Abdoulaye Niane working on Khelcom farm. Photo by Klara Bauters/VTDiggerDuring the last Trump administration, Vermont rallied with other Northeast states against tariffs on Canadian steel and aluminum, remembered Tim Tierney, director of Recruitment and International Trade of the Agency of Commerce and Community Development. Northern New England governors wrote a letter to the Trump administration. Ultimately, metal imports from Canada were exempted as outcry rose over the impact.This time, the outcome remains uncertain. President-elect Donald Trump promised during his campaign to impose steep tariffs on trade, including a 10-20% tariff on all imports and potentially a 60% tariff on Chinese imports. Trump has made tariffs central to his economic strategy, claiming they will stimulate the U.S. economy, protect American jobs, and increase tax revenues. If tariffs are imposed again, Tierney said, states are likely to band together to influence policy, as they did last time, although not everything can be stopped.“We will do our best to coordinate with all of our states that would be adversely impacted, whether it’s in agriculture or commodity pricing,” he said.A tariff is a tax on imported goods that raises their prices, encouraging consumers to buy domestic products instead and allowing domestic producers to raise their prices, too. Often the goal is to make goods produced in the U.S. more attractive to consumers. Some economists, however, caution that tariffs could backfire by fueling inflation and driving up interest rates.Although there is no guarantee tariffs will be implemented as Trump has proposed, many Vermont businesses rely on Canada for products they might not be able to source from the U.S. since the pandemic, said Cathy Davis, president of the Lake Champlain Chamber of Commerce.“You don’t have to cross an ocean to get something from Canada,” she said. “You don’t have to have something on a cargo ship for six months.” While some local businesses have voiced concerns about potential supply chain disruptions from tariffs, Davis said most are waiting for more details before making concrete plans.Many Vermont businesses also count on imported raw materials or finished products, whether from overseas or nearby countries like Canada and Mexico. Tariffs could lead to higher prices or tighter profit margins, said Joan Goldstein, commissioner of the Department of Economic Development of the Agency of Commerce and Community Development.Goldstein expressed concern about the potential ripple effects on consumers and manufacturers, noting that higher prices could result from international trade tensions.“If they’re a manufacturer, and they’re trying to export goods to these countries, there may be retaliation,” Goldstein said. “Those are the themes that we’re concerned about. It’s affordability for the consumer, affordability for the manufacturer, and then retaliation in the cases where those countries impose tariffs on U.S. goods.”In September, a survey conducted by the University of Chicago asked a group of economists if they believed tariffs mainly lead to higher prices for consumers in the country that imposes them. The overwhelming majority, 98%, agreed with the statement, indicating they believe that tariffs tend to be passed on to consumers through price increases.Abdoulaye Niane working on Khelcom farm. Photo by Klara Bauters/VTDiggerImports and exportsVermont is home to several companies with international reach, including GlobalFoundries, one of the state’s largest exporters, as well as Revision Military in Essex, Liquid Measurement Systems in Georgia, and HEI in Colchester, all of which have global customers, according to Davis.“It’s not just paying the tariff on something you’re importing, but how a country that you might be selling to, how they’ll react if we impose a tariff,” Davis said. “We’re all sort of waiting to see how other countries around the world would behave as well.” In August 2024, the value of Vermont’s exports reached $159 million, an increase of around $8.9 million from last year, or almost 6%.The state’s top exports included integrated circuits, aircraft parts, chocolate and sports equipment. The state, however, imports far more than it exports, reaching $321 million this year, which resulted in a negative trade balance of $163 million.Vermont’s primary export destinations were Canada, Taiwan and China. Given that these countries are also among those facing the highest U.S. tariffs under Trump’s trade policies, there are concerns about how these nations might respond and the potential impact on Vermont’s international trade, said Davis. University of Vermont economics professor Richard Sicotte said other countries might respond strategically to minimize the impact of tariffs by outsourcing production to other countries to reduce tariffs.Savvy businesses often find ways to minimize tariff impacts and reduce costs while staying competitive in the U.S. market, Sicotte said. Many goods, like t-shirts, are assembled in multiple countries, with steps such as fabric weaving or button attachment occurring in different locations. However, tariffs are typically applied based on the last country the product was shipped from, even if most of the value was added elsewhere.“If you were a Chinese company, you would say, ‘well, if we sent it from here, we’re going to have to pay a 60% tariff to enter the U.S., but if I offshore my production to Thailand or something like that, I will only have to pay a 10% increase,’” Sicotte said. “So they can avoid, by taking their own strategic decisions, much of the impact of the tariff.” On the one hand, that would mitigate the negative impact of tariffs on prices in the U.S., but it would also limit the protection offered to American firms from the tariff, he added.At the same time, Trump’s policies around the expulsion of the undocumented migrants may raise prices for Americans of goods, said Sicotte. Removing millions of people from the workforce nationwide could make an ongoing labor shortage worse, he said. That in turn might further drive up prices as businesses will have to offer higher wages to attract workers. This can be good for workers in the short term, as they earn more, but the higher wages lead to higher production costs for businesses. These higher costs then cause the prices of goods to rise. “There’s a lot of moving parts,” he said. “That’s why it makes it so hard to estimate (the impact), when we don’t have all the facts yet.”Supporting companiesFrank Cioffi, president of Greater Burlington Industrial Corp., warned that food prices could be significantly impacted by the president-elect’s stance on illegal immigration and deportation. Cioffi said deportation could severely disrupt agricultural production, especially in the vegetable and produce sectors, leading to higher prices for consumers. “Prices could go up if you don’t have workers in the fields in the bigger vegetable or produce industry,” Cioffi said. “Or if you institute tariffs on Mexico, a lot of our produce comes from Mexico, higher prices is definitely something that consumers will feel.”Cioffi said he believes foreign trade zones may help Vermont manufacturers. A foreign trade zone is an area within a country where goods can be imported, stored and processed without being subject to standard customs duties or tariffs. Greater Burlington Industrial Corp. has a licensed foreign trade zone at Patrick Leahy Burlington International Airport.“There’s a baby food producer in the town of Georgia and they’re the only employer right now that we have in northwestern Vermont that uses it,” Cioffi said. “What it enables people to do is to import a product that is in the midst of a production phase and it suspends the tax due until it goes to its final destination.” He said he hopes to have a conversation with the U.S. Department of Commerce to see whether a foreign trade zone might help.While Davis is waiting on more information about the potential tariffs, she emphasized the importance of federal advocacy to provide assistance for businesses adjusting to supply chain disruptions. “If there were tariffs that were going to move forward, there would need to be some support for companies so that they could make changes to their supply chains, find domestic suppliers, or onshore manufacturing,” she said.Cioffi said it’s possible some of Trump’s posturing on tariffs and economic policy may be part of a negotiation tactic.“It’s certainly causing economists distress. We import a lot. It’s not as if we’re a sole entity here, we’re a global economy,” Cioffi said. “You can’t be an island. We’re really interdependent.”“Cross my fingers”Area farmers could benefit from the proposed new tariffs if customers find supermarket produce too expensive and instead choose to buy from local sources. However, these same tariffs could also pose significant challenges for farmers.On a small farm in Barre, Abdoulaye Niane, the farmer of the family-operated Khelcom farm, quietly worked to set up a third greenhouse. He has planted twice as much garlic this year — unrelated to the election results — than the year before, he said. He may have made the right decision as crops like garlic could significantly impact food prices for both consumers and retailers across the nation.In 2021, Naine completed the Farmer Training Program at the University of Vermont and, the following year, established an organic farm with his wife. To enhance efficiency on the farm, Naine occasionally purchases tools from China and Canada. Although he sells his products exclusively within the local community, import tariffs could still affect his operations.“I buy tools from a company called Dubois Agrinovation and I hope the price remains the same,” he said. “I want to cross my fingers and hope for the best.” From Canada, he sources hoops and hand tools. “We’re organic so we don’t spray here but we use the hoops to cover the crops with the insect netting,” he said. Naine was concerned to learn that the price of vegetables and other produce might rise as a result of Trump’s tariffs.“One of our goals is to make organic food accessible to the locals. If we have to raise our prices, then we’ll do it, but I hope not,” Naine said.Read the story on VTDigger here: What Trump’s tariffs could mean for Vermont.