States Most Affected by Trade War with Mexico

The border between the U.S. and Mexico may soon expand into a 40-foot-high, 1,000-mile-long concrete barrier separating us from them. On Jan. 25, President Donald Trump issued an executive order to immediately begin erecting a border wall. But the million-dollar question or, more accurately, the $15 to $25 billion question is: Who will pay for it?

During his presidential campaign, Trump suggested that Mexico itself should fork over the cash to keep its own citizens out of American soil. And when our southern neighbor refused, Trump instead proposed taxing all Mexican imports by 20 percent to finance the wall’s construction. In brief, the so-called “border-adjusted tax” would be imposed on U.S. corporations and discourage them from offshoring business.

If and when the president’s plan comes to fruition, experts predict it will trigger a trade war between our two nations. But the impact of the economic fallout will be different for every state. WalletHub’s data analysts therefore compared the 50 states and the District of Columbia across five key indicators gauging the effects of the possible trade battle. Read on for our findings, expert insight on the issue and a full description of our methodology.

Main Findings

Ask the Experts

According to official estimates, Mexico is the third-largest trading partner of the U.S., with exports and imports combined totaling $583.6 billion in 2015 as well as sustaining about 1.1 million jobs in the previous year. President Trump, however, intends to overhaul the North American Free Trade Agreement, or NAFTA, a move that many of his critics fear will result in significant economic and political repercussions on both sides of the U.S.-Mexico border. For insight into the future of trade between the U.S. and our Central American neighbor, we consulted a panel of experts in fields such as macroeconomics and political science. Click on the experts’ profiles to read their bios and thoughts on the following key questions:

1. Who in the U.S. will be most affected by a trade war with Mexico?
2. What would be the economic impact to the U.S. of pulling out of NAFTA?
3. What is the likelihood that a trade war with Mexico puts either country into a recession?
4. What is the best way to encourage companies to keep production facilities in the U.S., other than a tax on imports?

Ask the Experts

David E. Kaun
Professor of Economics at University of California-Santa Cruz
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Antonio V. Saravia
Assistant Professor of Economics and Director of the BB&T Center for Undergraduate Research in Public Policy and Capitalism at Mercer University
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Malcolm Fairbrother
Associate Professor in Global Policy and Politics in the School of Geographical Sciences at University of Bristol
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Robert Dayley
Professor in the Department of Political Economy at The College of Idaho
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Harlan Holt
Visiting Assistant Professor of Economics at Union College
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Charles Hankla
Associate Professor of Political Science at Georgia State University
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Methodology

In order to determine which states will be most and least affected by a trade war with Mexico, WalletHub’s analysts compared the 50 U.S. states and the District of Columbia across five key metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the least favorable outcome for a state.

We then calculated the overall score for each state and the District based on its weighted average across all metrics and used the resulting scores to construct our final ranking.

• Exports to Mexico as a Share of Total State Exports: Full Weight (~20 Points)
  Notes: Exports to Mexico/Total Exports
• Exports to Mexico as a Share of State GDP: Full Weight (~20 Points)
  Notes: Value of exports to Mexico/State GDP
• Imports from Mexico as a Share of Total State Imports: Full Weight (~20 Points)
  Notes: Imports from Mexico/Total Imports
• Imports from Mexico as a Share of State GDP: Full Weight (~20 Points)
  Notes: Value of imports from Mexico/State GDP
• Share of Jobs Supported by Trade with Mexico: Full Weight (~20 Points)
  Notes: Number of Jobs Supported by Trade with Mexico/Total State Employment

Sources: Data used to create this ranking were collected from U.S. Census Bureau, U.S Bureau of Economic Analysis, Bureau of Labor Statistics and The Wilson Center.