had cost the company 300 million dollars by 2025, and this figure could double by the end of the year. The company also announced layoffs of 238 workers at its factories in Illinois and Iowa, with third-quarter net income down 26% year-over-year. Similarly, the U.S. oil industry has been severely affected by tariff-driven increases in steel and equipment costs, with at least 4,000 people leaving the industry since January, according to BLS data.

In addition to the direct cost impact, the uncertainty caused by policy fluctuations is becoming the biggest obstacle to corporate decision-making. The CEO of Wyoming Machine, a metal manufacturing company, stated, “Our current strategy is to not fill vacancies when employees leave.” This “wait-and-see” attitude is prevalent among companies. Bryan Sheffield, an oil trader in Texas, pointed out that the uncertainty caused by tariffs makes it more difficult for oil and gas company CEOs to decide on their capital expenditures. Many corporate executives admitted that they cannot hire or expand until policies stabilize and costs become predictable.

Despite the widespread criticism from the business community, the Trump administration remains steadfast in its position. The Secretary of the Treasury stated, “For every John Deere, there are some companies telling us that ‘tariffs have helped our business, and we are increasing our capital expenditures and employment.’” The U.S. government believes that tariffs will ultimately stimulate companies to bring their businesses back to the U.S., leading to a surge in employment.

There are also voices in the market supporting tariffs. Michelle Feinberg, the founder of New York Embroidery Studio, a New York fashion contract manufacturer, plans to lay off employees and promote automation in the short term but still supports tariff policies aimed at helping domestic manufacturers from a macro perspective.

However, Michael Madowitz, the chief economist of the Roosevelt Institute, believes that the weakness in manufacturing is not due to a labor supply issue but is a victim of “demand slowdown and unresolved drastic policy changes.”