Former President Donald Trump announced new tariffs of up to 41% on nearly 70 countries on Thursday, reigniting debates on trade policy and its impact on the U.S. labor market. He just recently fired Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer, a holdover from the Biden administration. He contends this switch was crucial due to worries about data integrity. Taken together, these policy moves have created an atmosphere of confusion, fear, and unpredictability for employers and workers.
Trump’s tariff policy, which has raised the average effective tariff rate to 18.3%—the highest since 1934—has created significant implications for companies navigating the fluctuating costs of imported goods. Stephen Miran, former economic adviser to the Trump Administration, pointed to increasing uncertainty over Trump’s domestic spending bill. True to his unpredictable form, he mentioned that his inscrutable tariff policy is destroying jobs. Yet the most recent jobs report confirms the theory, with a notable decrease in the number of foreign-born workers. As a result, new employees have become much harder for employers to recruit.
Rising Tariffs and Labor Market Implications
On Thursday, Trump unveiled a series of fresh tariffs targeting almost 70 countries, aiming to protect U.S. interests but raising concerns among business leaders about the potential fallout. The new levies cover a wide variety of goods including steel, aluminum, and cars. The price of doing business just went up for companies that depend on these imports.
Daniel Zhao, a senior economist, emphasized that “Businesses hate uncertainty and that has made it difficult for the business community to go forward with hiring.” This variability over time makes it very difficult for employers to operate in a transparent environment of predictable hiring costs as they face increased cost pressures.
Employers added an average of about 35,000 jobs over the three months ending in July, reflecting a slowdown in labor market growth. According to the latest jobs report released by the U.S. Bureau of Labor Statistics, we experienced a net loss of 1.7 million foreign-born workers from March to July. This large decline is cause for concern about the breadth of the labor market’s health.
Firing of BLS Commissioner Sparks Controversy
The firing of McEntarfer has been widely condemned and remains a source of discord and protest. This has led Trump to accuse her of “manipulating” data without showing the evidence to back up these claims.
“We need accurate Jobs Numbers. I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY. She will be replaced with someone much more competent and qualified,” – Donald Trump.
The new OMB decision couldn’t come at a more important time, and not just for gauging the impact of this historic pandemic. Analysts say that unseating McEntarfer would itself pose new complications. This callous fix could prove an additional obstacle to judging how healthy the U.S. job market truly is.
Miran further testified that trade and immigration policies both play a role in exacerbating the uncertainties present in the labor market today. “Both of those sources of uncertainty are resolved,” he stated regarding potential future improvements in economic conditions.
Immigration Policy Challenges
Trump’s administration has pursued a restrictive immigration policy that includes revoking Temporary Protected Status for hundreds of thousands of immigrants and detaining undocumented individuals at work sites. Together, these measures have resulted in a significant decrease in foreign-born workers. Over the last three decades, these workers have accounted for over 54 percent of the growth in the American labor force.
Gregory Daco, the chief U.S. economist for consulting firm EY, told NPR that the decline in foreign-born workers bodes ill for job market expansion. Specifically he said, “the U.S. economy is now experiencing two historic, global supply shocks lockdowns followed by a war. One an unintended consequence of trade policy, the other of immigration policy. It’s precisely the one-two punch of both these shocks that jumps out at you in the most recent labor market data.
The U.S. is currently experiencing two macro-level supply shocks that are worsening short- and long-term threats to our nation’s labor market. These shocks are increasing the degree of uncertainty felt by both firms and labor.
