Tariffs Ain't the Job Creators Trump Thinks They Are, According to Ken Fisher
Potential influence of Trump's tariffs on the employment sector
In a talk on Kudlow, Ken Fisher, chairman of Fisher Investments, sheds light on how wide-ranging tariffs in the US may not bring the job boom President Donald Trump anticipates.
A report by Goldman Sachs, probing the labor market implications of Trump's tariffs, predicts a surge in manufacturing employment but a subsequent decline in employment across other affected sectors, leading to an overall negative impact on employment across the economy.
Goldman Sachs' economists, led by Jan Hatzius, scrutinized historical and academic studies focusing on the labor market's response to tariffs on industries shielded by them and those relying on tariffed imports downstream.
"Some studies have demonstrated tariffs could be beneficial for nascent industries, products with a high demand elasticity, or products with limited impact on downstream industries," the economists stated. "However, the extensive tariffs proposed by the Trump administration aren't aimed at such industries and products."
The report underscores the Trump administration's goal of enhancing the U.S. tariff rate by 15 percentage points (pp) and provides a general consensus from the reviewed academic studies that a 10pp increase in tariff rates stimulates employment in protected industries by 0.2%-0.4%, but elevates employment reduction in other sectors by 0.3%-0.6% due to higher input costs.
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Goldman Sachs analysis paints a picture of an overall negative impact on employment, though a manufacturing revival could be on the horizon, albeit slight. (Image by Emily Elconin/Bloomberg via Getty Images / Getty Images)
"These historical elasticities indicate that protection from Trump's tariffs might introduce a mere 100k increase in manufacturing employment (with estimates ranging from 0-240k), but elevated input costs might create an approximately 500k drag on employment (with estimates ranging from 0-1mn)," the economists penned.
"The bigger statistical evidence implies a slight increase of just under 100k in manufacturing employment due to tariff protection, but a substantial 500k pullback on downstream employment due to input cost pressures."
In essence, this estimate suggests the U.S. employment scene could shrink by 400,000 jobs even after accounting for increased employment in protected manufacturing industries.
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Tariffs are taxes on imported goods, charged to importers who typically pass the higher costs onto consumers through increased prices. (Photo by Mike Blake/Reuters / Reuters Photos)
The analysis cites several instances in which tariffs fostered growth in domestic manufacturing and downstream industries. The examples include: targeting tariffs to protect emerging industries like the 1890 McKinley tariff's impact on U.S. tinplate manufacturing, South Korea's industrialization process, and boosting domestic production of goods with a high import demand elasticity, such as the U.S. tariff on European pickup trucks from the 1960s and the 1983 tariffs on Japanese motorcycles to help Harley-Davidson.
However, Goldman Sachs' economists underscore that Trump's tariffs are broader and aren't being implemented to protect infant industries, goods with high demand elasticity, or final products, which makes the statistical analysis lean towards suggesting a net negative impact on employment—especially overall U.S. employment.
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President Trump unleashed a 90-day halt on his "reciprocal" tariffs and implemented a 10% base tariff on U.S. trade partners. (Photo by Chip Somodevilla/Getty Images / Getty Images)
"The range of estimates, especially around the employment impact of higher input costs, is broad, and it is difficult to pinpoint the net effect, particularly due to a lack of historical tariff surges of the magnitude and scope executed by President Trump," the economists asserted.
"But these estimates generally suggest a net negative impact on employment from trade protection, even before accounting for the employment drags due to the anticipated economic downturn under our baseline forecast," they added.
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Goldman Sachs' latest baseline forecast—updated after Trump announced a pause on his "reciprocal" tariff plans—projects a 45% chance of recession and a year-over-year GDP growth of 0.5% for 2025, with core PCE inflation peaking at 3.5%.
- Ken Fisher, in a discussion on Kudlow, expressed concerns that widespread tariffs in the US, as proposed by President Donald Trump, may not generate the job growth Trump expects, despite a predicted surge in manufacturing employment.
- Goldman Sachs' economists, including Jan Hatzius, assessed the impact of Trump's tariffs on employment and concluded that a 10% increase in tariff rates could lead to a 0.3%-0.6% decrease in employment across other sectors due to higher input costs.
- Hedge fund billionaire Ken Fisher warned that tariffs could potentially trigger situations as severe as a recession, as suggested by Goldman Sachs' analysis.
- Tariffs, as taxes on imported goods, can lead to increased prices for consumers as importers pass the higher costs onto them.
- The broad nature of Trump's tariffs, not being aimed at protecting infant industries, goods with high demand elasticity, or final products, suggests a net negative impact on employment, according to Goldman Sachs' economists.
