Trump tariffs, looming trade war spark worries about Maine's economy, rising prices

Photo / Jim Neuger Shipping containers at the International Marine Terminal in Portland.

Write a Comment

A looming global trade war triggered by new U.S. tariffs on Mexico. Canada and China has sparked concerns about higher prices and supply chain disruptions in Maine.

On Saturday, President Donald Trump signed an executive “economic emergency” order imposing 25% tariffs on imports from Mexico and Canada and an additional 10% levy on goods from China. Energy imports from Canada, including oil, gas and electricity, are to be taxed at a lower, 10% rate.

The move set off a chain of retaliatory threats and financial market reactions. Stock markets in Asia and Europe fell early Monday, and futures markets pointed to declines on Wall Street as well. The U.S. dollar rose to a two-year high, making U.S. exports more expensive abroad.

The head of Maine's largest business group is especially worried about taxing imports from Canada, the state’s largest trading partner.

Courtesy / Maine State Chamber of Commerce

Patrick Woodcock is president and CEO of the Maine State Chamber of Commerce.

“The broad and significant tariff imposed on Canadian imports will be particularly damaging to our state’s economy given Maine’s unique and significant trade position with Canada,” Patrick Woodcock, president and CEO of the Maine State Chamber of Commerce, said in a statement emailed to Mainebiz.

“While we welcome a comprehensive strategy to promote domestic manufacturing, we are concerned that applying a tariff to all imports will be disruptive to existing supply chains, and result in a material increase in energy costs right when Maine businesses and households are struggling with energy bills this winter,” he added.

Retaliatory measures

In response to Trump, Canadian Prime Minister Justin Trudeau announced plans to slap 25% tariffs on up to $155 billion in U.S. imports, including alcohol and fruit, while Mexican President Claudia Sheinbaum promised "retaliatory and non-tariff measures” without spelling out details.

Some Canadian provinces have also retaliated by banning American-made alcohol from store shelves, according to media reports.

In China, the country's ministry of commerce said it would file a legal case against the United States at the World Trade Organization and take “corresponding countermeasures to firmly safeguard its rights and interests” without spelling out what those countermeasures would be.

Trump has also threatened to impose tariffs on goods imported from the European Union as payback for “treating us so terribly,” he told reporters in Washington, D.C., on Friday, reiterating his frequent complaint against the 27-nation bloc.

Fuel costs, supply chain

Amir Mousavian, a supply chain expert and an associate dean at the University of New England College of Business, warned that the new tariffs and countermeasures could weigh on Maine’s economy given that Canada is its largest import supplier and export destination.

In particular, the 10% tax on Canadian energy imports “could raise fuel costs across the state, driving up logistics expenses and subsequently increasing prices across all sectors,” he told Mainebiz.

He warned that key Maine experts will suffer from retaliatory Canadian tariffs, reduced demand and potential loss of revenue.

“With Maine’s deep economic ties to Canada, residents and businesses are particularly vulnerable to rising costs and uncertainty in the supply chain of products, further straining household budgets and local industries,” he said.

However, based on what happened during the first Trump administration, he views the likelihood of long-lasting, substantial tariffs as “relatively low, as they are primarily being used for negotiation purposes.”

Manufacturers on alert

In Mechanic Falls, Auburn Manufacturing Inc. President and CEO Kathie Leonard plans to get in touch soon with the company's key Canadian and Mexican customers “to check their pulse,” she told Mainebiz over the weekend.

Auburn Manufacturing makes high-performance textiles for extreme temperature protection.

File photo / TIM GREENWAY

CEO Kathie Leonard of Auburn Manufacturing Inc.

“We, of course, hope they won’t cancel orders with us and begin buying Chinese products,” she said, noting that unlike the U.S. those customers are not in a trade war with China.

“Chinese textiles like ours are being imported to both countries already, so those imports may increase if the tariffs are put in place,” she said.

Leonard also noted that the strength of the U.S. dollar already makes American goods relatively expensive for customers in Canada and Mexico. “Adding another 25% to their purchase will most likely prohibit their ability to buy from us,” she said.

While she has some concerns about higher prices for some components of raw materials that originate in other countries, she said that tariffs on energy will raise prices as well.

“We use a lot of energy to make our textiles, so that’s another worry and will force us to raise our prices,” she said.

File / Tim Greenway

Mike Roughton is executive director of the Manufacturers Association of Maine.

Mike Roughton, executive director of the Manufacturers Association of Maine, said he finds it "particularly troublesome that the administration chose to go after Maine’s largest trading partner, and clear that the imposition of the tariffs would likely hurt Maine’s economy by raising costs, reducing trade and threatening jobs in key industries."

"The retaliatory measures promised from Canada would further strain Maine businesses and workers, particularly in trade-dependent sectors like seafood and forestry," he added.