Looming tariffs and sweeping firings of federal workers are “chilling” the economy, ABC News reported Thursday. Thousands of government employees have been laid off as President Donald Trump and South African centibillionaire Elon Musk seek to shrink the federal government.
“It’s a very difficult business environment, because they can’t plan for what their cost structure is going to be,” Rachel Ziemba, an adjunct senior fellow at the think tank the Center for a New American Security, told ABC News. “It’s adding to investment uncertainty, and some people are holding back on investments.”
Trump said that he will impose 25 percent tariffs on Mexico and Canada on March 4. He also plans to impose a 10 percent tariff on China on top of the 10 percent tariff he already put in place. He says that the tariffs are in response to the drug trade.
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“Drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels,” Trump said in a post on Truth Social. “A large percentage of these Drugs, much of them in the form of Fentanyl, are made in, and supplied by, China.”
“Every time a car part crosses the border, 25% tariffs could be very onerous,” Ziemba said. “We could see the cost of building a house go up quite substantially.”
These tariffs could also lead to layoffs. “If one of the inputs of your factory goes up by 25%, you might cut your production and say maybe we’ll have to fire some people,” she added.
And Elon Musk’s Department of Government Efficiency “also impacts consumption, because people are losing their jobs or are afraid of losing their jobs, so that might cause them to save more money,“ Ziemba said.
A survey from the Conference Board, a business membership and research nonprofit, found this week that consumer sentiment is the lowest it’s been since August 2021.
“Views of current labor market conditions weakened,” said Stephanie Guichard, senior economist for global indicators at The Conference Board. “Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a 10-month high.”
Inflation is also hurting buyers. “Average 12-month inflation expectations surged from 5.2% to 6% in February. This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs,” Guichard said.
Click here to read ABC's full report.