How the Proposed Trump Administration Tariffs Likely Will Impact Washington State’s Economy

1The Proposed Tariffs

The scope of the proposed tariffs is unprecedented in modern trade policy: up to 60% tariffs on all Chinese imports and potentially 20% or more on imports from trading partners around the world. This would represent a fundamental restructuring of the U.S. trade regime and a dramatic departure from decades of trade liberalization policy — including the USMCA (formerly NAFTA), which then-President Trump negotiated — that eliminates trade barriers between Canada, Mexico, and the United States.

There are also calls from Congress (the Select Committee on the China Communist Party) and incoming Trump administration officials, including Secretary of State nominee Marco Rubio, to revoke Permanent Normal Trade Relations (PNTR) for China. Currently only four nations lack PNTR status: North Korea, Cuba, Russia, and Belarus. The U.S. and China negotiated an agreement and Congress agreed to grant China PNTR in 2000. PNTR ensures China must treat U.S. goods and services as it does other trading partners. Actions against China could enable China to favor others — including our European competitors — rather than U.S. exports.

2What History Has Shown Us

Based on historical evidence, Trump's proposed 2025 tariffs on Canada, Mexico, and China threaten to repeat and amplify the economic damage of 2018–2019. Research from leading economists shows that similar tariffs during that period failed to achieve their stated goals while imposing significant costs on American consumers and businesses. Rather than bringing manufacturing jobs back to the U.S., companies simply relocated to other countries, while retaliatory tariffs harmed American farmers more than government compensation programs could offset.

As Harvard economist Gordon Hanson summarized: "The premise of Trump's economic policies — that manufacturing job loss has been painful for America, and especially painful for our industrial heartland — is spot on. But, in terms of how to deal with that job loss, tariffs would be pretty far down the list."

3Economic Costs to Households & GDP

For consumers, tariffs are just another form of inflation. A recent analysis from the Peterson Institute for International Economics (PIIE) determined that the proposed tariffs on China, Mexico, and Canada would cost the typical U.S. household more than $2,600 per year — hitting households in the bottom half of the income distribution even harder as a percentage of income.

Figure 1: Projected annual household cost of proposed tariffs by income quintile. Source: Peterson Institute for International Economics.

The Tax Foundation estimates that the tariffs would reduce GDP by 0.4 percent and eliminate 344,900 jobs. Retaliation from trading partners could more than double these economic losses. Imposing tariffs typically prompts retaliatory measures, making it more difficult for U.S. exporters to sell their goods abroad — a particularly acute risk for export-dependent Washington state.

Ted Alden, a noted trade expert and visiting professor at Western Washington University's College of Business and Economics, flagged an expected larger risk in Canadian retaliation through its own import tariffs, similar to what happened when the first Trump administration imposed tariffs on steel and aluminum in 2018.

4Agriculture & Retaliatory Tariffs

In response to the 2018–2020 tariffs, six trading partners — Canada, China, the EU, India, Mexico, and Turkey — responded with retaliatory tariffs on U.S. agricultural exports. The products targeted for retaliation were valued at $30.4 billion in 2017, with individual product lines experiencing tariff increases ranging from 2 to 140 percent. The estimated total loss to American agriculture in 2018–2019 was $27.2 billion. In Washington state alone, the direct reduction was up to $250 million — not counting reduced trade of commodities shipped through Northwest ports.

Washington state is the top U.S. producer of apples, blueberries, hops, pears, spearmint oil, and sweet cherries — all susceptible to retaliatory actions. When India imposed a 20% tariff on U.S. apples in 2018 in retaliation against U.S. steel and aluminum tariffs, Washington apple shipments to India fell 99%, and growers lost hundreds of millions of dollars until India finally lifted the tariff in September 2023.

U.S. dairy farmers were hit with up to 45% retaliatory tariffs from China in 2018. According to the U.S. Dairy Export Council and the National Milk Producers Federation, U.S. dairy exports to China had been growing at 12% annually in volume and 17% in value for the prior decade. Following the tariffs, exports to China plummeted by more than 45% in volume and 25% in value in 2019, resulting in an estimated $2.6 billion loss in U.S. dairy farm revenues from 2019 through 2021.

5Supply Chains & Manufacturing

U.S. manufacturers often rely on imported raw materials and parts. Tariffs on steel and aluminum have historically driven up costs for equipment manufacturing, automotive, and construction industries. U.S. steel users paid 9% more for steel than global competitors during the 2018 tariff period. When China controls the supply of critical minerals unavailable in the U.S. — such as those needed for EV batteries — companies face significant supply-chain risk if China takes retaliatory action to restrict supply.

Rather than bringing manufacturing back to U.S. shores, the evidence from 2018–2019 shows that firms simply shifted operations to third countries. Many moved from China to Vietnam, Indonesia, and Mexico. Vietnam's exports to the U.S. jumped 24.8% in 2019 alone. UCLA researchers found that "bystander countries" — those on the sidelines of the U.S.–China dispute — were able to boost production and increase exports of targeted goods into new and expanded markets, filling the gap without any reshoring to the United States.

6Washington State Industries at Risk

Cross-Border Trade with Canada: Canada is Washington state's largest import source and its second-largest export market (behind China). Oil and gas are the largest import from British Columbia ($3.3 billion in 2023), and refined petroleum was the second-largest export ($638 million). Crude oil flows in from Canada, is refined in Washington state, and some is exported back to Canada — a deeply integrated supply chain that would be severely disrupted by tariffs.

"That's a good example of how important it is to think about this from a supply chain relationship perspective, because if we're tariffing what we're importing and then we're trying to export it again, it's going to really mess up these markets," said Laurie Trautman, BPRI's Director. "It's not just something you're skimming off the top of an import." Other state products ranging from beef to equipment parts make one or more cross-border roundtrips, compounding the tariff burden at each stage.

Technology & Clean Energy: Clean technology companies employ approximately 90,000 scientists, engineers, and researchers in Washington state. Many clean energy and technology products manufactured here rely on materials whose global supply is dominated by China. Retaliatory actions could limit or restrict access to critical minerals. Lithium-ion batteries used in electric vehicles rely on cobalt, graphite, lithium, and nickel — midstream processing of which is dominated by China. Advanced wind turbines depend on permanent magnets using rare earth elements, with both production and processing highly concentrated in China. While the U.S. and its allies have made strides to nearshore or produce these minerals domestically, the process will take years.

Small Businesses: According to the International Trade Administration, over 12,000 small and medium-sized companies in Washington state export goods. These businesses are far less able to absorb the impact of retaliatory tariffs and non-tariff barriers, especially when substitute products are available from countries not subject to the tariffs. A sudden tariff-driven loss of a foreign market can be existential for a small exporter in ways it would not be for a large multinational.