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Various tariff cases before the U.S. Supreme Court may lead to greater volatility in labor and employment matters, depending on how the Court rules. Rulings upholding the tariffs may adversely affect compensation, labor demand, and employee morale.
On the other hand, some employers might benefit from the increased costs that tariffs can impose on foreign competitors, leading to higher sales and more competitive pricing. A shift in favor of domestic producers also could improve job security and wages for workers in those industries. Nonetheless, broader concerns, including a poor economy, high inflation, retaliatory tariffs, and increased pricing for imported goods or materials that domestic companies use, are likely to overshadow any potentially positive effects of tariffs.
The Impact of Pending Litigation Before the Supreme Court
Currently, the U.S. Supreme Court is considering whether the International Emergency Economic Powers Act (IEEPA) allows a U.S. president to impose tariffs on other countries during a national emergency. The relevant cases — Learning Resources v. Trump and Trump v. V.O.S. Selections — ask the Court to determine whether IEEPA allows the current tariffs that President Donald Trump has imposed, and if so, whether the ability to do so under IEEPA unlawfully shifts taxing power to the executive rather than the legislative branch.
The U.S. Court of Appeals for the Federal Circuit found the tariffs impermissible under IEEPA. That court ruled that the presidential authority to regulate imports under IEEPA does not include the tariffs that Trump has imposed via various executive orders after he declared a national emergency in Proclamation 10886.
On appeal by the Trump administration, the Supreme Court granted expedited review and held oral arguments in early November. While the high Court considers the case, the IEEPA tariffs remain in place.
Suppose the Court rules that IEEPA allows Trump to impose the disputed tariffs. In that case, domestic businesses are likely to face higher costs for materials, components, and goods, decreased profit margins, disruptions in supply chains, and overall, increased uncertainty about their economic futures. In turn, employees are likely to see fewer raises and cost-of-living adjustments, even as inflation rises. Furthermore, Trump could continue to issue modifications to existing tariffs and new tariffs very quickly, as he has since taking office.
Nonetheless, a recent survey found that only about a quarter of employers expect lower pay increases in 2025 due to anticipated tariffs and economic volatility. While about half of employers said tariffs should not affect this year's projected salary increases, they also reported that tariffs may adversely impact next year's budget. Decreased budgets also increase the possibility of layoffs.
However, if the Court strikes down the tariffs, inflation is expected to cool off, and global supply chains may improve. The elimination of the tariffs likely would lead to more predictable compensation patterns soon.
Current Effects of the Tariffs on Businesses
The currently imposed tariffs are significantly affecting certain businesses, including smaller companies, as they don't have the profit margins to absorb cost increases through price hikes, supply chain reshuffling, or layoffs. Therefore, smaller companies are at much higher risk of closure. The tariffs are also impacting companies that heavily rely on imported goods, such as those in the electronics, apparel, industrial machinery, and auto parts industries. The success of these industries relies largely on global supply chains and foreign materials and products.
Furthermore, as inflation rises, purchasing power plummets. Workers' wages are unlikely to keep pace with inflation, and health insurance premiums are increasing, resulting in smaller net paychecks. Employers are likely to feel pressure to maintain competitive wages, but higher costs and slimmer profit margins may not allow them to do so.
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