Tariffs On Mexico To Hit Texas Hard, Fed Economist Warns

The Trump administration’s proposed 25% tariffs on Mexico and Canada have been delayed, but Texas will be “in the line of fire” if they are eventually implemented, a government economist warns, Sasha Richie reported for The Dallas Morning News.

A 25% tariff on Mexican imports and found that it could lead to a 15–30% decrease in Texas’ GDP growth.

Pia Orrenius, vice president and senior economist at the Federal Reserve Bank of Dallas, described the coming year as a “balancing act” between economic headwinds and tailwinds.

Speaking at the institution’s economic outlook event, Orrenius cited business optimism surrounding potential deregulation and lower taxes, which could bolster growth.

However, she cautioned that tariffs, lower immigration, and government spending cuts could act as barriers to economic expansion. The Trump administration has already intensified its crackdown on illegal immigration, and a federal spending freeze has created uncertainty around Biden-era grants.

Tariffs, in particular, could hit Texas the hardest. “We’re really in the line of fire here on tariffs if they come—especially tariffs on Mexico,” Orrenius said.

Long before Mexico surpassed China as the No. 1 importer to the U.S., it was Texas’ largest trading partner, and that relationship remains strong today.

Orrenius said her team conducted a "back-of-the-envelope" calculation on the potential effects of a 25% tariff on Mexican imports and found that it could lead to a 15–30% decrease in Texas’ GDP growth.

Economists generally view tariffs as inflationary, reducing consumer purchasing power, raising prices, and potentially curbing consumption—all of which could drag down economic growth.

Additionally, due to production-sharing agreements between the U.S., Mexico, and Canada, tariffs could act as a tax on domestically manufactured goods, affecting businesses nationally and statewide.