Experts say that President Donald Trump’s ever-changing, on-again, off-again tariff war against some of Indiana’s biggest trading partners could threaten investment and economic growth as businesses contend with uncertainty due to frequent reversals in U.S. trade policy.

The latest abrupt reversals came Thursday. Two days after imposing 25% tariffs on all imports from Canada and Mexico, Trump postponed tariffs on many imports from the two countries for a month amid widespread fears of the economic fallout from a broader trade war, The Associated Press reported.

Trump’s about-face came one day after he exempted auto imports from both countries for 30 days, and it also came after a previous month-long tariff reprieve for Canada and Mexico right before tariffs were to take effect Feb. 4, according to wire reports. Trump also said he still plans to impose “reciprocal” tariffs starting on April 2.

Further complicating matters is that it is unclear what Trump is trying to achieve by imposing tariffs on U.S. trading partners. Sometimes he cites border security or stopping the flow of fentanyl, while in other instances he claims tariffs will lead to more U.S. auto manufacturing jobs or generate revenue for the Treasury.

On Tuesday, Trump said tariffs are about “protecting the soul of our country.”

However, the tariff whiplash that has been playing out during the first several weeks of the new Trump administration is creating uncertainty for businesses, complicating decisions on suppliers, factory locations and pricing strategies — and that uncertainty will likely discourage investment and slow economic growth, experts said.

“We’ve got a lot a lot of uncertainty about this, and in the face of this kind of uncertainty, what generally happens is that businesses slow down their investment significantly,” Kyle Anderson, an economist and clinical assistant professor of business economics at the IU Kelley School of Business in Indianapolis, told The Republic. “…For example, Cummins and companies like that aren’t going to want to make big investments in expanding output if they’re unsure about what their cost structure is going to look like.”

“I wouldn’t want to be a senior executive at an auto or truck manufacturer right now because you have no idea what the next week, month, six months is going to bring in terms of economic policy, and the decisions that get made are highly dependent upon these policies,” Anderson added.

‘Good chance’ of recession

However, if Trump ends up following through on his tariff threats against Canada and Mexico at some point, experts say it will likely push the U.S. economy into a recession, resulting in job losses in Indiana, as well as higher inflation, rising interest rates and an overall “lower growth trajectory” for the state’s economy.

“I have very serious concerns about the impact it will have on Indiana,” Anderson said. “…Both the Columbus region and the state as a whole are very dependent upon manufacturing and especially auto truck manufacturing, and a lot of those supply chains do stretch across Canada and Mexico.”

“I think there will be significant disruption to the economy,” Anderson said. “…If these (tariffs) go in as advertised, I would expect that there’s a good chance that we will end up in some sort of recession.”

Ontario Premier Doug Ford, the leader of Canada’s most populous province, told The Associated Press that if the tariffs remain, the American and Canadian auto industries will last approximately 10 days before they start shutting down assembly lines in the U.S. and Ontario.

An economic downturn in Ontario could have serious consequences for Indiana businesses, experts said.

A quarter of all exports by Indiana businesses in 2022 — about $11.53 billion of $45.45 billion in goods — went to Ontario, according to Canadian and U.S. trade records.

In 2022, Canadian businesses imported $14.32 billion in goods from Indiana — the highest annual total in at least 10 years and a $1.73 billion increase from the year before, according to the most recent records from the Government of Canada.

Nearly 91% of all exports from Indiana to Canada in 2022 — $13 billion in goods — were in the manufacturing sector, according to Canadian records.

Locally, foreign exports are significant part of the economy, making up about 29% of the Columbus Metropolitan Statistical Area’s gross domestic product in 2023, according to the most recent federal records.

The Columbus metro area includes all of Bartholomew County.

In 2023, local businesses exported about $2.54 billion in goods, according to the U.S. International Trade Administration Office. Canada and Mexico accounted for about 90% of those exports.

Machinery, including engines, accounted for around $1.84 billion in exports from the Columbus metro area in 2023, while transportation equipment, including vehicle parts, accounted for an additional $547 million in exports.

“Our local companies produce a lot of automotive components,” Jason Hester, president of Greater Columbus Economic Development Corp., said in January. “In many instances, parts move back and forth between the U.S., Mexico and Canada.”

“Retaliatory tariffs by Canada and Mexico will also reduce demand for our products made here and sold there, including everything from … car parts and engines to food products produced or grown here locally,” Hester added.

At the same time, tariffs will likely contribute to inflation and likely result in higher interest rates, experts said.

“This will be inflationary to the extent that these get put in because prices will go up on imported goods,” Anderson said. “…And in a time where we’re trying to get inflation under control. …This is also having a significant impact on the Federal Reserve and the potential for interest rates (cuts). Because if these tariffs go in, and we have inflation, then we’re going to see higher interest rates.”

Agriculture, China tariffs

Experts also say farmers could be particularly vulnerable to tariffs — especially in Indiana.

“Indiana’s economy is extremely vulnerable (to tariffs) in many dimensions,” Andreas Hauskrecht, an economist and clinical professor of business economics and public policy at the IU Kelley School of Business, told The Republic. “…If (Canada and Mexico) really retaliate, that would hurt our corn farmers, soybean farmers, poultry farmers. …Particularly with Canada, we are extremely vulnerable because when you look at agriculture, we (not only) get most of our fertilizer from Canada, but also potash and nitrogen. …If we really have 25% (tariffs) on this stuff, that would hit Indiana farmers between the eyes.”

While much of the focus has been on tariffs again Canada and Mexico, Trump has stood by his threat to impose 10% tariffs on imports from China.

On Tuesday, China said it would impose new tariffs on a range of U.S. agricultural imports next week, including 15% tariffs on U.S. corn, as well as 10% on U.S. soybeans — two of Indiana’s top agricultural exports.

Additionally, China will impose an additional 15% tariff on U.S. chicken, wheat and cotton and a 10% tariff increase on sorghum, pork, beef, aquatic products, fruits, vegetables and dairy products.

An analysis by the Brookings Institution published last month found that several Indiana counties — including Decatur County — are the most vulnerable in the nation to retaliatory tariffs from China.

While the median U.S. county has just 0.05% of its jobs in potentially affected industries, that figure rises to 11.7% in Decatur County — the 51st highest percentage among 3,112 counties, according to the analysis.

Trump won Decatur County with 78.4% of the vote in the 2024 election, according to the Indiana Secretary of State’s Office.

Other Indiana counties that the analysis found to be highly vulnerable to China’s retaliatory tariffs include Gibson County, with 39.2% of its jobs in potentially affected industries; Clay County, with 12.2%; Sullivan County, with 10.2%; Adams County, with 10%; Tippecanoe County, with 9.8%; and Elkhart County; with 9%.

“When you think about retaliatory tariffs, a lot of times those are put on agricultural products,” Anderson said. “Indiana is a big agricultural state. A significant percentage of that gets exported to other countries.”

Recession or ‘Golden Age?’

However, the concerns expressed by economists, business leaders and other experts stand in stark contrast to the views of federal lawmakers who represent parts of Bartholomew County.

Rep. Jefferson Shreve, R-Ind., said in a statement this week that Trump’s economic policies — including what Shreve described as the president’s plan to “bring back American manufacturing dominance” — “will set our country on the path of success.”

Rep. Erin Houchin, R-Ind., said in a statement that “we are rebuilding our economy” and “bringing manufacturing back to the United States and unleashing American energy to drive down costs for hardworking families.”

“America’s Golden Age has begun,” Houchin said.

In the meantime, experts say Trump’s tariff war and tactics run the risk of prompting countries that have had strong trade ties with the United States to start looking for different trading partners.

“There is a high risk that over the long run … there will be a reorganization of supply chains,” Hauskrecht said. “We can be sure that our trading partners are looking for alternatives (to the United States). …The United States is basically voluntarily giving up its role as the leader of the Western world.”
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