Do tariffs protect U.S. jobs and industry? Economists say no

Published

2 months ago

March 10, 2025

Business Finance News

President Donald Trump addresses a joint session of Congress at the U.S. Capitol on March 4, 2025.

Mandel Ngan-Pool/Getty Images

President Donald Trump has spoken of tariffs as a job-creating behemoth.

Tariffs will “create jobs like we have never seen before,” Trump said Tuesday during a joint session of Congress.

Economists disagree.

In fact, the tariff policies Trump has pursued since taking office would likely have the opposite effect, they said.

“It costs American jobs,” said Mark Zandi, chief economist of Moody’s.

He categorized tariffs imposed broadly as a “lose-lose.”

“There are no winners here in the trade war we’re seemingly being engulfed in,” Zandi said.

A barrage of tariffs

The Trump administration has announced a barrage of tariffs since Inauguration Day.

Trump has imposed an additional duty of 20% on all imports from China. He put 25% tariffs on imports from Canada and Mexico, the U.S.’ two biggest trade partners. (Just days after those took effect, the president delayed levies on some products for a month.)

Tariffs of 25% on steel and aluminum are set to take effect Wednesday, while duties on copper and lumber and reciprocal tariffs on all U.S. trade partners could be coming in the not-too-distant future.

There’s a deceptively simple logic to the protective power of such economic policy.

Tariffs generally aim to help U.S. companies compete more effectively with foreign competitors, by making it more expensive for companies to source products from overseas. U.S. products look more favorable, thereby lending support to domestic industry and jobs.

Workers pour molten steel at a machinery manufacturing company which produces for export in Hangzhou, in China’s eastern Zhejiang province on March 5, 2025.

AFP via Getty Images

There’s some evidence of such benefits for targeted industries.

For example, steel tariffs during Trump’s first term reduced imports of steel from other nations by 24%, on average, over 2018 to 2021, according to a 2023 report by the U.S. International Trade Commission. They also raised U.S. steel prices and domestic production by about 2% each, the report said.

New steel tariffs set to take effect March 12 would also “likely boost” steel prices, Shannon O’Neil and Julia Huesa, researchers at the Council on Foreign Relations, wrote in February.

Higher prices would likely benefit U.S. producers and add jobs to the steel industry’s current headcount, around 140,000, they said.

Tariffs have ‘collateral damage’

While tariffs’ protection may “relieve” struggling U.S. industries, it comes with a cost, Lydia Cox, an assistant economics professor at the University of Wisconsin-Madison and international trade expert, wrote in a 2022 paper.

Tariffs create higher input costs for other industries, making them “vulnerable” to foreign competition, Cox wrote.

These spillover effects hurt other sectors of the economy, ultimately costing jobs, economists said.

Take steel, for example.

Steel tariffs raise production costs for the manufacturing sector and other steel-intensive U.S. industries, like automobiles, farming machinery, household appliances, construction and oil drilling, O’Neil and Huesa wrote.

Cox studied the effects of steel tariffs imposed by former president George W. Bush in 2002-03, and found they were responsible for 168,000 fewer jobs per year in steel-using industries, on average — more jobs than there are in the entire steel sector.

Tariffs are a “pretty blunt instrument,” said Cox during a recent webinar for the Harvard Kennedy School.

They create “a lot of collateral damage,” she added.

Why tariffs are a ‘tax on exports’

Trucks head to the Ambassador Bridge between Windsor, Canada and Detroit, Michigan on March 4, 2025.

Bill Pugliano | Getty Images

Such damage includes retaliatory tariffs imposed by other nations, which make it pricier for U.S.-based exporters to sell their goods abroad, economists said.

Tariffs imposed during Trump’s first-term — on products like washing machines, steel and aluminum — hit $290 billion of U.S. imports with an average 24% tariff by August 2019, according to a 2020 paper published by the U.S. Federal Reserve. Those levies ultimately translated to a 2% tariff on all U.S. exports after accounting for foreign retaliation, it found.

“A tax on imports is effectively a tax on exports,” Erica York, senior economist at the Tax Foundation, wrote last year for the Cato Institute, a libertarian think tank.

Damage to the U.S. economy from those first-term Trump tariffs “clearly” amounted to “many times” more than the wages of newly created jobs, economists Larry Summers, former Treasury secretary during the Clinton administration, and Phil Gramm, a former U.S. senator (R-Texas), wrote in a recent Wall Street Journal op-ed.

(President Joe Biden kept most of Trump’s tariffs in place.)

U.S. trade partners have already begun fighting back against Trump’s recent tranche of tariffs.

China put tariffs of up to 15% on many U.S. agricultural goods — which are the largest U.S. exports to China — starting Monday. Canada also put $21 billion of retaliatory tariffs on U.S. goods like orange juice, peanut butter, coffee, appliances, footwear, cosmetics, motorcycles and paper products.

President Trump alluded to the potential economic pain of his tariff policies during his address to Congress.

“There will be a little disturbance, but we are okay with that,” he said. “It won’t be much.”

U.S. economy resilient despite 'agent of chaos' Trump, economist says

While many economists don’t yet forecast a U.S. recession, Trump in a Fox News interview on Sunday didn’t rule out the possibility of a downturn as tariffs take effect — though he said the economy would benefit in the long term. If a recession were to happen, it would weigh on protected sectors, too, economists said.

Voters elected President Trump with a mandate to institute an economic agenda that includes tariffs, Kush Desai, a spokesperson for the White House, said in an e-mailed statement.

“Tariffs played a key role in the industrial ascent of the United States stretching back to the 1800s through William McKinley’s presidency,” Desai said.

‘Disappointing results’ of Trump-era tariff policies

There is a historical precedent for the trade war that’s breaking out: The Smoot-Hawley Tariff of 1930, which triggered a reduction in exports and failed to boost agricultural prices for the farmers it sought to protect, Michael Strain, director of economic policy studies at the American Enterprise Institute, a conservative think tank, wrote in a 2024 paper.

Economists also believe the Smoot-Hawley tariff exacerbated the Great Depression.

While a nearly century-old economic policy doesn’t necessarily point to what will happen in the modern era, protectionist policies from the post-2017 years have — like Smoot-Hawley — “had disappointing results,” Strain wrote.

Evidence from recent years suggests protectionism may actually hurt the workers it seeks to help, Strain said.

For example, Trump’s first-term tariffs reduced total manufacturing employment by a net 2.7%, Aaron Flaaen and Justin Pierce, economists at the Federal Reserve Board, wrote in 2024. That’s after accounting for a 0.4% boost to employment in manufacturing jobs protected by tariffs, they found.

The 2018-19 trade war “failed to revive domestic manufacturing” and actually reduced jobs in the broad manufacturing sector, Strain wrote.

The share of U.S. employment coming from manufacturing jobs has been falling since the end of World War II, largely because technological advances have increased workers’ productivity, Strain said. It would be more helpful to direct economic policy toward connecting workers to jobs of the future, he said.

“Trade — like technological advances — is disruptive, but attempts to entomb the U.S. economy in amber are not a helpful response,” he wrote.

Personal Finance

How students choose a college

Published

17 hours ago

May 3, 2025

Business Finance News

Is it best to go to college or dive straight into the working world?

Ethan Bianco, 17, waited right up until the May 1 deadline before deciding which college he would attend in the fall.

The senior at Kinder High School for the Performing and Visual Arts in Houston was accepted to several schools, and had whittled down his choices to Vanderbilt University and University of Texas at Austin. Ultimately, the cost was a significant factor in his final decision.

“UT is a much better award package,” he said. In-state tuition for the current academic year is $10,858 to $13,576 a year, which would be largely covered by Bianco’s financial aid offer.

Vanderbilt, on the other hand, consistently ranks among the best private colleges for financial aid and promises to meet 100% of a family’s demonstrated need.

The school initially offered Bianco $35,000 in aid, he said. With that package, “it would be about $40,000 more for my family to attend Vanderbilt per year.”

However, he successfully appealed his award package and leveraged private scholarships to bring the price down further — and committed to Vanderbilt on National College Decision Day.

How cost plays into college choices

For most graduating high school seniors, the math works out differently. The rising cost of college has resulted in a higher percentage of students enrolling in public schools over private ones, according to Robert Franek, editor-in-chief of The Princeton Review.

“Currently, it is about 73% of the undergraduate population — but this year, with increasing uncertainties about financial aid and changing policies about student loans, it is very likely that number will go up,” Franek said.

Why these Gen Zers are ditching college degrees for blue-collar careers

Soaring college costs and looming student debt balances have pushed this trend, and this year, there are added concerns about the economy and dwindling federal loan forgiveness options. As a result, this year’s crop of high school seniors is more likely to choose local and less-expensive public schools rather than private universities far from home, Franek said.

Price is now a bigger consideration among students and parents when choosing a college, other reports also show. Financial concerns govern decision-making for 8 in 10 families, according to one report by education lender Sallie Mae, outweighing even academics when choosing a school

“Choosing a school is a personal and individual decision,” said Chris Ebeling, head of student lending at Citizens Financial Group. Along with academics and extracurriculars, “equally important is the cost,” he said. “That needs to be weighed and considered carefully.”

Carlos Marin, 17, on National College Decision Day.

Courtesy of AT&T

On National College Decision Day, Carlos Marin, a senior at Milby High School, also in Houston, enrolled at the University of Houston-Downtown. Marin, 17, who could be the first person in his family to graduate from college, said he plans to live at home and commute to classes.

“The other schools I got into were farther away but the cost of room and board was really expensive,” Marin said.

College costs keep rising

College costs have risen significantly in recent decades, with tuition increasing 5.6% a year, on average, since 1983 — outpacing inflation and other household expenses, according to a recent report by J.P. Morgan Asset Management.

Deep cuts in state funding for higher education have also contributed to the soaring price tag and pushed more of the costs onto students. Families now shoulder 48% of college expenses, up from 38% a decade ago, J.P. Morgan Asset Management found, with scholarships, grants and loans helping to bridge the gap.

Nearly every year, students and their families have been borrowing more, which boosted total outstanding student debt to where it stands today, at more than $1.6 trillion.

A separate survey by The Princeton Review found that taking on too much debt is the No. 1 worry among all college-bound students.

Incoming Vanderbilt freshman Bianco qualified for a number of additional private scholarships and even received a free laptop from AT&T so that he could submit the Free Application for Federal Student Aid and fill out college applications. He said he is wary of taking out loans to make up for the difference.

“I believe that student loans can be beneficial but there’s also the assumption that you’ll be in debt for a very long time,” Bianco said. “It almost becomes a burden that is too much to bear.”

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Personal Finance

Here are the HSA contribution limits for 2026

Published

1 day ago

May 2, 2025

Business Finance News

Maskot | Maskot | Getty Images

The IRS on Thursday unveiled 2026 contribution limits for health savings accounts, or HSAs, which offer triple-tax benefits for medical expenses.

Starting in 2026, the new HSA contribution limit will be $4,400 for self-only health coverage, the IRS announced Thursday. That’s up from $4,300 in 2025, based on inflation adjustments.

Meanwhile, the new limit for savers with family coverage will jump to $8,750, up from $8,550 in 2025, according to the update.

To make HSA contributions in 2026, you must have an eligible high-deductible health insurance plan.

For 2026, the IRS defines a high deductible as at least $1,700 for self-only coverage or $3,400 for family plans. Plus, the plan’s cap on yearly out-of-pocket expenses — deductibles, co-payments and other amounts — can’t exceed $8,500 for individual plans or $17,000 for family coverage.

Investors have until the tax deadline to make HSA contributions for the previous year. That means the last chance for 2026 deposits is April 2027.

HSAs have triple-tax benefits

If you’re eligible to make HSA contributions, financial advisors recommend investing the balance for the long-term rather than spending the funds on current-year medical expenses, cash flow permitting.

The reason: “Your health savings account has three tax benefits,” said certified financial planner Dan Galli, owner of Daniel J. Galli & Associates in Norwell, Massachusetts.

There’s typically an upfront deduction for contributions, your balance grows tax-free and you can withdraw the money any time tax-free for qualified medical expenses.

Unlike flexible spending accounts, or FSAs, investors can roll HSA balances over from year to year. The account is also portable between jobs, meaning you can keep the money when leaving an employer.

That makes your HSA “very powerful” for future retirement savings, Galli said.

Healthcare expenses in retirement can be significant. A single 65-year-old retiring in 2024 could expect to spend an average of $165,000 on medical expenses through their golden years, according to Fidelity data. This doesn’t include the cost of long-term care.

Most HSAs used for current expenses

In 2024, two-thirds of companies offered investment options for HSA contributions, according to a survey released in November by the Plan Sponsor Council of America, which polled more than 500 employers in the summer of 2024.

But only 18% of participants were investing their HSA balance, down slightly from the previous year, the survey found.

“Ultimately, most participants still are using that HSA for current health-care expenses,” Hattie Greenan, director of research and communications for the Plan Sponsor Council of America, previously told CNBC.

Build emergency and retirement savings at the same time

Personal Finance

There’s a higher 401(k) catch-up contribution for some in 2025

Published

2 days ago

May 2, 2025

Business Finance News

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If you’re an older investor and eager to save more for retirement, there’s a big 401(k) change for 2025 that could help boost your portfolio, experts say.

Americans expect they will need $1.26 million to retire comfortably, and more than half expect to outlive their savings, according to a Northwestern Mutual survey, which polled more than 4,600 adults in January.

But starting this year, some older workers can leverage a 401(k) “super funding” opportunity to help them catch up, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC.

More from FA Playbook:

Here’s a look at other stories impacting the financial advisor business.

Here’s what investors need to know about this new 401(k) feature for 2025.

Higher ‘catch-up contributions’

For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you’re age 50 and older, known as “catch-up contributions.”

Thanks to Secure 2.0, the 401(k) catch-up limit has jumped to $11,250 for workers age 60 to 63 in 2025. That brings the max deferral limit to $34,750 for these investors.

Here’s the 2025 catch-up limit by age:

50-59: $7,500
60-63: $11,250
64-plus: $7,500

However, 3% of retirement plans haven’t added the feature for 2025, according to Fidelity data. For those plans, catch-up contributions will automatically stop once deferrals reach $7,500, the company told CNBC.

Of course, many workers can’t afford to max out 401(k) employee deferrals or make catch-up contributions, experts say.

For plans offering catch-up contributions, only 15% of employees participated in 2023, according to the latest data from Vanguard’s How America Saves report.

‘A great tool in the toolbox’

The higher 401(k) catch-up is “a great tool in the toolbox,” especially for higher earners looking for a tax deduction, said Dan Galli, a CFP and owner of Daniel J. Galli & Associates in Norwell, Massachusetts.

While pretax 401(k) contributions offer an up-front tax break, you’ll owe regular income taxes on withdrawals, depending on your future tax bracket.

Upper-income consumers stressed: Here's why

However, your eligibility for higher 401(k) catch-up contributions hinges what age you’ll be on Dec. 31, Galli explained.

For example, if you’re age 59 early in 2025 and turn 60 in December, you can make the catch-up, he said. Conversely, you can’t make the contribution if you’re 63 now and will be 64 by year-end.

On top of 401(k) catch-up contributions, big savers could also consider after-tax deferrals, which is another lesser-known feature. But only 22% of employer plans offered the feature in 2023, according to the Vanguard report.