Are Texans Most Likely To Lose the Most Due to Tariffs?

The Trump administration’s campaign of taxing foreign governments in an effort to “Make America Great Again” may have unforeseen domestic ramifications. This is particularly true in the state of Texas, as its economy is intimately tied to its southern neighbor Mexico. In fact, some analysts foresee nothing short of a calamity for the Texas economy if the tariffs go forth as planned. But that’s also a big “if.”

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Here’s a look at the potential effect on the Texas economy due to the Trump administration’s tariffs as currently planned.

The Tide Is Turning

One of the problems with economic indicators is that some are lagging, meaning they only give a picture of what has already happened. On that level, Texas looks A-OK, as job growth was good in the first quarter of 2025.

But according to the Dallas Federal Reserve Bank, which has more up-to-date information on economic trends and sentiment, business activity is weakening. And this is before the full effect of the tariffs are even being felt.

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Manufacturing Data

Every month, the Dallas Fed conducts a manufacturing outlook survey to gauge the real-time, on-the-ground response of businesses to various economic stimuli. In the first quarter of 2025, manufacturing activity actually picked up a bit in Texas, but some of that was likely due to orders being pulled forward ahead of the implementation of tariffs.

The fact that manufacturing activity is now rapidly declining, with the index actually turning negative in April, helps validate that theory.

Business Sentiment

Perhaps not surprisingly, businesses are uncertain about the future due primarily to the tariff policy. According to the Dallas Fed, the uncertainty level among Texas businesses has reached multiyear highs, and this in and of itself can hurt economic prospects.

Businesses that are unsure what to expect may opt to hunker down and reduce capital expenditures or even hiring until the path ahead becomes more clear. This self-imposed slowdown can exacerbate the economic damage created by the actual tariffs themselves.

How Does This Specifically Relate to Texas?

Texas is the leading trade state in the country, so tariffs on foreign countries are likely to affect it disproportionately. Mexico is the state’s No. 1 trading partner, according to the Office of the Governor of Texas, to the tune of $272.3 billion worth of goods exchanged in 2023 alone. And it’s not just one-way trade either. Mexico is both the leading source of imports and the top export market for Texas.

The bottom line here is that when Mexico is subject to tariffs, it also has a large effect on the state of Texas. According to Trade Partnership Worldwide, Texas businesses could see a $47 billion economic loss. And a Perryman Group analysis found that a sustained 25% tariff on Mexican goods could cost the state over 287,000 jobs.

How Texans Can Protect Themselves

Although no one can tell with 100% accuracy what the final tariff policy will be — and how it will affect Texans — there are some steps you can take to prepare.

Just as businesses are hunkering down in the wake of the tariff uncertainty, it makes sense as an individual to boost your cash reserves as well. Since any type of economic contraction could lead to job loss, it’s best to sock away at least three to six months’ worth of income in a savings account.

From a longer-term perspective, it can make sense to upskill yourself so that your value as an employee can outlast any economic turndowns. This will help ensure job security even beyond the potentially temporary tariff issues.

If you have the luxury of flexibility, consider exploring other industries that might be less affected by tariff concerns than, for example, construction and auto manufacturing. Service-oriented industries are a good option, as are businesses that don’t source materials or trade with tariff-impacted countries like Mexico.

Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.

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This article originally appeared on GOBankingRates.com: Are Texans Most Likely To Lose the Most Due to Tariffs?