Border state governors and business leaders are making their case that new tariffs on Canada and Mexico will disrupt local industries from electric vehicles to lobster.
President Donald Trump targeted the two countries in his early trade policies, though he delayed until March 4 an additional 25% tariff he planned on most imports. An extra 10% tariff on imports from China went into effect this month.
Trump ordered additional tariffs on Monday, imposing a 25% rate on steel and aluminum imports, including from Canada and Mexico.
State officials across the country are broadly warning that tariffs will lead to higher consumer costs and hamper efforts to address affordability for necessities such as food, energy, and housing. State budgets could also be at risk, with California Gov. Gavin Newsom (D) warning in his proposed January budget summary that federal tariff policies could lead to higher prices for some goods and “subsequently constrain economic output.”
Border states such as Arizona, where companies have specifically set up their supply chains to leverage the location, will feel trade disruptions from tariffs most acutely.
“We have to just make the case that we have become this regional powerhouse of manufacturing, and a lot of it is our proximity to Mexico,” Danny Seiden, president and CEO at the Arizona Chamber of Commerce and Industry, said in an interview. “When you’re here in Arizona, that was a big selling point for us—that you would have access to import the parts that they make there that we don’t make anywhere else.”
‘New Era’
Arizona Gov. Katie Hobbs (D) raised the threat tariffs pose to the state’s semiconductor, agriculture, and clean energy industries when Trump first announced his plans. Imports from Mexico to Arizona totaled nearly $12 billion in 2023, including $1.8 billion in vegetables and melons and $1 billion in electrical equipment and components, according to the Arizona Commerce Authority. Arizona’s exports to Mexico totaled $8 billion.
Two electric vehicle manufacturers—
The automotive industry in Arizona and the bordering Mexican state of Sonora together support more than 50,000 employees, according to the Arizona-Mexico Commission.
Tariff changes “will be ever more costly for goods and services going back and forth across the border, which tends to happen in the transportation industry,” Zylstra said.
Concerns raised to the state’s federal delegation include that companies built their business models on the existing free trade agreement for the US, Canada, and Mexico, known as USMCA, Seiden said. He added that businesses need to take seriously Trump’s approach to using to tariffs to force policy changes in other countries, Seiden said.
“We’re in a new era, and they’re being used in a new way,” he said. Trump paused the tariffs on Mexico and Canada based on the countries’ commitments to reduce border crossings and drug trafficking.
Uncertainty for companies may be a feature of the Trump administration, Mark Jones, political science professor at Rice University, said in an interview. Businesses play an important role in explaining the broader effects of tariffs beyond the lens of politics, but if Trump chooses to ignore them, “there’s relatively little that they can do about it in the short term,” Jones said.
“What they probably will hope for is that much of this is a negotiating tactic, and that at the end of the day, the bark will be far worse than the bite in terms of tariffs,” Jones said.
Industry Concerns
Vermont Gov. Phil Scott (R), whose state borders Canada, announced Feb. 4 a new interagency team to assess the potential impacts of new tariffs. The team will also look at possibilities to mitigate impacts, with a focus on energy costs for consumers and businesses.
Vermont imported $2.6 billion in goods from Canada in 2023, with the energy industry accounting for more than half of that, according to data compiled by the Canadian government.
Hydroelectric power makes up the biggest share of Vermont’s electricity, most of which is generated in Canada, according to the US Energy Information Administration.
Tariffs on Canadian imports pose challenges to Maine, particularly for energy, forestry, and seafood, Patrick Woodcock, president and CEO of the Maine State Chamber of Commerce, said in an interview. The state’s lobster industry, for instance, relies in part on lobster caught in Maine and processed in New Brunswick, he said.
Maine’s lobster industry employs more than 5,600 independent lobstermen who harvest more than 100 million pounds of lobster per year, according to The Maine Lobster Marketing Collaborative.
“A lot of Maine businesses sort of look at Canada not as an export market and import market but as a core part of their business plan,” Woodcock said.
New York manufacturers, such as those in the Buffalo area that send plastics, chemicals, and other goods to Canada, are a top concern for The Business Council of New York State Inc., communications director Patrick Bailey said in an interview. The group plans to use real-world business stories and data to show the impacts if the tariffs take force, Bailey said.
“If they do go into effect, we’re hoping it is short term,” he said.
The Ohio Chamber of Commerce is optimistic that tariffs will be used to negotiate with other countries rather than implemented as a permanent policy, president and CEO Steve Stivers said in an interview. Stivers, a former Republican US House member from Ohio, voted for USMCA and said returning to that framework would be “a really good outcome.”
“The issues the administration has we take seriously as the Ohio business community,” Stivers said. “But that said, we are very hopeful we can get this stuff worked out so that tariffs don’t happen.”
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