4 ways Trump’s tariff plan threatens Michigan’s economy

Donald Trump’s plan to enact new tariffs on Canadian and Mexican goods has been put on pause. But Michigan leaders say if they’re allowed to take effect, the economic fallout could be devastating—especially for working families.

MICHIGAN—President Donald Trump was set to impose sweeping new tariffs this week, targeting America’s three biggest trading partners: Canada, Mexico, and China. But on Monday, his administration decided to tap the brakes on parts of the plan, citing ongoing negotiations with Canada and Mexico.

That pause, however, has done little to calm fears of the tariffs sparking an economic disaster in Michigan—a state where nearly one-fifth of the economy depends on cross-border trade.

“Michiganders are already struggling with high costs—the last thing they need is for those costs to increase even more,” Gov. Gretchen Whitmer said in a statement.

If Trump moves forward with the tariffs next month, state leaders warn they could make cars, gas, groceries, and home heating more expensive while putting over a million jobs at risk.

“Michiganders are going to be hurt more than any other state from these tariffs, which will make everyday essentials cost more,” state Rep. Julie Brixie (D-Meridian Township) said during a press conference this week. “Trump’s tariffs are going to jack up prices on nearly everything.”

Wait—What are Tariffs?

Tariffs are essentially a tax on imported goods. And when those taxes go up, the companies that are forced to pay the tariffs usually pass those added costs straight to consumers.

And that’s exactly what Michigan leaders fear will happen if Trump’s proposed tariffs takes effect. Under his plan, most goods from Canada and Mexico would be taxed at 25%, Chinese imports at 10%, and even Canadian energy—like oil and electricity—would face new fees.

“Because companies pass tariff costs on to the consumers, Trump’s middle-class tax hike will mean Michigan families pay more to heat their homes as they face below freezing temperatures, fill their gas tanks, and get affordable housing,” Whitmer said in a statement. “It will also harm our auto industry, driving up the cost of cars and slowing production lines.”

The 10% tariff on Chinese imports is now in effect. The other tariffs on Canada and Mexico (which Trump first promised on the campaign trail) were supposed to kick in this week. But after facing widespread backlash, Trump hit pause on them—for 30 days, or until March 5. 

That delay, in turn, has given businesses, economists, and Michigan leaders more time to sound the alarm. And here’s what they say Trump’s “middle-class tax hike” would look like in Michigan:

1. Car prices could jump and factory jobs could disappear.

Michigan’s auto industry is built on cross-border supply chains that rely on free trade with Canada and Mexico. In fact, the parts for a single car made in Michigan can reportedly end up crossing the border up to eight times before the final vehicle rolls off the assembly line.

Trump’s tariffs would effectively slap a 25% tax on those parts every time they move across the border—which could raise production costs and send car prices soaring for Michiganders. 

• Analysts estimate that new car prices, on average, would likely increase by anywhere from $1,000 to $9,000 or more—with some vehicles being affected more than others.

• More than 165,000 autoworkers could reportedly be laid off if the tariffs remain in place for any considerable time. And more than 550,000 workers at car dealerships representing international brands reportedly risk losing their jobs if the industry falters.

• General Motors, Ford, and Stellantis are reportedly preparing for industry disruptions.

“Tariffs on Canada will do nothing but hurt American workers and auto manufacturers,” US Sen. Gary Peters (D-Michigan) posted on Twitter. “He’s giving our overseas competitors a leg up.”

United Auto Workers Union President Shawn Fain has also criticized Trump’s approach. 

“We are willing to support the Trump administration’s use of tariffs to stop plant closures and curb the power of corporations,” Fain said in a statement last month. “But so far, Trump’s anti-worker policy at home, including dissolving collective bargaining agreements and gutting the National Labor Relations Board, leaves American workers facing worsening wages and working conditions even while the administration takes aggressive tariff action.”

It’s worth noting: It’s not just car prices that could be affected by Trump’s tariffs. Any industry that relies on imported parts—from appliances to electronics—could also see costs climb. Michigan imported more than $120 billion worth of goods from Mexico and Canada in 2023—making it one of the most trade-dependent states in the country, reports show.  

2. Gas prices could surge—especially in Michigan. 

With Michigan relying on Canadian crude oil more than most states, Trump’s proposed 10% tariff on Canadian energy could send gas prices 40-70 cents higher per gallon, experts warn.

That’s because most Midwest refineries process Canadian oil, and any new cost for those companies—much like the automakers—could be passed straight to drivers at the pump.

A prolonged trade fight over oil could also “really muck things up for both the US and Canada” due to the interconnected system of pipelines and oil refineries in the Midwest, Patrick De Haan, an economist with the fuel price tracking service Gasbuddy, told Bridge Michigan this week.

De Haan also said Canadians have the “nuclear option” of shutting off oil supply—a possibility that was outlined in a video statement released by Ontario Premier Doug Ford late last year.

Trump, for his part, has dismissed that scenario—recently telling reporters that “oil is not going to have anything to do with it, as far as I’m concerned.” But it’s still unclear whether the Trump administration would actually consider exempting Canadian oil and electricity from the tariffs.

“Energy markets are highly integrated, and free and fair trade across our borders is critical for delivering affordable, reliable energy to US consumers,” American Petroleum Institute President and CEO Mike Sommers said in a statement in response to Trump’s plan to impose new tariffs.

It’s worth noting: The US is the largest market for Canadian crude oil exports. But it’s not just about gas prices. Tariffs on Canadian natural gas could also cause Michiganders’ home heating and other utility bills to rise—which could, in turn, make Michigan winters even more expensive.

3. Grocery bills could spike—particularly for fresh produce. 

If Trump’s proposed tariffs on Mexican and Canadian goods go into effect, many Michiganders may also notice their grocery bills creeping up a bit faster than usual—namely because the US also imports billions of dollars worth of food products from Canada and Mexico every year. 

And with grocery stores typically operating on thinner margins than most other industries, those extra costs of doing business are even more likely to be passed on in the form of higher prices.

“Many families buy everyday products from Canada, Mexico and China, and they will surely pay the price,” Bob Thompson, president of the Michigan Farmers Union, said in a statement.

Mexico reportedly serves as the largest supplier of fresh fruit and vegetables to the US, and Canada leads in exports of grain, livestock, poultry, crop nutrients, feed ingredients, and more.

The first price hikes—on the most popular agricultural imports like avocados—would reportedly hit within one week of the tariffs being enacted, namely since fresh produce has a limited shelf life and grocery stores would need to absorb those extra costs immediately to churn a profit.

“Dairy meat, fresh produce, bread—these are the basics that Michigan families put on the table every single day, and they’ll all go up in price as a result of these tariffs,” Brixie said. “When Trump makes it more expensive to import the goods that stock grocery store shelves, those higher costs get passed straight to families in the checkout line. And it won’t stop there. Families will feel it everywhere. Farmers will feel it when they can’t sell their harvest. Small businesses will feel it when they try to restock their shelves. … These tariffs are a tax on every single Michigander who fills up their tank, who buys groceries, or tries to make ends meet.”

It’s worth noting: Canada and Mexico also import a lot of Michigan food, so farmers could end up being hit from both sides—higher costs to run their farms and fewer buyers for their crops. 

4. Michigan farmers could be crushed by retaliation. 

Tariffs don’t happen in a vacuum. 

When the US imposes new taxes on imports, other countries often hit back with their own tariffs on American-made goods. Canada and China have both threatened to enact their retaliatory tariffs in response to Trump’s latest plans—including a 10% tariff on American-made agricultural machinery in China, as well as a 25% tariff on American-made fresh fruit and juices in Canada. 

And that’s bad news for Michigan farmers who export about $2.7 billion in agricultural products annually—primarily to Canada and Mexico. That mostly consists of processed food products, sugar beets, soybeans, soybean residue, brewing waste, animal feed, dairy, wood, and meat.

“Donald Trump said he was going to make our grocery bills less expensive, but less than a month into his presidency and he’s already breaking this promise,” Thompson added. “This is not a solution to deal with trade deficits. These one-sided actions will only hurt our economic security, especially for farmers who suffered when Trump imposed tariffs during his first term.”

Six countries retaliated against tariffs Trump enacted on steel and aluminum in 2018—namely on billions worth of agriculture exports, which hit American soybean farms especially hard.

Michigan Farm Bureau officials have said those retaliatory tariffs ultimately hit the agriculture industry harder than other other sectors. And the one Trump is proposing could be even worse.

“We have to expect tariffs will immediately threaten agriculture jobs, our rural economies and ultimately what it costs to put food on the table,” Tim Boring, director of the Michigan Department of Agriculture and Rural Development, said in a statement last week.

The Bigger Picture

Trump’s tariffs may be on hold, but the damage they could cause to Michigan’s economy is clear. From higher car and grocery prices to gas hikes and farm losses, these tariffs would act as a tax on Michigan families—while doing little to fix the issues they’re meant to address.

Michigan leaders and businesses are pushing back against the plan. But if Trump decides to move forward with tariffs, Michigan’s economy could take one of the hardest hits in the country.

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