Tariff Turbulence
Michigan businesses brace for economic shifts
By Paul Natinsky
As the stock market continues its boisterous ride and federal tariff policy shifts by the week, businesses across Michigan—from multinational automakers to family-owned storefronts—are scrambling to adjust. A recent wave of heavy tariffs, particularly on imports from Canada, Mexico and China, has been announced, only to be partially walked back following sharp drops in stock indexes.
Across the country, economists warn of mounting recession risks. Goldman Sachs recently increased the probability of a U.S. recession in the next year from 20% to 30%. Kara Reynolds, an economist at American University, told ABC News: “If both businesses and consumers start to worry and pull back spending, that is what can tip the U.S. over into a recession.”
Local Ripples from Global Policy
In Michigan, the effects of tariffs are felt not only at the manufacturing level, but also in retail, hospitality and small business sectors that form the backbone of many local communities.
We spoke with veteran banking executive and businessman Mike Sarafa last month about how tariff uncertainty is hitting home. Sarafa said the erratic policy shifts are sending economic ripples far beyond their intended targets.
“It’s going to have a real impact on people’s everyday lives, there’s no doubt about it,” Sarafa said. “Especially in Michigan, where the economy is so intertwined with Canada through Detroit and Windsor. That border relationship is more intense than in other regions.”
Detroit’s auto industry, he added, is particularly vulnerable. With parts and assemblies crisscrossing the border multiple times before a car is completed, tariffs can multiply costs quickly—costs that may ultimately be passed on to consumers.
Michigan at the Forefront
Michigan exports billions in auto parts and agricultural products to Canada and Mexico each year. According to the Michigan Department of Agriculture and Rural Development, agriculture exports reached $2.7 billion in 2023 alone—much of it bound for these trading partners.
Governor Gretchen Whitmer recently visited the White House to express concern that proposed 25% tariffs on Mexican and Canadian goods could disrupt supply chains and kill jobs. Though often a critic of the Trump administration, Whitmer’s meeting underscored the bipartisan anxiety over trade policy’s impact on a state that has been a presidential battleground for three consecutive elections.
Whitmer warned that Michigan’s economy, especially the auto sector, is especially vulnerable. “When the price of components goes up, the price of cars goes up, and so does the risk to Michigan jobs,” she said in a January 2025 statement.
Ford Motor Company has already indicated that if the tariffs are not lifted, consumers could begin seeing higher vehicle prices as early as July. While Ford builds 80% of its U.S. vehicle volume domestically, many parts still depend on cross-border trade.
Main Street Struggles
For small and medium-sized businesses, tariff impacts can feel even more immediate. Sarafa noted how uncertainty is freezing decision-making at the local level.
“Tariffs, by definition, are inflationary,” he said. “They create non-market incentives, pushing businesses to make choices they wouldn’t otherwise consider. And on the consumer side, that often means people just stop spending on affected products altogether.”
In the Chaldean community, which includes many small business owners in sectors like retail, jewelry, and hospitality, the ripple effects are already visible. Sarafa pointed to conversations he’s had with local business owners who’ve seen customers hesitate or hold off on purchases due to rising prices or shipping delays.
“Travel, hospitality—anything discretionary—figures to take a dip. These are industries that matter to our community,” he said.
Sarafa also reflected on his own economic education. “The economic benefits of tariffs just aren’t there,” he said, referencing lessons from his time at Michigan State University with economist Mordechai Kreinin. “This is settled science. There’s this idea that tariffs give us negotiating leverage—or whatever Trump is doing—but the real-world impact is harmful to growth.”
Instability and Planning Paralysis
The instability of tariff policy—particularly under a second Trump administration—adds an extra layer of difficulty. Businesses are wary of investing or expanding in such a volatile environment. “It’s not just the tariffs,” Sarafa said. “It’s the fact that nobody knows what’s coming next. How can you make a five-year plan when policy might change next week?”
Despite widespread opposition, the U.S. Chamber of Commerce recently announced it would not pursue legal action against the tariffs, citing fears they could reappear in other legislative forms—a game of economic “whack-a-mole.” Instead, the Chamber plans to focus its efforts on lobbying the White House, much like Governor Whitmer.
Looking Ahead
For now, Michigan must brace for turbulence. With its manufacturing, agricultural, and retail sectors deeply reliant on international trade, the state is poised to feel both short- and long-term effects of tariff shifts.
Consumers may soon face higher prices for everyday items—from groceries to electronics to vehicles—while businesses continue to face rising costs and an unpredictable regulatory landscape.
Sarafa summed up the moment simply: “People need certainty to plan. Without it, we’re flying blind.”
How Tariffs Could Impact Michigan
A quick look at the ripple effects across key sectors
Auto Industry
• Michigan’s largest economic sector
• Vehicles often assembled across U.S.-Canada-Mexico borders
• Tariffs on parts could raise car prices and reduce manufacturing jobs
• Ford has warned of price hikes if tariffs persist into summer 2025
Agriculture
• $2.7 billion in exports in 2023
• Canada and Mexico are Michigan’s top agri-trade partners
• Tariffs could reduce export demand, hurting family farms and rural economies
Manufacturing
• Increased production costs due to imported materials
• Smaller manufacturers are more vulnerable to price fluctuations
• Potential slowdown in factory hiring and expansion
Retail & Consumer Goods
• Higher prices on imported items (electronics, clothing, appliances)
• Retailers may struggle to absorb cost increases, passing them to customers
• Consumer spending may slow, especially on discretionary items
Small Businesses
• Chaldean and other immigrant-owned businesses heavily impacted
• Jewelry, grocery, and import shops facing rising wholesale costs
• Unpredictable shipping delays and planning challenges
The Bottom Line
Tariffs are expected to increase inflationary pressure across Michigan’s economy, slow growth in key sectors, and create uncertainty for both businesses and consumers.