Minnesota stocks plummet as tariffs’ impact spooks consumers and companies

The American economy is showing signs of buckling under the weight of the largest tariffs in a century. And the new import taxes, which will have wide impacts for Minnesota companies, haven’t even gone into effect yet.

The reception from markets has been dour in the two days since President Donald Trump announced sweeping new “reciprocal” tariffs on international trade that will see $2.5 trillion of imports taxed at an average rate of 25% starting Thursday.

As China announced retaliatory tariffs on American goods Friday, U.S. stocks officially entered bear market territory, which happens when stocks fall 20% from their peaks, the Wall Street Journal reported.

The S&P 500 closed down more than 7% for the week, as more than $2.4 trillion was shaved from the value of U.S. companies. Minnesota companies including 3M, Sun Country Airlines, U.S. Bank and Solventum all lost more than 10% of their values since last Friday, draining 401(k) balances and prompting jitters among employees and customers alike.

Economists are forecasting “weaker consumer spending and confidence in the near term,” said Scott Anderson, San Francisco-based chief economist and managing director at BMO Capital Markets. “The big surprise for the market has been the magnitude of the reciprocal tariffs that have been put on this week.”

Consumers are preparing for a new round of inflation and possible job losses, as the risk of recession looks more like a probability than a possibility.

“The people who pay tariffs are consumers, not other countries,” said C. Ford Runge, a trade policy expert and professor at the University of Minnesota. “But the larger issue has to do with confidence. … Investors and people purchasing goods hit the pause button. That translates to demand affected up and down the supply chain and leads to recession.”

Candice McFarlane, 34, of Minneapolis, said Friday that she and her co-workers at U.S. Bank Stadium are already choosing different grocery stores to shop from these days. She said she knows the tariffs will have an effect.

“It’s definitely apparent,” she said. “It’s definitely evident.”

Rica Brown, 49, of Minneapolis, keeps a close eye on costs – shopping often, watching for deals and regularly using coupons.

She said she does not pay much attention to the news – too grim, she said – but she’s heard from her 30-year-old son that the president’s actions may cause prices to go up.

Meanwhile, Brown said, costs are already “going up too high on everything.”

BMO Capital Markets is forecasting that the consumer price index, excluding food and energy, will rise from 2.8% in the fourth quarter of 2024 to 4% by the end of this year. Anderson expects the unemployment rate to rise from 4.2% today to 5% by year’s end.

The direct impact from tariffs may take weeks or even months to surface as retailers draw down inventories and try to slowly ramp up prices, but it will be costly.

The Tax Foundation estimates the tariffs will cause “an average tax increase of more than $1,900 per U.S. household in 2025” due to higher prices for clothing, food, electronics and cars. The group said in a report Friday that the White House’s latest tariffs comprise the largest tax hike since 1982.

“This is going to be one of the biggest tax increases in modern U.S. history,” said Tim Kehoe, an economics professor at the University of Minnesota.

It’s been 90 years since the world has seen a trade war like this, Kehoe said. But considering the evidence from the relative trade “skirmish” with China during Trump’s first term, where Chinese producers lowered prices some to absorb some cost, American consumers will likely wind up paying 90% or more of the tariffs.

Foreign producers like China will likely take some of the hit, Kehoe said, but “we’re going to have to wait and see, and experience suggests that it’s not going to be that much.”

Several economists agreed the risk of recession is high and growing.

”The way the tariffs have been rolled out have just added to the market’s uncertainty and its decline,“ Anderson said. “It has been clumsy, to put it delicately, and that has added to the angst of businesses and consumers.”

It may not be enough to pause or backtrack on the tariffs, as Trump has done already with other tariff threats.

“Even if he announces tomorrow, ‘Just kidding, didn’t really mean it,’ the damage to markets and to confidence is already irretrievable,” Runge said.

The professor, who was involved in the Uruguay Round of trade talks that created the World Trade Organization, said Trump’s tariffs are less protectionism and more “protection racket.”

“I had to explain that concept to my students: ‘I’ll burn your house down, but for a fee I’ll leave you alone,‘” Runge said. “The problem is, he’s miscalculated and set the fire before he could get the payola.”

Minnesota Democratic Sen. Amy Klobuchar co-sponsored a bill Friday that would return some tariff oversight to Congress 90 years after policymakers handed tariff authority to the president. Several Republicans are backing the bill, which would cause tariffs to expire after 60 days if they do not receive congressional approval.

Louis Johnston, an economics professor at the College of St. Benedict and St. John’s University, said the tariffs are coming as economic drivers like federal research spending are getting cut and interest rates aren’t moving.

“I keep thinking of that movie, ‘Everything Everywhere All at Once.’ That’s what’s happening here,” Johnston said. ”This is lousy policy, incompetently implemented."

Paul Evans, a 59-year-old university instructor from Minneapolis, said spending cuts in federal education add to his concerns.

“It’s this confluence of things that are happening, and it’s in your brain all the time. What’s happening with the market? What’s happening with the economy? Do I do something now, or do I wait? It’s like quicksand.”

Downtown Target shoppers had varied levels of concern and knowledge of the expected tariff impacts on Friday afternoon. All expressed some worry over the price of goods generally, and some pointed to losses in retirement plans.

“Stupidest thing Trump has ever done,” said David Molvik, 76, of Minneapolis.

Molvik, a semi-retired organ builder who also worked in public broadcasting in Alaska, thinks the president’s trade approach simply translates to bad economics – and many people will be hurt as a result. He is also concerned about the effects on the markets.

“It’s been busy going down,” Molvik said of the stock market recently.

Consumer spending by wealthier households has been keeping the market higher in the past two years, Anderson said, but that trend is at risk of reversing.

The stock market downturn “makes us a lot more vulnerable to a downturn in spending,” he said.

This story contains material from Reuters.