- Michigan businesses should expect more uncertainty as Trump administration adjusts tariff policies, former trade official warns
- Trade agreement review with Canada, Mexico set to begin in July, weeks before current 10% tariff on most foreign goods is set to expire
- Michigan’s manufacturing and agriculture sectors, as well as close trade relationship to Canada put state’s businesses in the crosshairs
As the Trump administration reassesses tariffs struck down by the US Supreme Court and prepares a key review of a trade agreement with Mexico and Canada, Michigan businesses should continue to expect the unexpected, former federal trade official Christopher Padilla said this week.
“Whether you think tariffs are a good policy tool or not, the chaotic implementation and chaotic use of tariffs has been, I think, the thing that’s been most harmful to business,” Padilla told Bridge Michigan.
Michigan’s proximity to and close trading relationship with Canada – the state’s largest trade partner — mean the state is especially impacted by the shifting trade policies under President Donald Trump, who in February imposed a 10% global tariff and vowed to raise it to 15%.
Padilla, who served as Under Secretary of Commerce for International Trade in President George W. Bush’s administration, discussed those dynamics Thursday in a webinar with statewide business groups affiliated with the Michigan Smart Trade Alliance.
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Following the webinar, Padilla spoke with Bridge to discuss the current trade landscape and what it means for Michigan. Below are excerpts from the conversation, condensed for length and clarity:
Where do things stand currently?
Unfortunately, I think we’re in another period of great uncertainty, whether one supports the tariffs or not.
By the end of 2025, we had reached a point where people had a pretty good idea of what the tariffs were and were going to be. The president had negotiated a number of trade agreements with some of our key trading partners to cap some of the tariffs at roughly 15% …The administration had indicated it would begin talks to amend and perhaps renew the (United States-Mexico-Canada Agreement), which is particularly important for trade with Canada and Mexico.
And then we had the Supreme Court throw out two-thirds of the president’s tariffs, and the administration is now trying to rebuild the tariff wall, brick by brick. That introduces more uncertainty into the equation, because it’s now not as clear whether all of those agreements with trading partners are going to hold.
What’s contributing to the uncertainty?
From the point of view of a business trying to make plans, either for their supply chain or for investments, unfortunately, the uncertainty has returned. I think we’re going to see it at least through the end of July, when the 10% surcharge expires. By then, the administration will try to reimpose most of the tariffs that were there before the court ruling.
But there may be some bumps in the road. Will China just sit by while we raise the tariffs back to where they were or will they retaliate in some way? Will the president, who’s pretty angry with Europe again over the Iran war, you know, will he keep the 15% agreement, or will he punish them? These are the questions that unfortunately, businesses have to ask again.
Has there ever been a time that you can recall where there has been this level of uncertainty for businesses around the country?
No, never, and I’ve been involved in trade for probably 35 years now, either in government or in the private sector. It’s never been this unpredictable, and it wasn’t this unpredictable in the first Trump administration.
The president imposed tariffs mostly on China in the first term, but he also negotiated the USMCA, which is an important and pretty good agreement. He negotiated other agreements with Japan and with Europe. It’s this last year in particular, that has just been so, well, chaotic, really.
Who’s benefiting?
The steel industry probably would say that they have benefited. The administration frequently cites support from steel companies and from the Steel Workers Union. I think some textile companies have been pleased. There are some domestic manufacturers, for example, of home appliances that I think have felt that they have benefited from some of the higher tariffs.
So there have been some sectors that feel like they’re better off, but the much broader swath of the economy, I think, is feeling the negative effects.
What businesses are impacted most?
It’s been hardest on small businesses, because larger companies have been able to mitigate some of the effects of tariffs by shifting their supply chains, by passing off some of the cost of the tariffs to others in the supply chain or to their end customers.
Small businesses have a lot less flexibility. They don’t have the ability to switch suppliers as easily. Usually, they have thinner margins, and so they can’t just eat the tariffs for some period of time.
I wish I could say that it’s going to get better, but I don’t think it will. I think we’re in for three more years of this, because there aren’t a lot of signs that the administration’s policy is going to get a lot more predictable.
What does President Trump’s threat to block the Gordie Howe Bridge from opening mean for Michigan and the US-Canada relationship?
My guess is that it’ll proceed, and the bridge will open, and this will blow over. The president was irritated at Canada. He’s been irritated at Canada quite a bit, he’s made quite a few threats against Canada that have not materialized. There’s a long and growing list of threats that the president has made on trade that have not come to pass, and I suspect that this bridge one will be among those.
From the point of view of the economy, it doesn’t make a lot of sense to try to close the bridge. And frankly, there’s real questions as to whether he has the authority to do it.
Anything else on the horizon you’re keeping an eye on?
Two things. One, and this is particularly important for Michigan businesses, is the whole question about the renewal of the US-Mexico-Canada Agreement, and how Canada in particular, will be treated in that agreement. It’s pretty clear that the administration is not happy with Canada, and I think we should expect that they are going to…be tough on Canada. That’ll be impactful for Michigan businesses that do a lot of cross-border trade.
The other thing that I would watch is the process of rebuilding the tariff wall between now and the end of July. I think the administration believes that it’s a simple matter of…we put the tariffs right back to where they were. I’m not sure it’s going to be that simple.
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