President Trump’s latest 30% import duties on Mexico and the European Union, paired with stepped-up removals of undocumented workers, are already weighing on the Texas economy as the measures take effect this month. New data from the Federal Reserve Bank of Dallas and national models point to slower growth, higher prices, and job losses across core industries just as the state enters peak shipping and harvest seasons.
The tariff package, announced July 14 and effective August 1, 2025, overlays earlier penalties on steel, aluminum, and copper, with copper now at 50%. In March alone, Texas importers paid $1.5 billion in tariffs, a 165% jump from a year earlier. Analysts say the new round deepens the drag. The Dallas Fed estimates the combined effect of tariffs will trim state GDP by about 1.5% and cost roughly 100,000 jobs.
Trade Partnership Worldwide and the Penn Wharton Budget Model warn the U.S. impact will run deeper over time:
- Long-run GDP could see a 6% hit (Wharton).
- Wages could fall 5% nationwide.
- For a middle-income household, Wharton projects a $22,000 lifetime loss.
At the same time, federal immigration enforcement has accelerated. The administration has signaled up to 4 million removals over four years, focusing on construction, agriculture, hospitality, manufacturing, and transportation. Multiple academic reviews find that large-scale removals:
- Shrink local workforces
- Lift prices
- Curb housing supply
One study projects that if removals are carried out at this scope, Texas’s economy could shrink by about 10%, with statewide prices rising 9.1% by 2028 due to tight labor.
Texas’s exposure and short-term costs
Texas’s starting point makes the state especially exposed. Trade tied to Texas contributed an estimated $850 billion to the U.S. economy in 2024. Business groups say supply chains can adjust over time, but short-term costs are mounting.
- Tariffs announced in the first five months of the term could cost Texas companies roughly $6 billion.
- Analysis by VisaVerge.com indicates importers have little room to absorb the new fees while keeping prices steady, making pass-through to consumers likely in coming weeks.
Policy moves driving economic strain
President Trump’s 30% levies on imports from Mexico and the EU, plus 50% duties on copper, aluminum, and steel, hit industries that rely on cross-border inputs.
- For Texas manufacturers, higher metal costs raise prices on finished goods and squeeze margins.
- Smaller firms with thin cash buffers are most at risk of cutting hours or headcount.
Researchers at the Federal Reserve Bank of Dallas link recent slowing in hiring and factory activity to escalating trade frictions and immigration enforcement, noting that uncertainty alone can stall investment. The Penn Wharton Budget Model adds that broad tariffs act like a tax on both imports and U.S. production that uses those imports, lowering productivity and wages over time.
On immigration, operations are funded through the 2025 Omnibus Border and Budget Bill for America, with $170 billion in enforcement funding and an estimated $900 billion in additional costs over ten years if removals become permanent policy.
- Federal revenues could fall by about $300.4 billion.
- Deficits could widen by roughly $861.8 billion over the decade.
Interior enforcement requires more detention space and immigration court capacity; removal logistics and case processing are run by Immigration and Customs Enforcement, which outlines procedures and custody standards at ICE.
Critical: large-scale removals and wide tariffs interact—tight labor increases prices while tariffs raise input costs—amplifying economic pain across sectors.
Ripple effects across key Texas sectors
Construction
Construction faces the sharpest shock. Homebuilding in Texas depends heavily on immigrant labor, including many undocumented workers.
- Mass deportation would deepen shortages of skilled trades.
- New residential starts would slow, pushing up home prices and rents during an ongoing housing crunch.
- Academic studies (University of Utah, University of Wisconsin–Madison, Harvard JCHS) show past removal waves cut local construction employment and reduced new-home supply for years.
Agriculture and produce
Texas companies import about $13 billion in fruits and vegetables annually.
- 30% duties on Mexico and the EU shrink margins.
- Buyers report thinning margins and talk of pulling back orders, risking seasonal shortages if prices spike.
- Warehousing and cold-chain operators warn higher carrying costs will filter down the supply line.
Manufacturing and metals
Manufacturers note that 50% metals tariffs compound the strain.
- Fabricators using aluminum, steel, and copper face immediate price jumps.
- Quotes to customers are expected to rise after August 1.
- Transportation and warehousing employers, already tight on drivers and handlers, fear further attrition if deportations remove workers faster than they can hire and train.
National projections show sizable labor impacts if removals reach the planned scale:
- About 1 million fewer hospitality workers
- 461,000 fewer in transportation and warehousing
Border communities and major metros
In border communities and hubs such as Houston, San Antonio, Dallas–Fort Worth, models consistently predict:
- Higher prices on groceries, housing, and goods containing imported parts
- Mixed labor outcomes: localized wage bumps for some U.S.-born workers where employers compete, but broader net job losses and slower growth once supply-chain and demand effects ripple through
State leaders and business groups are divided. Governor Greg Abbott presents the tariffs as an opportunity to reset supply chains and expand in-state manufacturing. Glenn Hammer (Texas Association of Business) cites Texas’s diverse economy and adaptability. Others, including Dante Galeazzi (Texas International Produce Association), warn of disruptions and empty shelves. Rep. Tony Gonzales (R-San Antonio) supports tariffs as leverage in trade talks but concedes the risk of retaliatory measures.
Outlook and next steps
Trade talks with Mexico and the EU continue, but as of August 15, there were no announced extensions or carve-outs. Importers are revising contracts and shipping schedules to reflect the 30% rates, while metals buyers factor in 50% duties already in force.
On immigration enforcement, the tempo suggests more arrests and transfers to detention in the months ahead, with expanded immigration court dockets to process cases.
Businesses across sectors report they are:
- Mapping alternative suppliers
- Adjusting prices
- Trimming expansion plans until costs and labor stabilize
Local governments worry about slower sales tax collections and higher service demands. Families face harder choices on rent, groceries, and travel as the combined weight of tariffs and mass deportation lands on the Texas economy.
Key takeaway: model-based forecasts point to weaker output and higher consumer prices over the next several years. The central question is not whether the pain will spread, but how quickly—and how long—if policy remains on its current course.
Practical actions businesses are taking (summary)
- Renegotiating supplier terms and contracts
- Reworking delivery routes and logistics
- Investing in training to fill vacancies where feasible
- Passing costs to consumers where margins cannot absorb tariffs
Many businesses warn they cannot fully replace lost workers or avoid higher input costs. With forecasts showing weaker output and higher prices, stakeholders will be watching policy developments and trade negotiations closely for any signs of relief.
This Article in a Nutshell
Texas faces sharper inflation and job losses as 30% tariffs and accelerated removals take effect August 1, 2025. Metals duties hit manufacturing, while deportations threaten construction and agriculture labor. Businesses renegotiate supply chains, raise prices, and delay expansion amid forecasts of weaker output, higher consumer costs, and painful short-term adjustment for communities.
