Michigan braces for economic shock as Trump’s tariffs target auto industry

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Michigan has become a frontline casualty in President Trump’s sweeping global tariff campaign. Nearly 20% of the state's economy is tied to the auto industry, which relies heavily on imported components and vehicles from countries like Canada, Mexico, and China. With Trump imposing steep new tariffs, Michigan’s economic backbone is under serious threat, the Wall Street Journal reported.

Detroit’s major auto manufacturers have responded with urgency. Stellantis laid off about 900 workers in Michigan and Indiana due to ripple effects from idled plants in Canada and Mexico. Executives across the industry are stockpiling components, battling with suppliers over cost increases, and activating internal war rooms to manage the crisis.

Early signs of economic strain

Auto-parts maker Luxit, which depends on Chinese imports, saw tariffs jump from 20% to 54%. CEO Stephane Vedie said the company is moving some production from China to Tennessee and possibly Michigan, though job gains will be limited due to automation. Meanwhile, his team is negotiating with automakers to pass along costs—a process that diverts attention from growth.

Lucerne International, another Michigan auto supplier, faces similar challenges. With 80% of its components sourced from China, CEO Mary Buchzeiger is pushing for price hikes and reevaluating plans for a new US factory. The uncertainty has slowed investment talks. "There is no way we can absorb these tariffs," she said.

Fears of job losses and inflation

Anderson Economic Group projects the tariffs could add $2,500 to $12,000 to vehicle prices, even higher for luxury imports. University of Michigan economist Gabriel Ehrlich expects the steel and aluminium tariffs alone to cost the state 600 manufacturing jobs by next year, with broader auto tariffs hitting even harder.

The threat extends beyond factory floors. High-paying design and engineering jobs, university research funding, and Michigan’s agriculture and emerging tech sectors could also suffer. Secretary of State Al Schmidt of Pennsylvania warned in a recent letter that federal cuts to cybersecurity programs could hurt election security. Similar concerns have been raised in Michigan, where business confidence is declining.

Public reactions: worry and reluctant optimism

Leona Milton, owner of Detroit sandwich shop What’s the Dill, said any job losses in the auto sector would hurt her business: "People will lose their ability to shop with us."

Yet some residents see potential long-term benefits. Stellantis worker Mira Zeigler-Moore and Detroit finance professional Kelly Nering support the idea of reshoring manufacturing, even at the cost of short-term price hikes. "Let’s deal with it," Nering said. "In the long term we are protecting our interests."

Automakers scramble for solutions

GM aims to offset up to 50% of the new costs by accelerating imports before tariffs take effect. Stellantis is running assembly lines faster to stockpile parts. But labour cost disparities loom large. UAW workers in Indiana earn 10 times more than their Mexican counterparts, threatening profit margins if production moves stateside.

Ford dealer Jim Seavitt fears added costs for trucks assembled with Canadian engines. “That’s gonna add 6% to 7% to the truck,” he warned.

Uncertain future for Motor City

Detroit’s resilience has been tested before—through competition from Japan, the 2008 recession, and municipal bankruptcy. The recent revival, marked by investment in electric vehicles and the reopening of Michigan Central as a tech hub, now faces a new trial.

Retail activity in the state has plunged, suggesting waning consumer confidence. As tariffs pile on, even supportive voices like UAW President Shawn Fain admit the transition will be painful. “Free trade isn’t free. It’s a disaster,” he said.

But for workers like Daniel Campbell, the future remains uncertain. “Who is going to be able to buy these cars?” the Stellantis employee asked. As Michigan braces for the impact, the stakes have never been higher for the state that helped build America’s auto empire.