Trump tariffs spark ‘trade war’ with Michigan’s biggest trade partners

• Michigan officials brace for impact of Trump’s 25% tariffs on imports from Canada and Mexico, the state’s largest trade partners
• Canada imposes retaliatory tariffs on US goods, while China announces new tariffs on agricultural products
• The stakes are high in Michigan, where auto industry supply chains blur borders. One expert predicts state could be ‘collateral damage’

Canada, Michigan's largest international trade partner, on Tuesday accused President Donald Trump of intentionally starting a "trade war" and announced retaliatory tariffs to counter a new 25% import tax imposed by the United States. 

The dueling moves by Trump and Canadian Prime Minister Justin Trudeau threatened to disrupt Michigan's dominant auto industry, energy imports and more. China also announced retaliatory tariffs that could impact Michigan farmers, and Mexico planned to respond by Sunday. 

Trump predicted his new 25% tariffs on imports from Canada and Mexico, which he paired with an additional 10% tax on Chinese imports, will ultimately benefit the US by encouraging domestic production, calling it "very exciting" for Michigan auto companies. 

But experts and industry officials warned that families will likely pay a price through higher costs on cars, food and more.

The stakes are especially high in Michigan, where auto industry supply chains blur borders. Roughly $77 billion in goods cross the Canadian border each year, and the state trades another $69 billion with Mexico. 

“The tariffs’ harmful effects will extend beyond trade relationships and will cause businesses to purchase and produce fewer products, hire fewer employees, and increase prices to the detriment of consumers,” Glenn Stevens Jr, executive director of MichAuto for the Detroit Regional Chamber, said in a statement. 

“Michigan’s economic viability and business attractiveness will be reduced to collateral damage.” 

Here is what we know so far:

What did the US do, and why?

The Trump administration imposed 25% tariffs on Mexican and Canadian goods — essentially a tax on imports — and a 10% tariff on imported Canadian energy. They were made official just after midnight Tuesday following a monthlong delay. 

Trump also added another 10% tariff on Chinese goods, boosting the total to 20% for Chinese imports.

Related:

• Michigan braces for Trump tariffs on Canada, a $77B trade partner
• Experts: Trade tariffs remain threat to US auto industry
• Gretchen Whitmer: I want to find ‘common ground’ with Donald Trump

Initially pitched as a Day One priority, Trump’s tariffs on Canada and Mexico were framed as a means of discouraging illegal immigration and the flow of fentanyl across international borders. But the president has also argued they are necessary to rectify trade imbalances between the countries. 

"I would just say this to people in Canada or Mexico, if they're going to build car plants, the people that are doing them are much better off building here, because we have the market where they sell the most,” Trump said Monday. “And so I think it's going to be very exciting, very exciting for the automobile companies"

How are other countries retaliating?

The governments of Canada, Mexico and China denounced the measures as unjustified, announcing retaliatory tariffs and possible non-tariff escalations in the event of a prolonged trade war. 

Canada is immediately imposing 25% tariffs on $30 billion worth of US goods and will extend tariffs to an additional $125 billion in products in 21 days should the American tariffs remain in place, Trudeau said. 

“Canadians are reasonable and we are polite, but we will not back down from a fight, not when our country, and the well-being of everyone in it is at stake,” the prime minister said in a Tuesday morning press conference. 

Ontario Premier Doug Ford also announced plans for a 25% export tax on electricity that he said is sent to 1.5 million homes in Minnesota, Michigan and New York. He has threatened to cut off electricity exports altogether if Trump imposes more tariffs in April, saying he’d do so “with a smile on my face.”

The US imported 33 million megawatt hours of electricity last year, most of which came from Canada, according to the US Energy Information Administration. Michigan is among the top states for Canadian power imports.

China retaliated with tariffs on US agricultural products. As of March 10, US-grown chicken, wheat, corn and cotton will face an extra 15% tariff in China, while import taxes on soybeans, pork, beef, fruit, vegetables and dairy products will be increased by 10%

Mexico’s own retaliatory tariffs will begin Sunday, according to President Claudia Sheinbaum. As of Tuesday morning, Mexico had not announced what US products would face tariffs. 

Where does tariff money go? Who pays it?

Customs officials collect the tax from the company that is importing the goods, and the money goes to the US Treasury.

Companies generally pass along some or all of that additional cost to consumers, economists say.

How much trade does Michigan do with Canada?

Canada is Michigan’s largest international trade partner. The state imports more than $50 billion in Canadian goods annually, including crude oil, natural gas and raw materials, and exports $27.5 billion in goods.

About 40% of Michigan’s $65 billion in international trade heads to Canada, representing 10% of all the goods and services in the state’s economy.

Impacts could be particularly acute for Michigan’s automotive industry, which represents $304 billion in annual production and employs an estimated 20% of the state’s workers.

What does this mean for Michigan’s auto industry?

More than 280,000 Michiganders work in auto industry jobs, and the state has more than 2,200 automotive supplier and technology center facilities, according to data from MichAuto at the Detroit Regional Chamber.

In a social media post before imposing the tariffs, Trump claimed the tariffs would be good for the auto industry.

“The tariffs will drive massive amounts of auto manufacturing to MICHIGAN,” Trump wrote. “They have already stopped numerous new auto plants from being built in other countries, a GIGANTIC WIN (already!) FOR MICHIGAN, and the United States as a whole.” 

But experts and industry officials have been less optimistic.

"Let's be real honest," Ford CEO Jim Farley told an investor conference in February, "long term, a 25% tariff across the Mexico and Canadian border will blow a hole in the US industry that we have never seen." 

The tariffs will have a "huge impact" on the North American auto industry, according to a recent report by Anderson Economic Group of East Lansing. 

"Production and employment cuts would be inevitable," Anderson concluded in the report, which was published late last month before the tariffs took effect. 

Michigan is a "key state" for trade of vehicles, metals and energy – each of which it exports in greater volumes than it imports, Anderson added. 

Doug Ford, the Ontario premier, has also threatened to shut off exports of critical minerals such as nickel, which is a key component in the manufacture of electric vehicle batteries. "On the critical minerals, I will stop shipments going into the US for nickel. It will shut down manufacturing,” Ford said Monday.

The American Automotive Policy Council, which represents General Motors, Ford and Stellantis, on Tuesday renewed its call for auto parts and vehicles to be excluded from the tariffs.

“Our American automakers, who invested billions in the US to meet these requirements, should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the United States and stymie investment in the American workforce, while our competitors from outside of North America benefit from easy access to our home market,” council president Matt Blunt said in a statement.

The United Auto Workers union praised the Trump tariffs, however, saying it was "glad to see an American president take aggressive action on ending the free trade disaster that has dropped like a bomb on the working class."

How will tariffs impact consumers?

Combined with steel and aluminum tariffs already implemented by the Trump administration, cost for vehicles assembled in North America could rise between $4,000 to $10,000 per car, according to a recent study by the Anderson Economic Group that accounted for automakers’ expected attempts to substitute parts and adjust production.  

For other consumers, much of the initial impact could be felt when trying to buy produce and other ready-to-consume food shipped from Mexico, such as avocados, cucumbers, tomatoes and other fruits and vegetables grown in warmer climates. 

Vic Veda, spokesperson for the Michigan Retailers Association, said Tuesday that “grocery items that are imported from Canada and Mexico include goods like avocados, tomatoes, and other vegetables, fruits, and nuts” will increase in price because of the tariffs. 

“Michigan also sees imports of dairy and lumber from Canada. The uncertainty around these tariffs and their impacts, along with the additional 10% tariff on goods imported from China that was implemented, creates more stress for consumers and retailers who are seeking stability in pricing and supply chains.”

The price of fresh vegetables and fruits could end up rising 2.9% over the next year, according to a Yale University analysis of the US tariffs. Tariffs on China, Canada and Mexico could also lead to an average price increase of 10.6% for computers and electronics, 7.5% for apparel, according to the study.

What about Michigan’s agriculture industry?

China is already targeting agricultural imports in its counter measures against the US, and Trudeau on Tuesday warned the trade war could also “impede” access to “fertilizers that we have and that the United States needs to grow and prosper.” 

Experts say those kinds of retaliatory measures could lead to restricted markets and lower prices for farmers in states like Michigan, which exports $2.7 billion in agricultural goods each year. Canada, Mexico and China are Michigan's top markets. 

“We have to expect tariffs will immediately threaten agriculture jobs, our rural economies and ultimately what it costs to put food on the table,” Michigan Department of Agriculture and Rural Development Director Tim Boring said in February when Trump first announced the tariff plan.