Trade restrictions spark layoffs at major firms as recession risk rise

A growing number of American and international companies are slashing jobs in response to President Donald Trump’s sweeping tariffs on global imports. The wave of layoffs, spanning industries from automobiles to consumer goods, is raising red flags about the health of the US labour market and its economic trajectory.

Trump’s latest trade policy, rolled out in late March 2025, imposes a 25 per cent tariff on all automobile and auto parts imports, along with days later in April imposing sweeping tariffs on over a dozen trading partners.

The Trump administration has framed the move as a national security measure to protect domestic manufacturing. However, the real-world impact is proving far more complex—and costly.

The tariffs have increased cost pressure on companies, and while some companies have decided to pass on the additional cost to the consumer, some have resorted to cutting costs by reducing their workforce.

Thousands laid off across sectors

In just the last few weeks, companies have reported mass job cuts and halted production at facilities across North America. Stellantis NV has temporarily laid off 900 workers in the US and halted output at plants in Mexico and Canada, citing medium- and long-term effects of the tariffs.

Volvo Group and Mack Trucks, both hit hard by tariff-related cost spikes and falling demand, have announced more than 800 job cuts across Pennsylvania, Virginia, and Maryland. Meanwhile, Swedish fintech company Klarna is slashing 40 per cent of its workforce as it leans into AI to reduce costs.

Consumer goods giant Procter & Gamble is planning to cut 7,000 jobs, nearly 6 per cent of its workforce, over the next two years. The company cited uneven demand and increased input costs due to trade disruptions.

Some news reports also revealed that the company plans to exit certain product categories and markets. P&G imports several raw materials and packaging components from China, making it particularly vulnerable to tariff-related price volatility.

Steelmaker Cleveland-Cliffs laid off over 1,200 workers, while UPS is cutting 20,000 jobs after seeing a sharp reduction in shipments from major clients like Amazon.

Even tech giants like Microsoft, Google, and Amazon have announced tens of thousands of role reductions, citing a mix of automation, falling demand, and global cost pressures.

Congressman Ro Khanna has criticised the tariff-driven chaos. “This week, 19 factories had mass layoffs, 15 closed, and over 4,100 factory workers lost their jobs,” he posted on X. He also warned that the latest round of protectionist policies could trigger broader economic pain.

Economists sound alarm over recession risk

Wall Street is increasingly concerned. JPMorgan’s chief US economist Michael Feroli has downgraded GDP growth projections from 1.3 per cent to -0.3 per cent for 2025, stating that the economy is now expected to contract under the “weight of the tariffs”.

Federal Reserve Chair Jerome Powell has echoed the concern, noting that the tariffs may cause persistent inflation and economic drag—effects that could outweigh their intended industrial benefits.

Globally, the International Monetary Fund (IMF) has projected a 2.8 per cent annual decline in global output, including a 1.8 per cent drop for the US, due to the new wave of trade barriers.

Meanwhile, European brewers are warning of 100,000 potential job losses if the US follows through with levies on beer imports from the EU and Mexico.

While the recent job data released in the US has indicated an uptick in hiring and has offered a glimmer of hope for the US labour market, the concerns about unemployment loom as the data also showed a rise in layoffs.

Despite these warnings, Trump and his supporters continue to defend the policy as a step toward reshoring industry and protecting US jobs. But, at least so far, the reality playing out on the ground tells a different story.