Trump Tariffs Could Hit These US States Hardest

Introduction: The Impact of Trump’s Trade Policies

Donald Trump’s presidency marked a significant shift in American trade policy, characterized by the imposition of hefty tariffs on some of the United States’ largest trading partners, including close allies like Canada and Mexico. These tariffs, which Trump argued were necessary to revitalize American manufacturing and address perceived economic exploitation, have sparked a wave of retaliatory measures from affected countries. While the entire U.S. economy is likely to feel the effects of these trade disputes, some states are expected to bear the brunt more than others. The impact will largely depend on factors such as geographical proximity to the borders of Mexico or Canada, reliance on foreign energy imports, and whether a state is specifically targeted by retaliatory measures from overseas trading partners.

Trump’s Tariffs: Measures and Reactions

Since returning to the White House, Trump has introduced a series of tariffs aimed at addressing what he perceives as unfair trade practices. In March, the administration imposed a 25% tariff on goods from Mexico and Canada, excluding Canadian oil, and an additional 10% tariff on Chinese trade. These moves were met with swift retaliation from Canada and China, which introduced their own tariffs on U.S. goods. Trump initially tied the tariffs to Mexico and Canada to issues like illegal immigration and fentanyl smuggling, though these connections were unclear and controversial. The tariffs were later scaled back, with exemptions for automotive products and goods covered under the USMCA free trade agreement. However, Trump also introduced a 25% tariff on steel and aluminum from other parts of the world and threatened further measures against the European Union, including a potential 200% alcohol tax.

The reaction from trading partners was immediate. Ontario Premier Doug Ford, for instance, initially announced a 25% surcharge on electricity sales to the U.S., prompting Trump to double tariffs on Canadian steel and aluminum to 50%. After negotiations, both sides agreed to pause these measures, but the situation remains volatile. Trump’s aggressive trade policies have created uncertainty and tension, with the potential for further escalation.

Geographical Proximity: States on the Front Lines

States located near the Canadian or Mexican borders are among those most vulnerable to the effects of Trump’s tariffs. According to Gary Clyde Hufbauer, a trade expert at the Peterson Institute for International Economics, proximity to these borders means that these states are more heavily reliant on cross-border trade. "Distance matters in trade," Hufbauer explains. "States closer to Canada or Mexico will likely face greater challenges than interior states." For example, Texas, which trades over $200 billion annually with Mexico, is particularly exposed. California, Arizona, and New York also have significant trade relationships with their neighboring countries.

The U.S. Census Bureau reports that in 2022, Canada accounted for 17.3% of total U.S. exports and 13.4% of imports, valued at $2.1 trillion and $3.2 trillion respectively. These figures underscore the interconnectedness of the U.S. and Canadian economies, as well as the potential consequences of trade disruptions. States like Michigan, Minnesota, and Texas, which rely heavily on cross-border trade, are likely to feel the pinch more acutely as tariffs increase costs and reduce trade volumes.

Farming and Manufacturing: Sectors Under Pressure

The agricultural and manufacturing sectors are among the hardest hit by Trump’s tariffs. Kristen Hopewell, an economist at the University of British Columbia, notes that "no state will be immune to the negative impacts of these tariffs, but some will be hit much harder than others." The "farm belt" states, including Iowa, Illinois, Indiana, Ohio, Nebraska, Kansas, Kentucky, Minnesota, Missouri, North Dakota, South Dakota, and Wisconsin, are particularly vulnerable. Many of these states rely heavily on exports to Canada, Mexico, and China, which have all imposed retaliatory tariffs on U.S. agricultural products.

For example, roughly 85% of the potash used by American farmers for fertilizer comes from Canada. Trump’s tariffs on potash and other inputs have significantly increased costs for farmers, while retaliatory tariffs from Canada, Mexico, and China have reduced their access to key export markets. This dual squeeze is placing immense pressure on the agricultural sector, which is already grappling with challenging economic conditions.

Manufacturing hubs are also feeling the strain. Tariffs on steel and aluminum have raised production costs for manufacturers, undermining their competitiveness in the global market. States like California, Texas, Illinois, Ohio, Michigan, Pennsylvania, New York, Indiana, Wisconsin, and North Carolina, which are home to large manufacturing industries, are among the hardest hit. As costs rise and export markets are disrupted, these states face the likelihood of plant closures, job losses, and economic stagnation.

Energy: A Vulnerable Sector

The energy sector is another area where Trump’s tariffs have created significant vulnerability. Ontario Premier Doug Ford’s threatened 25% surcharge on electricity sales to the U.S. highlighted the potential for targeted retaliation in the energy sector. States like Michigan, Minnesota, and New York, which rely heavily on Canadian energy imports, are particularly exposed. Jeffrey J. Schott, another economist at the Peterson Institute for International Economics, warns that these states could face higher energy costs or even disruptions to their electricity supply if tensions escalate.

Canada is the largest supplier of oil to the U.S., accounting for 60% of American oil imports. Many refineries in the Midwest, particularly in states like Michigan, Wisconsin, Indiana, and Ohio, are specialized to process heavy crude oil from the Alberta oil sands. With no readily available alternative supplies, tariffs on Canadian oil would likely be passed on to consumers in the form of higher gasoline and heating oil prices. This would have a disproportionate impact on these states, further exacerbating the economic challenges they already face.

Red States: Political Targets in the Trade War

One of the most striking aspects of the trade war is the apparent targeting of politically significant states by U.S. trading partners. According to Politico, Canada specifically aimed its retaliatory tariffs at Republican-voting states, such as Florida, Ohio, and South Carolina, in an effort to pressure Trump’s political base. Similarly, the European Union has focused its retaliatory measures on states like Louisiana, Kansas, and Nebraska, which are key producers of soybeans, beef, and poultry.

These targeted measures have the potential to inflict maximum political damage on the Trump administration by affecting states that were critical to his election victory. For example, Canada’s tariffs on Florida fruit, Ohio household appliances, and Pennsylvania motorcycles are designed to hit Republican-leaning industries and communities. Similarly, the EU’s focus on agricultural products from Louisiana, Kansas, and Nebraska targets states that are not only economically dependent on these industries but also politically significant in the Republican coalition.

Conclusion: The Far-Reaching Consequences of Protectionism

The impact of Trump’s tariffs extends far beyond the economic sphere, with significant political and social implications. While the administration argues that these measures are necessary to restore American manufacturing and address unfair trade practices, the reality is that they have created widespread uncertainty and disruption. From the border states that rely on cross-border trade to the farming and manufacturing communities that are being squeezed by rising costs and retaliatory tariffs, the effects of these policies are being felt across the country.

The targeting of politically significant states by U.S. trading partners adds another layer of complexity to the situation, as these measures are designed to influence domestic politics and pressure the administration to reverse course. As the trade war continues to escalate, it is clear that there are no winners. The cumulative impact of these tariffs will likely be felt for years to come, with the potential to push the U.S. economy into recession and undermine its global trade relationships.