Mar 23, 2025
The Trump Administration has been moving aggressively to impose tariffs on select foreign countries from the earliest days of the presidency. If you aren't yet familiar with the economic tool, tariffs are taxes on imported goods such as raw materials, which businesses pay when they bring items into the country. In practice, most companies ultimately pass on these extra costs to consumers so as to avoid reducing their own profit margins.
Unfortunately, tariffs can affect the economy in direct and indirect ways, making the risk of a recession or downturn greater because of the added burden on the economy as a whole.
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The Trump Administration initially put 25% tariffs on both Mexico and Canada in March, before changing the strategy several times. While the administration has slapped these levies on other countries too (with Chinese imports a focus), Canada and Mexico remain directly impacted due to their proximity and volume of trade. When the tariffs are in effect, these and other countries are now often responding with their own reciprocal tariffs.
While the entire U.S. could be affected by these tariffs from all sides, there's one state in particular that could be disproportionately impacted: Texas.
What makes Texas especially vulnerable to tariffs
"Texas would by far be the state that's hardest hit by these tariffs," Ray Perryman, CEO of economic research company, The Perryman Group, told CBS. "We buy a lot of things from Mexico. Mexico buys a lot of things from us. For the last 30 years, we've stitched these economies together. They're really integrated in some fundamental ways. And when you rip those seams apart, you're going to start seeing some pretty significant impacts."
So how could tariffs impact the Lone Star State specifically?
Mexico has been the top trading partner of Texas for almost 20 years. The Office of the United States Trade Representative revealed that Texas exported $123.5 billion in goods to Mexico in 2024, with those goods accounting for 27% of all the exported goods statewide. Canada was the state’s next biggest trading partner, with $36.6 billion in trade, followed by Netherlands, South Korea, and China.
Texas does a ton of business with Mexico because of its geographic proximity — the state is right on the border so it's easy for goods to travel back and forth. With the new tariffs imposed by President Trump likely to be layered with retaliatory tariffs from Mexico, any future transactions for a business will likely be a lot more expensive.
While the short-term impact isn’t good, the long-term consequences may be even worse. The Perryman Group estimates that Texas is going to lose around 370,000 jobs annually as a result of the tariffs, and around $46 or $47 billion in gross domestic product (GDP).
For example, since Texas also acquires a large portion of its steel and lumber from Canada to build homes, the cost of construction could grow too, making it more difficult for people to find affordable housing in the state.
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"You're basically fundamentally changing a system that's evolved over a long time that works really well and has produced a lot of benefits," Perryman underscored. "And so when you start interfering with that and dismantling that, you're going to see some significant consequences that really do work their way through a lot of different crevices in the economy."
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What can Texas families do to prepare?
While you can reach out to your congressperson to share your opinion on the subject and seek out other ways to get politically involved, you can also take steps to prepare for economic disruption.
If you are part of one of the industries at-risk, such as construction and auto manufacturing, you may want to consider upskilling or switching careers entirely if you have this option. Make sure you are keeping up with industry standards to remain more competitive in your position or to strengthen any future job applications. You can update your resume and maintain a solid professional network, considering next career moves if the prospect of unemployment looms, as it does for some 370,000 people.
Beyond futureproofing your career, you may also want to prepare for more direct increased costs on goods. For example, produce is likely to become more expensive as much of it comes from Mexico; families may want to start looking for ways to save at the grocery store, such as clipping coupons or stocking up on sale items at a discount.
As there's a very real risk of having your source of income impacted, it's also a good idea to shore up your emergency savings so you've got a financial cushion if you stop receiving regular paychecks. You can tighten your budget now — both so you can get used to living on less and so you can grow your emergency fund faster.
Finally, since the stock market has already been impacted by tariffs and the threat of a trade war, Texans should make sure their investments are diversified. However, you also do want to make sure you are investing only money you won’t depend on for at least another several years so you aren’t forced to make emergency withdrawals during a time of economic chaos.
By taking these steps, Texans can better brace for the financial impacts the state is now projected to experience.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
