Tariffs and Labor Markets: The Employment Impact of the Recent Trade Conflict

TL;DR

This study uses a multiregional input-output model to evaluate the global employment and trade impacts of recent US tariff escalations, revealing significant job losses especially among informal and low-skilled workers.

Contribution

It introduces a comprehensive MRIO-based framework to simulate the effects of tariff changes on global employment and trade, considering endogenous trade adjustments.

Findings

Over 23 million global jobs lost in worst-case scenario

Informal and low-skilled workers face over 80% of employment decline

High-income countries experience notable export contractions

Abstract

This paper assesses the global employment and trade effects of renewed tariff escalation following the reintroduction of the United States' America First strategy in 2025. Using a multiregional input-output (MRIO) framework integrated with a trade model, the analysis captures endogenous adjustments in bilateral trade shares and final demand in response to changes in prices and competitiveness. Three scenarios are simulated to reflect alternative configurations of trade policy: existing tariffs without retaliation, updated tariffs including retaliatory measures, and a potential scenario characterized by de-escalation of the trade conflict. The results indicate that tariff increases generate widespread employment and export losses, with cumulative global job declines exceeding 23 million in the most adverse scenario. Informal and low-skilled workers bear the largest burden, accounting for more than 80 percent of total employment losses, while high-income and upper middle-income countries experience significant contractions in export volumes.