On April 2, during the “Liberation Day” address, President Donald Trump announced a series of new tariffs impacting U.S. trade relations with over 180 countries.
Trump’s plan involves implementing tariffs ranging from a low of 10% for non-Chinese companies to as high as 125% for Chinese goods. Although the tariff rates may continue to change, they are currently reshaping the global trade landscape significantly.
While the tariffs will directly influence imported goods and consumer prices, they might also have longer-term effects on Social Security. Those currently receiving or soon to receive Social Security benefits should be informed about these potential impacts.
### The Cost-of-Living Adjustment Could Be a Double-Edged Sword
A foreseeable outcome of the tariffs is an increase in prices. Certain companies may absorb these higher costs, but many are expected to transfer them to consumers, resulting in inflation. This inflation affects Social Security’s annual cost-of-living adjustment (COLA).
The COLA aims to counteract rising prices. Since Social Security recipients receive a fixed amount, a COLA helps maintain their purchasing power.
The COLA is determined by comparing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the previous year’s third quarter to the current year’s third quarter.
For instance, if the third-quarter CPI-W data for 2025 shows a 5% increase over 2024, recipients would see a 5% rise in benefits starting January 2026.
Assuming the tariffs lead to higher inflation as anticipated, the COLA for 2026 might be larger than expected. While increased benefits are beneficial for retirees, there is a chance they might not keep pace with rising costs.
### Unemployment Could Strain the Social Security System
The likelihood of a recession has increased with the new tariffs, potentially affecting the Social Security Trust Fund.
Social Security is mainly funded by payroll taxes, which currently total 12.4% of a worker’s salary—shared equally by employers and employees. Self-employed individuals cover the full amount.
Recessions typically lead to higher unemployment as businesses lay off workers and reduce hiring in response to decreased demand. This scenario could reduce the number of contributors to the Social Security system, while the number of beneficiaries remains stable or increases if people claim benefits earlier than planned.
This imbalance could stress a system already facing long-term funding issues. Current recipients may not need to worry, but future beneficiaries could be affected.
### New Tariffs May Not Be Entirely Negative for Social Security
Despite concerns about unemployment’s impact on Social Security, there is a potential upside. If tariffs lead to increased domestic manufacturing, more jobs and contributors to the trust fund may result.
While it’s uncertain whether the tariffs will achieve this outcome, any additional payroll revenue could help ease system strain.
In the short term, positives from the new tariffs regarding Social Security are limited, but there may be a long-term silver lining.
