Michigan State University professors Jason Miller, a supply chain management expert, and David Ortega, a food economics and policy expert, discuss the significance of Trump imposing tariffs on Canada. Mexico and China. Here are excerpts: 

How will tariffs impact the U.S. economy? 

Miller:

The general expectation is tariffs will be a net negative impact on the U.S. economy, as this is the general conclusion from academic research examining the 2018-19 U.S.-China trade war. During that period, manufacturers that saw larger increases in tariffed inputs to their production processes saw slower export growth, and manufacturing sectors targeted for retaliation saw reductions in employment.  

Ortega:

The economic impact of tariffs depends on their scope and duration. In the short term, tariffs can raise prices for imported goods. But they can also raise the price of intermediary goods, or inputs that we import and are needed to produce goods domestically. Imposing tariffs on our trading partners can lead to retaliatory tariffs from other countries, which hurt U.S. exporters — especially in agriculture and manufacturing. We saw this play out during the U.S.-China trade war, where tariffs led to higher costs for consumers and significant losses for American farmers.

How will tariffs impact Michigan businesses? 

Miller:

Tariffs on Canadian and Mexican auto parts and finished vehicles will be highly detrimental to Michigan. For example, over 50 per cent of imported auto parts from Canada have a final destination in Michigan, where they are used by automakers as inputs into either other auto parts (e.g., broader assemblies) or directly put into finished vehicles. Likewise, Michigan is a key state of final destination for auto parts produced in Mexico. Michigan firms also import a lot of steel and aluminum from Canada for use in making their goods. These products will become less cost competitive due to higher steel prices.

Ortega:

Michigan’s economy is deeply tied to both manufacturing and agriculture, so tariffs could hit the state particularly hard. From Canada alone, Michigan imports around $1.5 billion worth of agricultural and food products. We also rely on imports of fresh produce from Mexico to meet year-round consumer demand for fresh fruit and vegetables. Moreover, U.S. agriculture relies on exports to sustain prices and revenues, and past trade disputes have shown that retaliatory tariffs can disrupt foreign market access for Michigan-grown products like dairy, meat, soybeans and other grains and specialty crops.

What sectors/industries could be most impacted by these new tariffs? 

Ortega:

Given the scope and scale of the tariffs that have been proposed, this would really affect many sectors of the U.S. economy from manufacturing and automotive to agriculture. In the agri-food sector, we depend on trade with our trading partners to meet year-round consumer demand for fresh fruit and vegetables, as well as rely on imports for goods that we cannot produce domestically such as coffee, spices, tropical fruit, etc.

Mexico and Canada are our largest and arguably most important trading partners. Total agri-food trade exceeds $74 billion, with more than $28 billion in U.S. exports, primarily corn, soybeans, oilseeds, livestock and meat products. We import over $45 billion worth of products from Mexico, as the majority of our fresh produce imports — fruits and vegetables — come from there. For example, 90% of avocados consumed in the U.S. are from Mexico. We also import berries — particularly strawberries and raspberries — from Mexico, as well as tomatoes, peppers, cucumbers, squash, cabbage and onions. We also import beer and tequila from Mexico. 

Total agri-food trade with Canada is valued at more than $72 billion, with more than $32 billion in U.S. exports, including grain alcohol, processed foods, consumer-oriented products, pet food and corn. We import baked goods, canola oil, beef and pork, and processed potato products among other items from Canada.

What response can we expect to see from China, Canada and Mexico?

Ortega:

We can expect our trading partners to retaliate. Canada, for example, announced a list of retaliatory tariffs on products, including food and agricultural products, that would go into effect should the U.S. impose tariffs. And historically, when the U.S. imposes tariffs, other countries respond with retaliatory measures. We saw this play out during the U.S.-China trade war in 2018. As a result of retaliatory tariffs, U.S. agricultural exports to China plummeted, with losses exceeding $25 billion. Soybean farmers bore the brunt of this impact.

Miller:

China’s response has been quite measured, as noted by Bloomberg. Canada and Mexico committed to more border security efforts, but we will see how this plays out since tariffs have only been delayed for a month. 

Source:  Michigan State University February 21, 2025 news release