On March 3, 2025, 25% tariffs were set to be enacted on US imports from Mexico and non-energy imports from Canada. These tariffs were subsequently delayed by President Trump and are expected to be implemented on April 2, 2025. A 10% tariff was enacted on imports from China and planned for Canadian energy imports. Additionally, the administration has planned “reciprocal tariffs” on other US trading partners, meaning that all industries would be subject to new tariffs equivalent to the tariff rate those countries impose on US exports. If fully implemented across all sectors, this bundle of tariffs has the potential to disrupt long-integrated global supply chains for key industries in the Ohio River Valley region and, in the short run, will likely lead to higher consumer prices and reduced US employment.
This report analyzes US Trade import data, maintained by the US Census Bureau, to study how imports subject to the new Canada, Mexico, and China tariffs could affect the economies of Kentucky, Ohio, Pennsylvania, and West Virginia. Notably, this report attempts to minimize assumptions and therefore does not attempt to estimate the impacts of any retaliatory tariffs imposed by Canada, Mexico, or China nor does it attempt to assess reciprocal tariffs which have been much more in flux and may have sectoral carve-outs (Gavin, Dawsey, & McGraw, 2025). There is virtually no precedent or existing research that studies what a sudden and universal implementation of tariffs will do to economies in the context of modern globalization.
Key Findings:
▶ China, Canada, and Mexico are the three largest trading partners of the Ohio River Valley states. Collectively, these three countries represented over $100 billion in imports in 2024 which is just under one-third (33%) of total imports to the region.
▶ Total imports from Canada, Mexico, and China represent a sizable share of each state’s overall economy, ranging from approximately 2% of gross domestic product (GDP) in West Virginia and over 8% of Kentucky’s GDP. Tariffs, therefore, have the potential to be highly disruptive for businesses in our region’s states.
▶ If the proposed 2025 Trump Administration Tariffs had been in effect for 2024, they
would have represented a new import tax of over $21 billion on businesses across the four Ohio River Valley states. This dollar amount would be the equivalent of the federal government suddenly raising taxes by $2,307 on every Kentucky household, by $1,753 on every Ohio household, by $1,609 on every Pennsylvania household, and by $797 on every West Virginia household.
▶ Tariffs on Canada, Mexico, and China will likely be passed by the importing US businesses onto consumers by US companies, resulting in higher prices. Nationally focused studies have estimated that these price hikes would cost the typical US household over $1,200 annually (Clausing & Lovely, 2025).
▶ Tariffs on Canada, Mexico, and China will likely reduce state GDP growth, domestic employment, and consumption in the short term. Businesses effectively have three responses to choose from when responding to new, sudden tariffs: use fewer of the imported inputs, find new, more expensive alternative suppliers for the inputs where possible, or pay the tariff outright. The first option would come with a scale-back in US production and potentially idling capacity would mean laying off workers and cutting costs. This would reduce GDP growth. The latter two options would both mean more expensive inputs, raising producer costs. Most peer-reviewed, empirical evidence from recent tariff data suggests that these higher costs will be passed through consumers (Fajgelbaum et. al., 2019). This would raise consumer prices and accelerate inflation as well as reduce consumption, further lowering GDP growth in the short- and medium-run.
▶ There may be opportunities in the long run for positive economic impacts if tariffs are strategically implemented and in place long enough, with enough certainty, to spur significant domestic capital investment. If producers believe the tariffs are not temporary, they may choose to “re-shore,” or relocate, parts of their supply chain to the region. This could create new jobs and raise wages, so long as new trade agreements do not result in the subsequent elimination of the tariffs. Otherwise, producers may choose to “wait out” the tariffs rather than invest billions in manufacturing facilities. At this stage, haphazard and uncertain implementation signals indicate that tariffs may be intended to create leverage in renegotiating free trade agreements. In such a use-case, they would be unlikely to generate significant re-shoring of American production.
▶ Positive economic impacts in the Ohio River Valley could be either partially or totally negated by either retaliatory tariffs or sustained price increases for consumers in industries that cannot easily re-shore their supply chains. These effects could mean that even with new job creation and the reshoring of some industries, the net economic impact of the tariffs on the economy could be negative.