Economists have issued a warning that Donald Trump’s tariff plans could devastate the state of Texas, including the potential loss of more than 300,000 jobs.
The president-elect said earlier this week that plans to implement tariffs on Mexico and Canada would come in to place if they didn’t stem the flow of migrants and drugs across the borders.
His plan to rid the country of illegal immigrants was one of his key promises during his campaign, but economists are warning that drastic effects could be felt in Texas and across America.
Ray Perryman, CEO of financial analysis firm The Perryman Group, told Newsweek that the move would have a ‘disproportionate impact’ on Texas.
The founder said: ‘If 25 per cent tariffs on all goods from Mexico and Canada were to be implemented and maintained, we estimate that the annual losses to the U.S. economy would be about $250.6 billion in annual gross domestic product (2024 dollars) and about 1.97 million jobs. These losses amount to almost 1 percent of U.S. GDP.’
The impact that the tariff’s would impose on Texas, according to Perryman, would be that much more drastic due to its proximity to and integration of supply chains with Mexico.
Perryman told the outlet that they estimated the impact to be about $46.9 billion in yearly gross state product and 370,000 jobs.
He added that if Trump’s tariffs sparked retaliatory tariffs from Mexico or Canada, or if they sparked inflation which led to an interest rise, the ‘adverse effects would increase.’
An author and nonresident senior fellow at the Peterson Institute for International Economics, Gary Clyde Hufbauer, agreed that the tariffs could severely impact the state.
He told Newsweek: ‘A tariff war with Mexico will severely impact Texas. Not only all those avocados, mangoes, beer, tequila, etc. becoming more expensive to Texas customers, but the decline in cross-border truck and rail traffic will throw a lot of Texans out of work.’
He further noted the then potential loss of Texas sales of consumer goods, cattle, gas, petroleum and electricity to Mexico as well as a loss of Mexican tourism would also add to the impact on the state.
Another economist and founder of Ginn Economic Consulting, Vance Ginn,added: ‘Raising taxes through tariffs is a costly mistake that hurts Americans and undermines economic growth.
‘A 25 per cent tariff on goods from Mexico and Canada would disproportionately harm Texas, the nation’s top trading state with these countries, by raising costs for businesses and consumers, distributing supply chains, and reducing economic efficiency.’
Ginn further added that in 2023, Texas exported and imported billions of dollars in goods and services to Mexico and Canada, vital trade that supports many Texas jobs.
‘Protectionism through government-imposed tariffs distorts markets, reduces competition, and forces Americans to pay higher prices,’ he added.
Maxwell Marlow, director of research at the Adam Smith Insitute, a British economic focused think tank which advocates for free markets, told Newsweek: ‘Be under no illusion. Should Donald Trump enact his tariffs, they will be paid for by American consumers through higher prices on everyday goods.’
Marlow added that many Americans went to vote with the intention and hope of defeating inflation, and having a cheaper cost of living, ‘not facilitate its return through bad trade policy’.
‘Retaliatory tariffs from America’s trading partners risk further escalating the situation, weakening America’s exports and productivity. This would be particularly devastating for areas such as Texas, where goods cross borders multiple times during their production.
‘The government should avoid meddling with intricate supply chains – raising grocery bills in the name of outdated 18th-century mercantilist myths is not in the best interest of workers,’ he concluded.
While Trump’s tariff plan has come under a lot of scrutiny, it was supported on X by billionaire hedge fund manager and Trump support Bill Ackman.
Ackman described the tariffs ‘as a weapon to achieve economic and political outcomes which are in the best interest of America, fulfilling his America first policy.’
‘To be clear. According to Trump, the 25 per cent tariffs will not be implemented, or if implemented will be removed, once Mexico and Canada stop the flow of illegal immigrants and fentanyl into the US,’ Ackman added.
Trump, earlier this week, claimed that Mexico’s President Claudia Sheinbaum had ‘agreed to stop migration through Mexico’ following the threat of tariffs.
However, Sheinbaum refuted the statement and said: ‘We reiterate that Mexico’s position is not to close borders but the build bridges between governments and between peoples.’
Sheinbaum warned of dire economic consequences for the U.S. and Mexico, including job losses, as she suggested possible retaliation in kind.
‘One tariff will follow another in response and so on, until we put our common businesses at risk,’ Sheinbaum said in a letter to Trump, which she read aloud in a press conference.
Justin Trudeau, the Canadian prime minister, said he would work with Trump.
He said: ‘This is a relationship that we know takes a certain amount of working on, and that’s what we’ll do. One of the really important things is that we be all pulling together on this.’
The tariffs suggested by Trump could cost every American consumer as much as an additional $810 a year, according to ING chief international economist James Knightley.
The cost of imposing Trump’s 25 percent tariffs on Canada and Mexico would mean an estimated additional $680 per American, Knightley told DailyMail.com.
He based his estimates on $896 billion in goods the U.S. imported from Canada and Mexico last year without substitution for American made products.
Adding additional 10 percent tariffs on all Chinese products on top of Monday’s threat of against Canada and Mexico could bring that new cost to as much as $810 for a grand total upwards of $3,200.
Knightley noted the $810 figure is a worst-case scenario where there are not substitutions for purely U.S. made products to replace the foreign made goods.
He also said a stronger dollar may help mitigate at least some of the impact, but it would still lead to some higher prices.
ING found even before Trump’s latest tariff threat; his past proposals coupled with constraints resulting from his proposed immigration policies could lead to a one percentage point increase to inflation.
Mexico is the US’s biggest trading partner, with $475 billion in goods being imported from the country last year, The Washington Post reported.
The majority of these imports were manufactured items such as cars, computers and household appliances, which could go up in price under the proposed tariffs.
A tariff with Canada as America’s second largest trading partner would also have widespread impacts.
The US imported more than $418 billion in goods, including crude oil and machinery such as turbines and engines, from Canada last year alone.
The US also imports billions in plastics, pharmaceuticals, metals and agricultural products from their northern neighbor every year.