President-elect Donald Trump promised during his campaign to impose tariffs on foreign goods, which he said would strike back at unfair policies in other countries selling to the U.S.
At the end of November, Trump announced plans to impose 25% tariffs on Canada and Mexico and an additional 10% tariff on goods from China. Many economists, however, warned that the impact of tariffs could actually hurt the bank accounts of everyday Americans.
Texas is no stranger to tariffs. Loren Steffy, who wrote about this issue for Texas Monthly, said Texans are in a position to be strongly impacted by tariffs on Mexico or Canada.
“The Texas economy is deeply connected with Mexico in particular, and also with Canada,” he said. “A lot of the business that Texas does with Canada, of course, comes through the oil side of things, where we import crude oil from Canada and refine it on the Gulf Coast.
“When it comes to Mexico, it’s a much broader situation. We have lots of different manufacturers and other goods that are imported every day. We’re looking at about $445 billion worth of goods annually. So it’s a pretty big part of the Texas economy.”
» MORE: Proposed Trump tariffs on Mexico and Canada raise trade questions
Steffy said the Republic of Texas relied heavily on tariffs back in the day.
“The Republic of Texas, of course, didn’t have many sources of income. And so one of the few things they could do was tax things that came across the border because most people were getting goods from the United States or Mexico at that time,” he said. “About half of the Republic of Texas economy came from import tariffs back in the day. But that was in 1846. And things have changed a lot since then.”
In the short term, Steffy said economists agree tariffs will mean higher prices for consumers.
“This is going to raise the cost of goods in a lot of different ways,” he said. “Either it’ll raise the cost of components and raw materials, which will be passed on, or people will simply have to pay a higher price to bring these goods across the border.”
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The long-term impacts are less clear, Steffy said, and depend somewhat on how companies respond.
“If the tariffs stay in place, it can encourage more U.S. companies to build manufacturing here in the States. That can result in slightly lower prices,” he said. “But keep in mind, if the market price is set by tariffs, you know, companies are going to respond to that market price. So even over the long term, we could see a sustained higher price environment if the tariffs remain in place.”
It is also unclear at this point whether Trump’s tariffs will roll out as promised, or if there will be adjustments once the president-elect takes office.
“He definitely likes to use tariffs as an opening negotiating tactic, kind of an opening threat to kick things off,” Steffy said. “Look, the last Trump presidency, its hallmark was uncertainty. And I think we’re looking at more of that heading into the next four years. So we don’t really know what he’s going to do.
“But, you know, you mentioned immigration, and that’s something he seems very serious about. And of course, that, too, will have a big effect on the Texas economy. So, you know, tariffs, mass deportations, it could be a kind of a one-two punch for us here in Texas.”
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