Michigan braces for Trump tariffs on Canada, a $77B trade partner

• President Trump says he plans to move forward with 25% tariffs on imports from Canada and Mexico as soon as the weekend
• Michigan likely to be heavily impacted due to heavy trade with Canada, especially in auto industry
• Experts say cost of goods in Michigan could also rise if imports are taxed

President Donald Trump is standing by plans to impose steep tariffs on Canadian and Mexican imports as early as Saturday, a move that could have major consequences for Michigan’s auto, energy and agricultural sectors and increase costs of staples like gas and groceries.

As a border state whose economy is closely intertwined with its Canadian neighbors, Michigan is particularly vulnerable to the impact of blanket US tariffs and possible retaliation, experts and observers told Bridge Michigan.

The state will be the “most disproportionately affected” by Canadian tariffs because of an auto industry supply chain that “works as though there's no border” between the countries, said Jason Miller, a supply chain management professor at Michigan State University. 

Initially pitched as a Day One priority, Trump’s proposed 25% tariffs on Canada and Mexico were framed as a means of discouraging illegal immigration and the flow of fentanyl across international borders. 

Speaking with reporters Thursday, Trump said he also hopes to rectify trade imbalances. "We have very big deficits with those countries," he said. "Those tariffs may or may not rise with time."

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Hours into his second term, Trump last week ordered a review of U.S. trade policies, creation of an “external revenue service” to collect tariffs and an evaluation of the US-Mexico-Canada Agreement, a deal governing trade between the three nations that he signed in 2020. 

While the scope and scale of his pending tariffs is not clear, the potential impact in Michigan could be felt far beyond the auto industry. 

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.

“We have a completely integrated economy,” said former Michigan Gov. Jim Blanchard, a Democrat who served as US Ambassador to Canada under then-President Bill Clinton. “People should not take Canada for granted. That is a huge mistake.”

Michigan’s economic ‘wild card’

Michigan entered 2025 with a rosy economic outlook, boasting moderate employment growth, rising personal incomes and growing tax revenues. 

That could all change, economists recently warned, if tariffs on materials drive up production costs in key industries like the automotive sector. 

Though certain import protections could benefit Michigan companies in domestic auto sales, retaliatory action from Canada or other countries could have a dramatic impact on international sales, Gabriel Ehrlich, an economic forecaster at the University of Michigan, told state officials this month during a hearing on Michigan’s revenue picture.

“Putting that together, we consider trade policy to be a significant wild card for Michigan's economy over the next few years,” he said at the time. 

US Commerce Secretary nominee Howard Lutnick told Michigan US Sen. Gary Peters during his Wednesday confirmation hearing that any initial tariffs would be “an action-oriented model” towards heightened border security. A more robust tariff policy is expected later this spring, he said.

Peters, though, warned that tariffs on Canadian imports could force price hikes by Michigan automakers, who rely on auto parts that routinely go "back and forth" between the two countries.

Officials at General Motors, the Michigan-based automaker that also produces vehicles and components in both Canada and Mexico, said this week they are preparing contingency plans for the potential Trump tariffs. 

“We are working across our supply chain, logistics network and assembly plants so that we are prepared to mitigate near-term impacts," CEO Mary Barra told investors and analysts on a Tuesday earnings call. 

United Auto Workers President Shawn Fain expressed openness to working with Trump on trade policy in a recent Washington Post column, agreeing with Trump’s position that trade agreements with Mexico and Canada need an upgrade and arguing tariffs are a “necessary tool” to help the working class.

Michigan manufacturers, too, could see benefits from targeted tariffs that keep domestic goods competitive with Canadian imports, said Dale Crawford of the industry group Steel Tube Institute.

Any tariffs “should be applied strategically to address unfair trade practices without disrupting essential cross-border supply chains,” Crawford said, adding that a “phased approach” would be more practical for products not currently manufactured in the US.  

For automakers, the potential increased cost of new tariffs on Canadian imports could be “especially acute” and cause disruption in existing supply chains, Glenn Stevens Jr., executive director of MichAuto, recently wrote.

“The long-term impact if significant new tariffs on goods from Asia, Mexico, and Canada are imposed is deadly apparent: higher prices, smaller margins, and disrupted supply chains,” he continued. 

In a recent speech at the Detroit Auto Show, Gov. Gretchen Whitmer said she’s not opposed to tariffs outright, but she wants to make sure they aren't used to "punish our closest trading partners" and don’t hurt automakers.

Whitmer said her office has been in "active discussions" with Ontario Premier Doug Ford's team about "ways we can collaborate on tariffs, lower the cost of doing business, and protect Michigan industry and consumers." 

Whitmer and Ford’s close working relationship — including on the new Gordie Howe Bridge set to open later this year — might help ease some of the impact on Michigan, Blanchard said, even amid potential nationwide retaliations. 

Produce price hikes

If trade tensions between the United States, Canada and Mexico escalate with tariffs, Michigan consumers could start noticing it soon.

Miller, the Michigan State University professor, noted much of the initial consumer impact would be felt when trying to buy produce and other ready-to-consume food shipped from Mexico. Think: avocados, cucumbers, tomatoes and other fruits and vegetables grown in warmer climates. 

“Since these are goods that don't have a long life cycle, there's not much inventory,” Miller said. “If this all gets tariffed, every grocery retailer knows everyone's prices went up, and so they can raise their prices to pass on some of that cost.”

Depending on how long tariffs are imposed, that could also extend to other imports like beer and tequila from Canada and Mexico, though a longer shelf life means there’s more inventory currently available and price increases may not be felt immediately, Miller said. 

Retaliation from affected countries could also impact Michigan’s $2.7 billion in agricultural exports, which could lead to “restricted markets and lower prices for farmers,” said John Kran, national legislative counsel for the Michigan Farm Bureau.

“We stand ready to work with the presidential administration to ensure tariffs do not drive up the cost of important supplies like fertilizer or limit the export of goods from America’s farmers,” he said. 

Gas, energy implications

Prices at the pump could also increase disproportionately for drivers in Michigan and the Midwest if crude oil is included in the tariffs, as most of the oil used in Michigan and other Great Lakes states comes from Canada, said Patrick De Haan, an economist with the fuel price tracking service Gasbuddy. 

Trade fights over oil, in particular, could “really muck things up for both the US and Canada” due to the interconnected system of pipelines and oil refineries in the Midwest, De Haan said, adding that Canadians also have the “nuclear option” of shutting off oil supply.

Trump appeared to dismiss that possibility on Thursday, telling reporters that “oil is not going to have anything to do with it, as far as I'm concerned."

It’s unclear whether a similar exemption would be in place for electricity imports. The United States imported 38.9 million megawatt hours of electricity, most of which came from Canada, according to the US Energy Information Administration.

Ford, Ontario’s premier, suggested the possibility of flipping the switch on electricity flowing from Canada to the US in a video statement last month, noting that the province was prepared to “go to the extent of cutting off their energy, going down to Michigan, going down to New York State and over to Wisconsin.” 

It’s possible that Trump doesn’t intend the threat of tariffs to go on long enough to cause major disruptions to the US economy, Republican strategist Jason Cabel Roe said. 

“I think rather than it being a belief that America should abandon its free trade principles, it is more being used as an economic weapon to get what we want,” Roe said. “I do think he would run into real opposition if America abandoned free trade.”