An analysis by the Federal Reserve Bank of Kansas City found that tariffs may have slowed job growth to the US economy in 2025 after higher import taxes are implemented.

Economists a Kansas City Fed noted that job growth slowed markedly from 170,000 a month in 2024 to just 75,000 a month through August 2025, a trend that Fed policymakers have watched closely and that helped prompt three interest rate cuts at the central bank’s meetings in September, October and December.

The report notes that tariffs can theoretically increase or decrease the demand for labor in the economy, and that the higher tariffs implemented by the Trump administration are occurring alongside other developments affecting the workforce, such as the emergence of artificial intelligence (AI), an aging population and reduced immigration.

“Overall, our findings suggest, at least so far, that domestic firms may have added fewer jobs in response to the tariffs, similar to the employment effects of the 2018 tariffs,” the economists concluded.

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Tariffs may have suppressed job growth in the US economy, according to analysis by the Kansas City Fed. (Allison Joyce/Bloomberg via Getty Images)

The analysis used a sector exposure to imports as a proxy for the exposure of firms in these industries, employment growth in these industries was found to be slower than those without higher exposure to tariffs.

Economists found it job growth in almost all sectors 2025 was below the 2022-23 average, reflecting the strong post-pandemic recovery in those earlier years as well as the recent slowdown.

They also found that sectors with greater exposure to tariffs faced a greater decline in employment growth, which they attributed to direct tariff effects.

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Tariffs are taxes on imported goods paid by the importer, which usually passes some of the higher costs on to consumers through higher prices. (Brandon Bell/Getty Images)

“Tariffs are therefore likely to have reduced employment growth, although there is considerable uncertainty about the exact effect, and we cannot rule out that tariffs do not have a direct effect on employment growth,” the economists noted.

In addition, the analysis estimated how many additional jobs could have been added to the economy without direct tariff effects delete the contract.

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President Donald Trump proposed significantly higher tariffs in April 2025. (Chip Somodevilla/Getty Images)

Economists at the Kansas City Fed estimated that the economy could have added 19,000 more jobs each month, on average, from January to August 2025 without tariff effects – although they noted that there is considerable uncertainty around this estimate.

Based on this average, it suggests that if the size of the labor force had remained constant, the tariffs might also have increased the unemployment rate by 0.1 percentage points.

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The most recent data from the Bureau of Labor Statistics showed that the unemployment rate rises to 4.4% in December, after November initially saw a rate of 4.6%, the highest since September 2021, which was revised down to 4.5% after a regular population adjustment in the latest report.