A report by Goldman Sachs has analyzed the impact of tariffs introduced by former President Donald Trump on the U.S. labor market. The findings indicate that although the tariffs could potentially increase employment in the manufacturing sector, job losses in other impacted industries are likely to result in a net negative effect on employment overall.
The study by Goldman Sachs, led by economist Jan Hatzius, reviewed historical studies to assess the influence of tariffs on both protected industries and those reliant on imported goods affected by tariffs. The report states that while tariffs can effectively aid nascent industries and products with high demand elasticity, the broad application of tariffs under the Trump administration does not target such sectors.
The analysis highlights that the U.S. tariff rate is set to increase by 15 percentage points under the Trump plan. Historical data suggests a 10-point increase in tariffs generally boosts employment in protected sectors by 0.2% to 0.4%, whereas a 1-point rise in costs driven by tariffs reduces employment by 0.3% to 0.6%.
These historical elasticities suggest that protections from Trump’s tariffs could slightly increase manufacturing employment, potentially adding under 100,000 jobs, but higher costs could result in the loss of approximately 500,000 jobs. Overall, this points to a net reduction of around 400,000 jobs across the U.S. economy, despite gains in manufacturing sectors.
The report also references past instances where tariffs successfully boosted domestic manufacturing and supporting industries, such as the 1890 McKinley tariff on tinplate and the 1960s tariff on European pickup trucks, which supported U.S. light truck manufacturing. However, Goldman’s economists emphasize that the current tariffs are broad and not specifically targeted towards such objectives.
Goldman Sachs’ baseline forecast, following Trump’s decision to pause his “reciprocal” tariff implementation, projects a 45% likelihood of a recession and an annual GDP growth of 0.5% for 2025, with core PCE inflation reaching 3.5%. The economists acknowledge the uncertainty in estimating the net impact of these tariffs, yet predominantly anticipate a negative overall effect on employment due to the trade protections.