Politico Pro: Trump’s new tariffs could hit hard in Republican territory

The new tariffs on Canada and Mexico, as well as additional duties on China, are expected to increase costs for Texas companies by $47 billion, more than any other state.

President Donald Trump’s new tariff hikes on Canada and Mexico will affect many states and congressional districts he won in the November election — starting with Texas.

The Lone Star State, which Trump captured with 56 percent of the vote in 2024, is especially vulnerable to tariffs on Mexican goods. Its two-way trade with Mexico was $272 billion in 2023, or about one-third of total U.S.-Mexican trade that year.

Texas imported nearly $142.7 billion of Mexican goods, including computer equipment, auto parts, autos, oil and gas and electrical equipment and components.

It also exported nearly $130 billion worth of goods to its southern neighbor, including petroleum and coal products, semiconductors, oil and gas, computer equipment and auto parts.

The state also does a large amount of trade with Canada, despite being situated on the opposite border. Data provided by the Canadian embassy shows that Rep. Wesley Hunt’s (R-Texas) Houston-area district was the top U.S. exporting district to Canada last year, with $4.5 billion in shipments. Another Texas district that includes the Johnson Space Center, represented by Republican Rep. Bruce Babin, was the 11th largest source of U.S. exports to Canada last year, with $2.3 billion in shipments. It underscores the political peril the tariffs represent for Republicans, who nonetheless have maintained broad support for the president’s trade agenda.

Republican Gov. Greg Abbott last month brushed off the threat of tariffs against the fellow North American countries as a negotiating tactic and expressed confidence they would not hurt his state.

“Listen, the Texas economy is the most powerful economy in the United States, and we're able to withstand all types of challenges, and we're going to make our way through this. And so, to be honest, I'm not really concerned about it,” he told Bloomberg Television.

But Sen. Ted Cruz (R-Texas) last week acknowledged that “trade with Mexico and Canada is enormously important to the Texas economy.” And he expressed hope that a deal could be struck with the two governments to avoid the tariffs.

State-by-state impact: The new tariffs on Canada and Mexico, as well as additional duties on China, will increase costs for Texas companies by $47 billion, more than any other state, according to Trade Partnership Worldwide, a Washington-based analytical firm.

California is second with $33 billion in increased costs, the firm found.

The Golden State is also the second-most vulnerable state on the Mexican trade front, with trade worth nearly $95 billion in 2023, including $33 billion in exports and $62 billion in imports.. That may resonate less with Trump, since he handily lost the state in last year’s election and seems to take pleasure in needling the state’s Democratic governor, Gavin Newsom.

Next comes Michigan, the historic center of the U.S. automotive industry and an important swing state that Trump won in November by appealing to blue collar voters. Its trade with Mexico was $84 billion in 2023, including $15 billion in exports and $69 billion in imports.

The state-by-state trade figures show how integrated automotive trade has become between the two countries. Although Michigan is a long way from Mexico, autos and auto parts account for more than half of the two-way trade.

Autos and auto parts also account for a large share of Illinois and Tennessee’s trade with Mexico. Those states are the fourth and fifth-largest state trading partners with Mexico.

Jamie Tronnes, the executive director of the Center for North American Prosperity and Security, a Washington-based think tank, said last week the new duties would have an immediate impact on the automobile industry.

“If these tariffs go in as they are planned right now, we will have an auto market shutdown within days,” Tronnes warned. “We’re not talking weeks.”

Tronnes said the consequences would also start to pile up for farmers, some of Trump’s core supporters, who rely on North American trade for equipment and fertilizer.

“When it starts to affect the red states is when it’s going to really affect Trump personally,” Tronnes said. “Because he’s really in touch with his supporters. He likes to reward their loyalty in a way.”

Canada connections: Five U.S. states sourced over half of their imports from Canada last year, many along the U.S. northern border: Montana (92 (percent), Maine (70 percent), Vermont (67 percent), North Dakota (65 percent) and Wyoming( 55 percent).

Canada also was the top supplier of merchandise imports for 22 U.S. states, in another sign of how closely the two economies are linked. In addition, Canadian officials point out that over 70 percent of Canadian goods exported to the U.S. are used by American manufacturers to produce other goods.

Canada was the largest merchandise export market for 32 U.S. states, and among the top three for 45 U.S. states in 2024.

California exported nearly $37 billion worth of goods to Canada last year, making it the state’s second largest export market behind Mexico. Canada was also the second largest export market for Texas, which shipped more than $18 billion worth of goods to the northern U.S. neighbor in 2024.

Canada was the top export market for Michigan ($23 billion), Ohio ($20 billion), Illinois ($20 billion), New York ($17 billion) and Pennsylvania ($15 billion) in 2024.

Tariffs on Canada “will be devastating” to New York’s economy, particularly in the western part of the state, New York Gov. Kathy Hochul said in an interview Monday on CNN. “To us in western New York, it's not another country. It's just our neighbors across the bridge.”

Many New York businesses that depend on Canadian imports now face a 25 percent price increase, Hochul, a former Democratic congresswoman, continued.

“How is that about reducing people’s costs? We were promised lower prices on day one, inauguration day. Not only is everything going to go up, even eggs. Eggs now cost $11 in New York City, up 20 percent from what they've been on inauguration day. So this is not … what we were promised,” she said.

National context: The Peterson Institute for International Economics, a free market think tank, estimates that a 25 percent tariff on all Mexican and Canadian goods will slow growth and accelerate inflation in all three countries.

The additional tax on imported goods would reduce U.S. economic output by about $200 billion, a relatively tiny amount in the nearly $30 trillion economy, Peterson scholars Warwick McKibbin and Marcus Noland wrote in a recent report.

The tariffs would take about $100 billion out of Canada’s much smaller economy, a loss of more than 1 percent. But the biggest impact would be on Mexico, where Trump’s tariffs could reduce the country’s GDP by 2 percent annually compared to current expectations.

That’s because exports account for roughly 40 percent of Mexico’s GDP and roughly 80 percent of its exports go to the U.S., many of them produced by foreign-owned factories, or “maquiladoras,” within 30 miles of the border.

“For Mexico, a 25 percent tariff would be catastrophic,” the Peterson scholars wrote. “Moreover, the economic decline caused by the tariff could increase the incentives for Mexican immigrants to cross the border illegally into the U.S. — directly contradicting another Trump administration policy.”

Trump’s tariffs could cause more than 177,000 job losses in the United States, 278,000 in Canada and 1.4 million in Mexico, said Joshua Meltzer, a senior fellow at the Brookings Institution, a public policy think tank.

And those figures could go even higher, depending on how hard Canada and Mexico retaliate against U.S. exports, he added.

“The big picture is really a trade war, because it's clear Mexico and Canada will retaliate, and Trump has effectively said he'll up the ante,” Meltzer said in an interview. “So I think we'd be quickly in sort of what you would fairly call a trade war, essentially escalating tariffs amongst the U.S.’s largest trading partners.”