As President Donald Trump piled on new tariffs last year, many economists quickly warned that prices and unemployment would spike. With most of the 2025 economic results in, it’s looking like those forecasters get partial credit.
While prices for certain imports like beef, coffee and tomatoes increased significantly last year, price hikes overall were little changed. The same can’t be said of the job market.
The average monthly job growth last year was the lowest in decades outside of recession years. Additionally, the unemployment rate increased by 0.4 percentage points to 4.4% over 2025, according to the December jobs report, released Friday.
Though the job market had already been tightening leading into 2025, Trump’s sweeping tariffs and his many, many subsequent adjustments haven’t helped.
With little clarity over Trump’s next move, businesses have paused hiring plans – or, in some cases, laid off workers.
“There’s no compelling reason to be out there hiring en masse,” said University of Central Florida economist Sean Snaith. “That is a rational response when you’re dealing with this kind of uncertainty.”
Tariffs have also changed businesses’ calculations on what is or isn’t profitable anymore.
“Companies are seeing higher prices, depressing profitability; and in terms of new investment, they’re hesitant because tariffs make a lot of investments that have been profitable unprofitable,” said Dean Baker, senior economist at the Center for Economic and Policy Research.
Customers are also putting off purchases due to the back and forth on tariff levels. For instance, the Federal Reserve Bank of Richmond noted in the central bank’s recent Beige Book, a compilation of business anecdotes, that several manufacturing contacts “said that their customers reduced new orders due to uncertainty about tariffs.”
And it’s not just customers who are confused. Trump’s erratic trade policy has also left businesses in a state of paralysis. For the most part, they’ve been absorbing higher tariffs without passing along the heftier bills to consumers. That’s helped keep inflation in check.
That could change, though, depending on how the Supreme Court rules in a landmark tariff case that could invalidate Trump’s most significant levies. If that happens, companies could even get massive refunds for the tariff costs they’ve already paid, although that process could take a lot of time to sort out.
Ultimately, the relatively muted price increases and the slower hiring, though they might look different, come down to the same thing: uncertainty.