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What impact could Trump tariffs have on Minnesota?

By
Updated  November 27, 2024 9:56am CST
Economy
FOX 9

How might Trump's tariffs impact Minnesota?

President-elect Donald Trump’s threat on Monday to impose 25 percent tariffs on Canada and Mexico when he returns to the White House in January captured the attention of world leaders and prompted warnings from economists that his plans would raise prices for consumers.

The Brief

    • President-elect Donald Trump announced plans for 25% tariffs on Canada and Mexico to curb illegal immigration and drug trafficking, which economists warn could raise consumer prices on essentials like gas and groceries.
    • Minnesota, which imports $14.4 billion worth of goods annually from Canada, could face higher household costs due to tariffs, particularly on energy imports like crude oil and natural gas.
    • Some speculate Trump may use the tariff threats as a negotiation strategy, similar to his first term.

(FOX 9) - President-elect Donald Trump’s threat on Monday to impose 25% tariffs on Canada and Mexico when he returns to the White House in January captured the attention of world leaders and prompted warnings from economists that his plans would raise prices for consumers.

What is a tariff?

Tariffs are a tax on imports. They are charged as a percentage of the price a buyer pays to a foreign seller. In the United States, tariffs are collected by Customs and Border Protection agents at ports of entry. Most imported and exported goods can currently move between the United States, Mexico and Canada without tariffs because of the US-Mexico-Canada trade agreement Trump signed during his first presidency.

What we know

Trump said the plans, which he announced in a pair of posts on his Truth Social site, were designed to curb illegal immigration and drug trafficking from both countries.

"This tariff will remain in effect until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country!" he wrote.

But economists quickly warned that new tariffs would almost certainly raise prices on everyday items such as gas and groceries. 

Impacts on Minnesota

Minnesota’s largest trading partner is Canada, with the state importing $14.4 billion worth of goods from the country each year, according to the Consulate General of Canada in Minneapolis.

The state’s biggest imports from Canada are crude oil, natural gas and electricity, according to the Consulate General.

"That would go into higher costs for Minnesota households," said economist Timothy Kehoe, a professor at the University of Minnesota.

Kehoe, who also serves as an advisor at the Federal Reserve Bank of Minneapolis, said when businesses pay tariffs they pass the cost onto consumers.

"This is going to be costly," he said. "We have to see how it plays out."

At a news conference at the State Capitol on Tuesday, Gov. Tim Walz chimed in on the prospect of new tariffs.

"Agriculture pays the heaviest price," he said. "States like Minnesota pay the heaviest price for that."

Some Republicans speculated that Trump could be using the threat as a negotiating tactic, pointing out that he threatened Mexico with a tariff over illegal immigration during his first term. He did not impose the tariff after Mexico took action to curtail illegal immigration.