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Texas local businesses reported slower revenue growth since late last year, sparking uncertainty over President Donald Trump’s policies on tariffs and concerns of a possible recession, according to a report released by the Federal Reserve Bank of Dallas on Thursday.
As the nation’s leading trade state, Texas has been significantly impacted by the higher tariffs on imports from Mexico, Canada, and China imposed earlier this year by Trump’s administration.
“The uncertainty index for both manufacturers and service sector companies jumped in March to levels not seen since late 2022, during the height of the pandemic,” the Dallas Fed Texas Business Outlook Surveys (TBOS) report stated.
Nearly half of Texas businesses surveyed expressed concerns that rising costs could reduce consumer demand and push the state into a recession. Among those hit hardest are manufacturers, many of whom reported difficulties maintaining production levels. The Texas service-sector was also affected: its revenue growth has been declining since late 2024, reaching zero by March, according to TBOS respondents.
The Trade Partnership Worldwide, an international research firm, estimates that the tariffs could cost Texas businesses $47 billion and cut the state’s gross domestic product (GDP) growth by 1.5 percentage points. Researchers predict that this decline in economic growth could lead to the loss of approximately 100,000 jobs.
Tony Payan, the executive director of the Center for the U.S. and Mexico at Rice University’s Baker Institute for Public Policy, said that tariffs are “going to hit Texans very hard.”
“We have to remember that 40% to 50%, depending on the season, of our agricultural produce comes from Mexico,” said Payan. “Tariffs on cucumbers or strawberries or avocados, other Mexican fruits and vegetables, they have no easy and quickly available import substitution opportunity. So inflation is going to be very hard to control.”
Payan added that “the Texas government and congressional delegation should have been a lot more assertive in pushing back against the White House and President Trump.”
“They're too quiet, and there is too much economic activity at stake being put at risk, and there are too many Texans who are going to be affected by losing their job or by losing their export markets and inflation,” said Payan.
With $850 billion in trade in 2024, Texas relies heavily on international commerce, the Dallas Federal Reserve reports. Mexico is the state’s largest trading partner, accounting for $281 billion in trade last year. The increased cost of imports is expected to have significant ripple effects, particularly for industries along the Texas-Mexico border.
In April, President Trump announced a new 10% baseline tariff on all U.S. imports, along with additional duties on specific countries, which has sparked debate among Texas politicians.
U.S. Rep. Roger Williams, R-TX, defended the tariffs, arguing that they will benefit American industries.
“For too long, America's past policies have put the U.S. auto industry at a disadvantage,” Williams wrote on X on Wednesday. He added that the tariffs would “increase competition, boost revenue, and bring back American jobs.”
Not all Texas leaders agree with Williams. San Antonio Mayor Ron Nirenberg, speaking at a trade summit in Washington, D.C., alongside mayors from Canada and Mexico, voiced opposition to the administration’s trade policies.
“We’re here to speak out against Trump’s unprovoked trade wars and tariffs that he is threatening to pursue,” Nirenberg said in a video posted on his X account on March 28.
He stressed that the tariffs put hundreds of thousands of jobs at risk.
“One in five jobs in Texas depends on international trade, and within the automotive sector alone, 300,000 jobs are on the line.”
Disclosure: Rice University and Rice University's Baker Institute for Public Policy have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.
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