Trump’s trade war risks undoing Michigan’s hard-earned progress

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Do you miss 2024? It seems like so long ago for Michigan’s economy.

Yes, the state’s economy slowed last year along with the nation. But Michigan hit some important positive milestones that threaten to be undone by President Donald Trump’s economic wrecking ball.

The number of people in the state’s labor force—nearly 5.1 million—was the highest in 23 years. And the labor force participation rate—the percentage of working-age adults employed or looking for work—returned to pre-COVID levels.

Michigan also recorded the largest number of payroll jobs in 20 years, averaging 4.5 million positions last year.

Most important, incomes rose as inflation softened and the state produced more high-wage jobs. Last year was the first year since 2020 that the average Michigan worker saw a gain in real earnings. Just 14% of jobs in the state paid $15 an hour or less, down from more than 22% in 2022.

Those numbers come from the Michigan Center for Data and Analytics, a state agency that doesn’t hesitate to publish unflattering economic data about Michigan’s economic performance.

Its annual report highlights a number of areas, including the unemployment and labor force participation rates, where Michigan lags competitor states. And the report, released in April, noted the state’s economy, while still growing, was continuing to slow in the early months of this year.

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But Trump’s chaotic implementation of tariffs and other moves by the administration could throw the state’s economy into reverse.

Detroit’s automakers have been some of the hardest-hit U.S. corporations as Trump has slapped big tariffs on almost every country in the world in an attempt to end trade deficits with the U.S. He’s tariffed countries such as Brazil and Canada where the U.S. has trade surpluses.

Ford, General Motors and Stellantis have collectively paid $2.1 billion in tariffs so far this year and expect to pay billions more by the end of 2025. They’ve largely eaten the tariffs, but analysts say they will soon have to pass a hefty chunk of those costs to consumers.

The tariffs’ hit on automakers and other employers has alarmed Gov. Gretchen Whitmer, who scored a recent private meeting with Trump to discuss how the levies were hurting the Detroit Three and the state’s economy. The outcome of that meeting wasn’t disclosed, but it seems unlikely Trump will back away from what he sees as the centerpiece of his economic blueprint.

Ironically, tariffs might give some foreign automakers an advantage over the Detroit Three.

Ford Motor Co. CEO Jim Farley has complained that the 15% tariff Trump slapped on imported Japanese cars is less than the 25% tariff Detroit automakers pay on some of the vehicles and parts they import from Canada and Mexico. Trump had earlier assessed a 25% tariff on Japanese-built vehicles but lowered it as part of a broader trade agreement.

Farley told Bloomberg TV that the new tariff, combined with Japan’s lower labor and currency costs could make a Japan-built Toyota 4Runner $10,000 cheaper than a Michigan-built Ford Bronco.

Trump’s deal with Japan outraged the United Auto Workers union, which said it “hands a win to transnational automakers that rely on low-road labor practices, substandard wages, excessive (temporary workers), and union-busting.”

UAW President Shawn Fain was an early supporter of Trump’s tariff strategy, but the duties could prove costly to his members’ pocketbooks. Analysts say tariff-induced losses at the Detroit Three could cut thousands of dollars from autoworkers’ profit-sharing checks this year.

It almost seems as if Trump is rooting against the home team with his trade war.

And it’s not just automakers and large corporations that are reeling from the tariffs. Small businesses in the state are being hit as well by the levies and an overall uncertainty caused by the president’s economic policies.

A June survey of 644 small-and-medium-sized businesses, conducted by the Lansing-based Michigan Business Network, found those business owners in a gloomy mood because of tariffs, inflation and other issues.

Expectations of increases in profits, sales and investments were at their lowest points in the 16-year history of the semiannual survey, MBN founder and CEO Chris Holman said.

“We have never seen less enthusiasm by business owners for expecting increases in their revenue or profits this year because of tariffs and inflation,” Holman told Detroit Free Press business columnist and “Michigan Matters” television show host Carol Cain.

Trump, you may recall, promised to lower prices “on day one” of his administration. But inflation has remained stubbornly high.

Fewer than half of business owners surveyed said they were optimistic about how Trump’s election would favor their businesses. That’s down from 60% who were enthused about his election six months ago.

Trump has warned his sweeping economic overhaul will create a painful transition period on the way to a revitalized domestic auto industry and a “golden age of America.”

Michigan businesses and workers are feeling the pain. But they’re not so sure it’s going to subside any time soon.