WASHINGTON – If President Donald Trump follows through on a proposal to slap a 20 percent tax on Mexican imports, it could lead to severe consequences for Minnesota's agriculture sector and some of its manufacturers.
A trade war with Mexico could slow the flow of goods from Minnesota south of the border, a revenue stream that brought $2.4 billion to the state in 2015.
"This could be the start of a major trade war," said University of Minnesota trade economist Tim Kehoe, who worked with Mexico on the North American Free Trade Agreement (NAFTA). "The Mexicans have said that if there is any border tax, they are going to do it right back. There would be big negative consequences for agriculture."
Trump's spokesman floated the plan Thursday as a way to pay for the administration's planned border wall but later said that at this point the tax is an "option."
The sting from the tax itself would be relatively limited in Minnesota, since last year $2 billion of the state's $28.6 billion in imports — roughly 7 percent — came from Mexico.
The risk would come if Mexico, which sends the majority of its exports to the United States and would be hard hit by the tax, retaliated and started taxing imports from the United States or buying fewer of them.
And Minnesota's agriculture sector has the most at stake: Mexico buys more Minnesota corn and soybeans than any other country.
"We've got a lot of members with dogs in the fight," said Kevin Paap, president of the Minnesota Farm Bureau. "And a lot of them supported Mr. Trump. This is a concern."