As many as half of the parts used to make a car in the U.S. come from other countries. According to February 2026 estimates by Kelly Blue Book, tariffs could cause cars under $40,000 to increase in price by as much as $6,000. (This will also mean more sales tax, more loan interest and higher insurance and repair bills.)
What do tariffs mean for state economies, and where might impacts be the greatest?
In a recent analysis, the Pew Charitable Trusts looked at the value of each state’s imports and exports and how they compared to state gross domestic product. The percentages compare import and export dollars to state GDP. The higher the numbers and the higher the percentage, the more a state economy would be affected by tariff policy, whether due to higher costs for imported materials needed for manufacturing or changes in activity around ports or shipping.
"Whether the recent wave of tariffs marks a temporary shift in federal policy or the beginning of a lasting new normal remains unclear," the Pew researchers said. "But for now, state governments are adapting to a world of heightened economic and policy uncertainty."
In a conversation with Governing, Kyle Handley, director of the Center for Commerce and Diplomacy at the University of California, San Diego, described the dimensions of this uncertainty. The interview has been edited for length and clarity.
How do import tariffs affect state economies?
States are exposed in different ways. In states like Michigan, or a lot of Rust Belt states, the auto industry is prominent in terms of manufacturing employment. Steel is more expensive now because of import tariffs. Aluminum is more expensive now because of import tariffs, and other parts are more expensive. If you have big clusters of manufacturing employment, then you're going to be hurt more by the tariffs.
The other reason you could be hurt by the tariffs is because your economy is highly integrated with the business of trade. Places that have busy ports of entry are affected by these trade barriers as well, because a big part of their economy is logistics and freight and moving things elsewhere in the country.
Have states that export faced retaliation from trading partners?
That tends to be very targeted. What's interesting about this latest trade war is that there hasn't been a lot of retaliation. I think a lot of countries concluded it wouldn't do much good. It might hurt the U.S., but it would hurt them too.
Canadian provinces have taken U.S. liquor off the shelves. Anecdotally, at least, I have heard that has taken a lot of demand off the table for whiskey and bourbon producers.
China has hit U.S. agriculture again, because they did that last time and it was effective. There are agricultural markets, soybeans and sorghum in particular, that have dried up. Those are clustered in different parts of the country.
What kind of pushback are you seeing?
If you're a red state governor, you're not going to call out President Donald Trump on Twitter (now X) or social media. I would not be surprised at all if some of the states that have a lot of automotive production did contact the administration and say: “You can't put all these really high tariffs on Canada and Mexico because our supply chains are so integrated with Canada and Mexico right now that if we have to pay a 25 percent tariff or more on auto parts we're going to start laying off workers at this factory.”
Blue states have complained more about this publicly — some in the form of lawsuits, including the big thing we just went through with the Supreme Court. They're not worried if they draw Trump's attention. In fact, they may be seeking it for the same reasons that Republicans don't want his attention. It plays well for them.
Tariff policies have changed several times. What are the consequences of this?
I have worked a lot on what we call trade policy uncertainty. One of the biggest downsides of all of 2025, and now the Supreme Court decision, is that the tariffs are constantly changing. Either because of a Supreme Court decision, because Trump changes his mind, or because they're using this law one week and a different law the next. They're changing the rates based on all manner of different things, and there often doesn't appear to be much rhyme or reason to it.
If you're a business person and you're trying to plan ahead and figure out what you're going to do, and which markets you're going to enter and where you should be sourcing different parts in your supply chain, you're spending a ton of time looking at tariff schedules, trying to read between the lines, maybe calling up your congressperson and asking if they can do something.
All of these things are economic losses. It's time spent on complexity and uncertainty. Then you hold back on hiring, you maybe hold back on bringing out new product lines. You hold back on investment generally, expanding your factory, expanding your marketing and distribution. That is a freezing up of economic activity, which is obviously going to be bad for growth.
Has this crashed the economy? Absolutely not. The economy is too big for that, and the tariffs are too small to make a huge difference. But it certainly gummed up the works and things are probably a little worse than they otherwise would have been without this new trade war.
