Trump tariffs will slow Michigan growth, kill 13,000 auto-related jobs, experts predict
LANSING — State officials agreed May 16 to revise downward state revenue projections by $456 million over the next two years, largely due to President Donald Trump's tariff policies, which one forecaster said will cost Michigan 13,000 jobs from the auto sector alone.
Still, Treasurer Rachael Eubanks, Budget Director Jen Flood and other officials said they expect economic growth will continue in Michigan, but that it will be slower than what was forecast in January, when the last revenue estimating conference was held.
That means the 2026 budget that state lawmakers are now working on will be tighter than anticipated.
The new projections revised downward by $585 million how much the state can expect to collect in its general fund — the state's main checking account — in the 2025 and 2026 fiscal years. But that projected loss is softened by larger-than-anticipated growth in the School Aid Fund, which is largely supported by sales tax revenues. Officials revised upward, by $128 million, how much the state can expect to collect in the School Aid Fund in 2025 and 2026.
More: U-M economists predict rising jobless rate, auto sales slowdown in Michigan as tariffs hit
Forecasters who made presentations at the conference held at the Capitol stressed that a high degree of uncertainty surrounds their projections, as trade policy coming from the White House, which has major impacts on the automotive industry and other sectors of the Michigan economy, changes from week to week and sometimes from day to day.
Gabriel Ehrlich, director of the Research Seminar in Quantitative Economics at the University of Michigan, told the conference that while uncertainty is high surrounding Trump's tariffs, he projects a 1.8% decline in domestic vehicle production in the next three to five years. That could equate to 3,300 direct job losses in the transportation equipment manufacturing sector, and 13,000 total Michigan jobs when spinoff effects are included.
It's true that protective tariffs could result in more auto manufacturing being returned to Michigan from abroad, but that possibility is more than offset by the effect higher prices for vehicles will have on consumers, plus the effect of retaliatory tariffs other nations are expected to impose on vehicles manufactured in Michigan and elsewhere in the U.S., Ehrlich said.
Left unanswered at the revenue estimating conference is how Trump's policies will impact the revenues Michigan receives from the federal government, which account for 42% of the overall state budget. Figuring out what federal revenues the state will receive is not part of the estimating process set out in a 1991 state law.
State Budget Director Jen Flood said potential federal cuts are a major concern and she and her officials are closely monitoring budget developments in Washington, D.C.
Potential cuts to Medicaid alone could have a $2 billion impact on Michigan, Flood said. Other areas of concern include cuts to the Supplemental Nutrition Assistance Program (SNAP), the federal Education Department, and funding for school meals, she said.
The consensus estimates are rosier than those put forward by the Senate Fiscal Agency, which would have revised state revenues downward by $954 million over two years. But they are more pessimistic than estimates produced for the conference by the state Treasury Department, which pointed to only a $361 million reduction over two years.
The downward projections came two days after the Michigan Senate passed a 2026 budget that is $1.1 billion higher than what Gov. Gretchen Whitmer proposed in February. The Senate version, mostly framed by Democratic lawmakers, is far from final and must be melded with a budget House Republicans are still working on.
'Our country has experienced significant changes since January, including shifting economic policies," said Sen. Sarah Anthony, D-Lansing, chair of the Senate Appropriations Committee.
"The full impact of these changes is still unknown, so it's no surprise that the numbers presented at today's conference are more conservative than previous estimates."
Senate Minority Leader Aric Nesbitt, R-Porter Township, called for spending cuts but also tax cuts as the budget is finalized.
"If Michigan families have to tighten their household budgets, the Legislature has a duty to make the necessary cuts in our state budget and put money back in the pockets of those who need it most," Nesbitt said.
Contact Paul Egan: 517-372-8660 or pegan@freepress.com.
This article originally appeared on Detroit Free Press: Forecast: Trump tariffs will slow growth, kill 13K auto-related jobs
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