Tariff Turbulence—For Employees

For workforces around the world, the pain is obvious. Under the on, then off, tariff plans, people could be facing much higher or volatile pricing for groceries, appliances, cars, housing, and more. Paychecks, already stretched thin because of high inflation and interest rates, may be depleted more while retirement accounts shift up and down dramatically.

The headlines of the past week, impossible to miss, have centered on the difficulties consumers and organizations may be facing from tariff turbulence. But while employers digest these financial repercussions, experts say, their workers are bound to experience some serious collateral damage—in the form of lower raises and bonuses, additional layoffs, and hiring freezes—if too many tariffs go through. “Tariffs are inserting another element of chaos into employees’ lives,” says Jonathan Wildman, a Korn Ferry Advisory senior client partner.

Already, leaders from across the business landscape have said they will have to slash spending and possibly cut jobs to absorb the costs of other countries’ reciprocal tariffs. That means workers who are banking on raises or bonuses to offset tariff pain are likely to be disappointed, say experts. According to Korn Ferry research, raises have been falling for the last few months in anticipation of tariffs, from a median increase of 3.8% in October down to 3.5% in late February. Tom McMullen, leader of the US Pay Equity practice at Korn Ferry, expects firms that haven’t already done so to lower raises even further. “There may still be fluctuation to the south of 3.5 percent,” he says.

But the real danger is that top talent may leave for higher-paying roles. Sure, many older and mid- to lower-level employees will be staying in their roles for a while, if not clinging to them, with voluntary turnover running at a three-year low. But against the backdrop of return-to-office mandates and other issues, high performers may be able to bolt—even in this tough market—for safer and better roles. Certainly, they’ve been thinking about it: In studies conducted before the tariffs, about one-third of high performers said they were planning to leave their jobs in the next 12 months. “There’s always a market for top talent,” says McMullen. If these high-performing employees do leave their current jobs, damage in the long term could be even worse than in the short term, say experts: Organizations would be left with a workforce of lower-paid but marginal performers.

The biggest challenge for leaders, however, is keeping people engaged and productive. Wildman says tariffs are another example of an environment where uncertainty and volatility are ingrained rather than episodic. At times like this, he argues, employee-engagement initiatives, reward and recognition programs, and other traditional initiatives aren’t enough. “The tariff experience is ripe for companies and employees to start to think about what they need from work in new and different ways,” he says.

In a tariff-fueled economy, says Korn Ferry senior client partner Roger Philby, the best leaders won’t just adjust salary and prices—they’ll adjust priorities. Because people don’t just want more pay. They want more reasons to stay. "Your best talent is always being courted. Now they’re also being squeezed at home," Philby says. "This is the moment to win them back—even if they never left."

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