“In a 2019 study, Aaron Flaaen and Justin Pierce found that U.S. industries facing higher input costs from tariffs, including steel-consuming manufacturers, experienced net employment losses rather than gains.”

We find that industries more exposed to tariff increases experience relative reductions in employment, as a small positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Counties with higher exposure to either rising input costs or foreign retaliation experience relative increases in unemployment rates that manifest after tariffs are imposed and are highly statistically significant. Manufacturing workers who were displaced by tariffs were not readily absorbed into employment in other industries.

Despite being intended to boost manufacturing activity, we find U.S. industries more exposed to tariff increases experience relative reductions in employment, as a small positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Industries more exposed to tariffs experience relative increases in unemployment rates and relative decreases in labor force participation. Workers who lose employment in the manufacturing sector due to tariffs are not readily absorbed into employment in other sectors.

We find that tariff increases enacted in 2018 are associated with relative reductions in manufacturing employment and relative increases in producer prices. In terms of manufacturing employment, rising input costs and retaliatory tariffs each contribute to the negative relationship, and the contribution from these channels more than offsets a small positive effect from import protection. An interquartile shift in exposure to tariffs is associated with a relative reduction in manufacturing employment of 2.7 percent, with the positive contribution from the import protection effects of tariffs (0.4 percent) more than offset by the negative effects associated with rising input costs (-2.0 percent) and retaliatory tariffs (-1.1 percent).

Despite being intended, in part, to boost manufacturing activity, we find that U.S. industries more exposed to tariff increases experience relative reductions in employment, as a small positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. An industry at the 75th percentile of exposure to the rising input cost channel experiences a relative reduction in manufacturing employment of -2.0 percent, relative to an industry at the 25th percentile. The results point to the importance of increased costs from tariffs on inputs as a mechanism through which tariffs affect the manufacturing sector.

We find that industries more exposed to tariff increases experience relative reductions in employment, as a small positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices via exposure to rising input costs. This pattern for unemployment rates mirrors that found for industry-level manufacturing employment and suggests that workers who lose employment in the manufacturing sector due to tariffs are not readily absorbed into employment in other industries.

Estimates from a study released in December by Aaron Flaaen and Justin Pierce at the Federal Reserve Board of Governors show that by mid-2019, increased input costs due to the steel and aluminum tariffs are associated with 0.6 percent fewer jobs in the manufacturing sector than would have been the case without the tariffs. We compute that this amounts to about 75,000 fewer jobs in manufacturing attributable to the March 2018 tariffs on steel and aluminum. Industries that use steel most intensively are at the highest risk of job losses and plant relocations due to the imposition of steel tariffs.

We find that U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment as a positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices via rising input costs.

Despite being intended, in part, to boost manufacturing activity, we find that U.S. industries more exposed to tariff increases experience relative reductions in employment, as a small positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Workers who lose employment in the manufacturing sector due to tariffs are not readily absorbed into employment in other sectors. The results in this paper point to the importance of increased costs from tariffs on inputs as a mechanism through which tariffs affect the manufacturing sector and the broader labor market.

Flaaen and Pierce (2019) find that industries more exposed to upstream tariff increases experience relative reductions in employment, driven by rising input costs and retaliatory tariffs. There are a handful of studies that use other periods of tariff implementation to estimate the effects of tariffs through supply chains.

In a study of the tariffs imposed by the Trump Administration in 2018, Flaaen and Pierce (2024) find evidence that tariffs had a small positive effect on employment in protected industries. Looking at the aggregate trend of steel employment in the United States, the steady decline in steel employment did appear to moderate. However, this modest positive effect in protected sectors was offset by larger negative employment effects in steel-consuming industries facing higher input costs.

Flaaen and Pierce (2024) show that tariffs in the first Trump administration, particularly on steel and aluminum, reduced U.S. manufacturing employment by offsetting any protective benefits through higher input costs and retaliatory tariffs. The study demonstrates that industries consuming steel and aluminum as inputs experienced net employment losses despite the tariffs' intended purpose of protecting domestic manufacturing.

The Flaaen and Pierce study on 2018-2019 tariffs was initially circulated as a Federal Reserve working paper in 2019 and subsequently published in the peer-reviewed Review of Economics and Statistics in December 2021. The study has become a widely-cited reference in academic and policy discussions of tariff effects on U.S. manufacturing employment, with findings consistently showing net negative employment effects from tariffs despite their stated intent to boost domestic manufacturing.