Kenfisher, executive chairman of Fisher Investments, discusses the impact of US sweep tariffs on Kudrow.
Goldman Sachs’ new report examining the president’s methods Donald Trump’s Tariffs have found that while the labour market could spur increased manufacturing employment, unemployment in other industries affected by the tariffs could have a net negative impact on employment across the economy.
Economists at Goldman Sachs, led by Jan Hatzius, reviewed historical and academic studies on the impact of tariffs on the labor market in industries protected by tariffs and downstream industries that rely on tariffs imports.
“Some studies have found examples of tariffs that can be effective when applied to nascent industries, particularly products with high demand elasticity or products with less cost impact on downstream industries,” the economist said. “However, the broad tariffs provided by the Trump administration do not cover these types of industries or products.”
The report noted that the Trump administration’s plan to raise the effective US tariff rate by 15 percentage points (PP) and the academic research they reviewed suggest that a 10 PP increase in tariff rates would increase employment in the protective industry by 0.2%-0.4%, while a 1 PP increase in tariff-driven costs would drop by 0.3%-0.6%.
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Goldman’s analysis showed that manufacturing could see a boost, but it found that there was an overall net-negative impact on the workforce. (Photographer: Getty Images/Emily Elconin via Getty Images/Bloomberg)
“These historical elasticities mean that Trump’s protection from tariffs will only be under 100k (in an estimate ranging from 0 to 240k) below 100k, but higher input costs will result in nearly 500k of drugs in employment (in the estimate ranging from 0 to 1mn),” the economist wrote.
“The broader statistical evidence points to the negative effects of net employment,” they explained. “Expanding these estimates into the US economy means that manufacturing employment from tariff protection is an increase of just under 100,000 people, but it will drag downstream employment from input cost pressures by around 500,000 people.”
Balanced, this estimate suggests that employment in the US economy will cut overall employment by 400,000, even after considering the increase in employment in protected manufacturing.
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Customs duties are taxes on imports usually paid by importers who pass higher costs to consumers at higher prices. (Photo by Reuters/Mike Blake/Reuters)
This analysis cited three examples of situations in which tariffs can help grow domestic manufacturing and downstream industries. These include target tariffs aimed at protecting emerging industries, such as the impact of the 1890 McKinley tariff on US tin plate manufacturing, and South Korea’s industrialization process.
Another example includes increasing domestic production of products with high import demand elasticity, such as US tariffs on European pickup trucks in the 1960s, with import resilience, significantly limited imports, and supporting the production of lighter trucks. Tariffs on products that do not affect downstream manufacturers, rather than intermediate products, could also boost domestic employment, such as tariffs on Japanese motorcycles imposed to help Harley-Davidson.
However, Goldman economists emphasized that Trump’s tariffs are not being implemented in a way that is more broadly focused on the infant industry, highly elastic products or end products. This shows that tariff planning may help in manufacturing employment, but is likely to become net resistance to employment across the US.
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President Trump issued a 90-day suspension on his “mutual” tariffs and imposed a 10% baseline tariff on US trading partners. (Chip Somodevilla / Getty Images / Getty Images)
“The estimated range of estimates regarding the impact of increased input costs on employment, especially on the employment, and it is difficult to be confident in the net impact, especially given the lack of a historical tariff increase in size and width implemented by President Trump,” the economist said.
“However, these estimates primarily show the net negative impact on jobs from trade protection, even before explaining the resistance to employment from a slowdown in growth expected under the baseline outlook,” they added.
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Goldman Sachs’ latest baseline forecast was updated after Trump announced a suspension of his “mutual” tariff plans, predicting 45% chances and year-over-year GDP growth in 2025, with core PCE inflation peaking at 3.5%.
