How Trump tariffs could affect Minnesota consumers and companies

A set of tariffs on Canada, Mexico and China announced by President Donald Trump last month are scheduled to go into effect Tuesday.

However, Trump has a penchant for delaying implementation at the last minute, as he did last month. Should the plan proceed this time, Minnesotans will most acutely feel the effects at gas pumps and grocery stores.

Tuesday will bring not only potentially new tariffs but also earnings reports from several big U.S. retailers, including Minnesota-based Target and Best Buy.

Such reports are closely watched as they can shed light on how well U.S. consumers are doing, and spending by U.S. households is the main engine for the world’s largest economy. But these reports could carry extra resonance following data showing U.S. households may not be waiting for tariffs to hit to change their behavior.

The 25% tariffs would be levied on most goods imported from Mexico and Canada, which could hit U.S. consumers hard on fresh fruits and vegetables brought in from the south.

Meanwhile, energy imports from Canada face a 10% tax rate. Minnesota and many Midwest states depend on Canadian oil for gasoline.

Trump had imposed a tariff of 10% on imports from China and that’s scheduled to rise to 20% beginning Tuesday.

With the three countries being Minnesota’s largest trading partners, here’s a look at what the brewing trade war could mean in the state.

Most of the oil refined into gasoline in Minnesota comes from Canada, the state’s largest trading partner. General Mills sources many of its oats for the nation’s top-selling cereal, Cheerios, from the country. And companies involved in the auto industry have a strong relationship with Canadian firms, as does the Iron Range ore industry.

The most immediate impacts of any tariffs on Canada and Mexico will be on food, fashion and electronics, said Neil Saunders, managing director at GlobalData.

“Retailers will take a multi-pronged approach. They will try to reduce costs in their supply chain and wider operations, they will absorb some of the cost, and they will pass some across to consumers,” Saunders said. “Low-margin sectors, which include food and electronics, will feel the pinch more than most as margins are not robust enough to absorb all of the increase.”

After historic grocery inflation finally cooled off to average levels, higher grocery bills may be on the horizon.

The Consumer Brands Association, which counts Minnesota companies like General Mills, Hormel Foods, Land O’Lakes and Target among its members, said in a statement tariffs “could lead to higher consumer prices and retaliation against U.S. exporters.”

The Canadian tariffs are meant to “address the flow of illicit drugs across our northern border,” according to the president’s executive order initiating tariffs on Saturday. Trump was specifically speaking about fentanyl.

The same rationale, plus illegal immigration, was given for Mexican tariffs. Both countries have pledged to send their own troops to enforce the border in exchange for the tariff pause.

The moves would blow up the trade agreement between the U.S. and the two countries that Trump negotiated during his first term.

Canada and Mexico are Minnesota’s top trading partners, with China third. Combined, the state imports far more than it exports to those countries.

In 2023, Minnesota imported $14.1 billion worth of goods from Canada and exported $7 billion, according to census data. Oil is the largest share of Canadian imports.

The state imported $3.3 billion from Mexico, roughly the same level as Minnesota exported to the country in 2023.

Minnesota’s annual imports from China through November 2024 reached $6 billion. The state exported $2.4 billion to China in 2023.

Should it go into effect, Trump’s 10% tariff on Canadian energy could hit Minnesota particularly hard, since the state relies on imports of oil, natural gas and electricity from its northern neighbor.

The Canadian tariffs “would be passed on as a 10% tax to Minnesota consumers,” said Peter Wyckoff, a Minnesota Department of Commerce deputy commissioner who oversees energy.

The state’s two oil refineries — Marathon Petroleum in St. Paul Park and Flint Hills in Rosemount — get most of their crude from Canada, as does the Cenovus refinery in Superior, Wis. Together, those three refineries provide much of Minnesota’s gasoline.

Minnesota is the main portal for much Canadian crude flowing into this country. The Enbridge corridor of pipelines running through northern Minnesota transports oil to refineries throughout the Midwest and to the Gulf Coast.

“Instead of a trade war, we should be working to advance North America as an energy powerhouse,” Calgary-based Enbridge said in a statement.

The largest supplier of natural gas to Minnesota — Northern Natural Gas — relies on several U.S. sources, but Canada is also an important provider. Five of the six pipelines that transport gas in Minnesota originate in Canada, and in 2023 Minnesota imported nearly 550 billion cubic feet of Canadian natural gas — much of which was transported on to other states.

As for electricity, Manitoba Hydro is significant supplier to Minnesota, Wyckoff said, particularly to Minnesota Power.

The Duluth-based utility and Manitoba Hydro built a $700 million, 224-mile power line that was energized in 2020. Power from Manitoba Hydro constitutes about 11% of Minnesota Power’s energy supply.

For propane, very little is imported from Canada.

“Nobody needs to overact to the situation,” said Dave Wager, executive director of the Minnesota Propane Association. “We don’t expect any supply disruptions. ... Propane is just a very small part of this large tariff issue.”

Dan Glessing, a Wright County dairy farmer and president of the Minnesota Farm Bureau, told the Star Tribune last month that the state’s producers — of everything from grain to pork — are heavily dependent on foreign trade, especially with Canada and Mexico.

Any disruption to grain trading is likely to spike prices, a boon for farmers but a potential drag on consumer prices.

Higher costs of fertilizer might also push up crop prices or eat into farm income.

During a call with fellow Democratic senators last month, Sen. Amy Klobuchar noted that the 25% tariffs on Canadian goods would jack up the price for needed farmland fertilizer potash by as much as $1.70 an acre for corn and $1.42 an acre on soybeans, right as farmers prepare to enter fields in the spring for planting.

The Fertilizer Institute has asked the Trump administration to exempt potash and other fertilizer imports from tariffs, since the U.S. imports 95% of its potash fertilizer, nearly all from Canada.

“No substitutes exist for potash as an essential plant nutrient,” the group said in a statement.

Last month, Busy Baby founder Beth Fynbo Benike in Oronoco was awaiting a cargo ship of goods from China that would be subjected to the 10% tariff.

Fynbo Benike said the tariff will force her to boost the price of her baby mats from $30 to $33 each. She’s not sure customers are willing to pay that much.

Her silicone Busy Baby mats were to be be shipped to dozens of Target warehouses and stocked in 257 Target stores starting March 6. The dilemma prompted Fynbo Benike to write Trump with a request that he impose tariffs based on volume “so you don’t crush little companies like ours. We are not iPhone. We do maybe six [small] container shipments a year.”

Industrial manufacturers are also bracing for impact. Delkor Systems makes and ships about $100 million of robotic packaging machines from its Arden Hills factory each year. About 10% to 15% of that goes north or south of the border.

As a result, “I’m quite concerned about our future opportunities,” Delkor CEO Dale Andersen said Monday. “We’re building several machines right now for Canada. If all of a sudden our customers had to pay a 25% tariff then they would have to buy equipment from some other country.”

“But a lot of people I’ve talked to, [including] a few of the other owners of machinery businesses for packaging, we all sort of feel that this is sort of a negotiation ploy. No one I’ve really talked to thinks that this is going to last for more than maybe a month or two.”

This story includes reporting from the Associated Press and staff writers Carson Hartzog, Patrick Kennedy, Dee DePass, Christopher Vondracek, Kim Hyatt and Mike Hughlett.