President
The Trump administration has imposed tariffs on China and all imports of steel and aluminum as of March 10 and 12, respectively. While the 25% tariff on Mexico and Canada was paused just a few days after going into effect on March 4, next week marks what Trump is calling "Liberation Day." On April 2, the administration has promised to impose further tariffs on U.S. trade partners, especially those who have enacted counter-tariffs on U.S. goods, which include the European Union, Canada and China.
This could ultimately spiral into an all-out trade war, with the inflated prices of imported materials driving up business operating costs to an unsustainable degree. Employers will have to save money somewhere, and they won't likely achieve that by buying — or hiring — domestically, explains Rick Hammell, the founder and CEO of global workforce management company Helios.
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"The thinking behind tariffs is that it's creating jobs within America," he says. "But most companies are always focusing on how to cut costs, and outsourcing employment is actually one way to do that. Since the announcement of tariffs on Canada and Mexico, a number of companies we work with have told us they want to hire more people in those countries' particular markets."
This isn't exactly shocking: By cutting out the U.S., employers can avoid the tariffs altogether. For example, if a company already has an established customer base in Canada, then why not have local talent run operations there, where the materials will be cheaper?
Tariffs do not tend to drive mass job creation, at least not in this century. When President George W. Bush imposed tariffs on steel in 2002, it resulted in 168,000 fewer jobs in industries that depend on steel to operate. Economists at the Federal Reserve Board estimate that Trump's first-term tariffs dropped manufacturing employment by 2.7%.
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"[The Trump administration] is expecting jobs to be created, and that's a great notion," says Hammell. "But putting tariffs on your allies isn't a really good idea."
Tariffs won't just impact recruitment. Wages and benefits may also see cuts as employers scramble to combat rising operating costs. HR and benefit teams will have to ask themselves what they can eliminate; meanwhile, workers will be up against higher costs of living as anything made from imported materials skyrockets in price.
Hammell emphasizes that the most effective way to drive down costs will still be to hire talent in countries where labor and material costs will be relatively lower. Global workforces come with their own compliance headaches, but HR teams may have to endure them if the company feels it cannot do a majority of its business in the U.S. anymore.
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"We see a lot of potential for creating jobs outside the U.S.," says Hammell. "Because when you look at the choice between hiring in the U.S. or hiring abroad, just one helps you go around the tariff component."
That being said, Hammell warns employers against rushing into any big hiring decisions. The tariffs may not deeply impact their industry, or outsourcing talent could lead to operation inefficiencies. C-suite and HR teams will have to work together to find the right solution.
"Take a step back and try to understand what's happening and how it's going to impact your business," says Hammell. "Not everything on the news is going to affect every business."
