Another swing state braces for impact as Trump tariffs target state’s top 3 trading partners

03 February

An employee works on an assembly line at startup Rivian Automotive's electric vehicle factory in Normal, Illinois, U.S. April 11, 2022.

Michigan officials are responding to tariffs imposed by President Donald Trump over the weekend that a recent report said will disproportionately impact Michigan’s economy, whose automotive industry makes it “particularly vulnerable.”

On Saturday, Trump imposed 25% tariffs on all imports from Canada and Mexico and a 10% tariff on Chinese imports, set to become effective Tuesday, initiating a full-blown trade war.

An analysis by Fitch Ratings, which looked at U.S. Census Bureau trade data, highlights which states have the highest level of economic exposure to a “broad-based trade war” which it determined would “likely be disruptive” to U.S. states’ economies.

Of those states, Michigan would potentially be hardest hit, as it tops all other states with 19% of its imports, as a percentage of gross domestic product (GDP) coming from Canada, Mexico and China. Illinois is next at 12%, while no other U.S. state tops 10%.

Following the tariff announcement, Gov. Gretchen Whitmer issued a statement saying the decision will raise costs on goods and services critical to Michiganders, while placing more than a million Michigan jobs at risk.

“Michiganders are already struggling with high costs — the last thing they need is for those costs to increase even more. A 25 percent tariff will hurt American auto workers and consumers, raise prices on cars, groceries, and energy for working families and put countless jobs at risk. Trump’s middle-class tax hike will cripple our economy and hit working-class, blue-collar families especially hard,” said Whitmer.

In response, all three nations targeted by the Trump tariffs have said they will respond in kind, with Canadian Prime Minister Justin Trudeau announcing a similar 25% tariff to be phased in on more than $100 billion worth of American products and calling on Canadians to “buy less American products [and to] choose Canadian products and services rather than American ones.”

Mexico President Claudia Sheinbaum has also ordered the implementation of retaliatory tariffs, while China said it would “safeguard its own rights and interests,” although it did not detail what those would be. However, China did say it plans to challenge the American tariffs through the World Trade Organization (WTO).

According to the Office of the U.S. Trade Representative, Michigan’s largest export market in 2023 was Canada, with the state shipping $27.5 billion in goods there, representing 42% of the state’s total goods exports. Mexico was second with $14.9 billion, followed by China at $2.4 billion.

In addition to the Trump tariffs targeting Michigan’s top three export markets, the Fitch analysis noted that the state’s place at the center of domestic automotive manufacturing also placed an outsize target on its economy.

“The U.S. automotive industry relies heavily on the movement of parts and finished vehicles across the U.S., Canada and Mexico,” states the analysis, which notes that Michigan is home to nearly one-fifth of all U.S. auto production, the most of any other state.

U.S. Sen. Gary Peters (D-Bloomfield Twp.) said Sunday that Trump’s tariffs will hurt workers and the manufacturing industry.

“Parts for a car built in Michigan can be shipped back and forth across the Northern Border upwards of 8 times before final assembly,” he said on social media. “Trump’s tariffs on Canada will do nothing but hurt American workers and auto manufacturers. He’s giving our overseas competitors a leg up.”

Despite calling the tariffs “Trump’s middle-class tax hike,” Whitmer said she would “be glad to work with him, and anyone, to protect Michigan’s auto manufacturing, lower costs, and fight for Michigan’s working families.”

That part of her message was more along the lines of Whitmer’s more conciliatory approach to Trump since he retook office, which included a congratulatory statement following his inauguration and an executive directive for state departments and agencies to review programs and services for compliance to Trump executive orders on DEI, “EV mandates” and gender issues.

But manufacturing is not Michigan’s only vulnerable sector to the tariffs, particularly to the effects of the retaliation against its exports.

According to the Michigan Department of Agriculture and Development (MDARD), Michigan’s total agriculture exports in 2023 were $2.7 billion, which had an economic impact equivalent to $5.22 billion across the state.

With Canada the top importer of Michigan’s agricultural and food products, and Mexico in second place, MDARD Director Tim Boring also expressed concern about the impact the tariffs will have.

“While there are still a lot of unknowns, it’s important to remember two things: Canada and Mexico are our biggest export destinations, and the last time this happened retaliatory tariffs specifically targeted agriculture,” said Boring. “We have to expect tariffs will immediately threaten agriculture jobs, our rural economies and ultimately what it costs to put food on the table.”

That point was echoed by Michigan Agri-Business Association (MABA) President Chuck Lippstreu.

“As a border state, leading agricultural exporter, and major North American trade and transit hub, Michigan deeply values our strong, long-term commercial relationships with Canada and Mexico,” said Lippstreu. “We are deeply concerned that across-the-board tariffs risk substantial negative economic consequences for Michigan agriculture and rural communities in our state.”

According to MABA, in addition to Canada being the state’s top export market, Michigan also imports key agricultural products, including crop nutrients and feed ingredients from Canada, while key agricultural industries in Michigan have forged lasting, long-term commercial ties in Mexico.

“MABA is concerned retaliation could disrupt current and future market opportunities and open the door to international competitors,” said the association.

There’s another effect the tariffs may produce, according to the Peterson Institute for International Economics, a Washington, D.C.-based think tank.

According to a report published Friday, the institute says because Mexico ships one-sixth of its annual economic output to the United States, and because many of those exports originate in duty-free factories located within 30 miles of the border, the livelihoods of those workers would be heavily impacted and “could compel some of them to migrate to the United States, undercutting U.S. efforts to stop border crossings.”

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Michigan Advance is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Michigan Advance maintains editorial independence. Contact Editor Susan J. Demas for questions: info@michiganadvance.com.

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