Texas and California: The Biggest State Losers in Trump's Tariff War

As President Trump escalates his tariff war, Texas and California find themselves on the front lines, bearing the brunt of the economic fallout. With the latest tariffs targeting key trading partners like Mexico and China, these two states are projected to be the biggest losers among U.S. states, facing significant increases in tariff payments and potential long-term economic consequences.

According to data compiled by Trade Partnership Worldwide, Texas and California companies will absorb the highest bills for payment of new customs duties. Texas is projected to see an eightfold jump in tariffs paid by businesses, from $7.2 billion in 2024 to $64 billion with all tariffs imposed. California businesses will see a triple in tariff payments, with the bill rising from $17 billion to $46 billion.

The majority of the total tariffs that could be levied on Texas and California companies relate to Mexico, with Texas businesses facing a daily tariff charge of $108 million a day if Mexico tariffs are levied on March 4. California businesses are also the most exposed to the steel and aluminum tariffs, which will increase from $411.7 million in 2024 to $2 billion under the new tariff duties, or a weekly tariff of $38 million.

These tariffs will lead to higher prices for consumers, as businesses pass on their increased costs. Economists largely view tariffs as a tax, especially on the lowest- and middle-income families in the nation. The cost of living in Texas and California, particularly for low- and middle-income families, is expected to rise significantly as a result of these tariffs.

To mitigate these effects, policymakers could consider targeted tax cuts or rebates for low- and middle-income families to offset the increased costs of goods and services. Encouraging businesses to invest in automation and productivity improvements to reduce their reliance on imported goods and lower production costs could also help. Promoting trade agreements and negotiations with key trading partners to reduce tariffs and increase market access for U.S. goods and services, providing assistance to affected industries and workers, and encouraging businesses to diversify their supply chains and reduce their dependence on a single country or region for critical inputs are additional policy responses that could help mitigate the negative effects of tariffs on the cost of living in Texas and California.

In conclusion, Texas and California are the biggest state losers from President Trump's escalating tariffs, with significant increases in tariff payments and potential long-term economic consequences. Policymakers must take action to mitigate the negative effects of tariffs on the cost of living in these states, particularly for low- and middle-income families. By implementing targeted policy responses, they can help to offset the impact of tariffs and support the economic well-being of Texas and California residents.