An examination of the 2025 U.S. tariffs found no statistically significant relationship between tariff exposure and employment growth during the year, according to an analysis published by the Federal Reserve Bank of Chicago. The study tracked how tariffs affected jobs through two competing forces: higher costs for imported materials and protection for domestic producers from foreign competition. Despite expectations that tariffs would either create or destroy jobs, the short-run data revealed neither the employment gains that supporters predicted nor the significant losses that critics feared.
The analysis covered 57 industries from November 2024 through December 2025, with tariff costs beginning to climb in March 2025 and staying elevated through year's end. Manufacturing bore the brunt of tariff exposure—15 of the 18 manufacturing industries examined ranked among the 20 sectors facing the highest tariff costs. The study found that tariff costs and protection were highly correlated: industries receiving shelter from foreign competition simultaneously faced rising prices for tariffed materials. When researchers focused exclusively on manufacturing, the pattern suggested offsetting effects—tariff costs appeared linked to employment declines while tariff protections appeared linked to gains, with similar magnitudes. A one-percentage-point increase in tariff costs corresponded to roughly 985 jobs lost per month in manufacturing on average, whereas the same increase in tariff protection corresponded to about 1,066 jobs gained monthly. However, neither relationship reached statistical significance.
The authors point to several factors that may explain why predicted effects didn't materialize in the employment data. The report notes that because tariff costs and protection are highly correlated, "industries receiving tariff protection may simultaneously face rising input costs from tariffed materials, creating downward pressure on employment that offsets any protective benefits." The researchers also acknowledge that their method compares more-exposed and less-exposed sectors rather than capturing economy-wide demand shocks from tariffs. Additionally, the analysis assumes companies kept their mix of inputs and import shares constant at 2024 levels, though firms may have switched to domestic or non-tariffed alternatives when prices rose.
The findings contrast with simulation models that forecast manufacturing employment would increase within the first year through protective effects. According to the authors, employment adjustments may simply take longer to show up than the sample period captured, particularly if businesses initially respond by tweaking hours, overtime, or temporary staffing before making permanent hiring decisions. The study's measurement approach also carries limitations: it doesn't account for potential retaliatory tariffs on U.S. exports, which could reduce jobs in export-oriented industries and cancel out any protective benefits. The process of translating trade data into employment categories introduces potential misclassification that could weaken the estimates.
As more time passes, longer-term studies may offer clearer evidence on whether these tariffs ultimately shifted job growth in either direction. For now, the short-run evidence suggests the two channels largely canceled each other out, leaving total employment roughly where it would have been without the policy change.