Donald Trump promised to remake the American economy if voters returned him to the White House. Now that they have, his plans are likely to hit Minnesota more painfully than other parts of the nation.
Ramstad: Trump’s plans may slow an already sluggish Minnesota economy
His vow to deport illegal immigrants will hurt a workforce that is smaller than it was when he was last president. And his tariffs could hurt farmers, retailers and consumers.
The economy and immigration were top issues for Minnesota voters on Tuesday, according to Associated Press exit polls.
And excitement at Trump’s return swept over stock markets Wednesday. Major indexes soared to new highs as investors bet that Trump will hit the gas on a national economy that was already performing well. His plans for lower taxes and less regulation, particularly on business, could accelerate growth above the 3% annual rate that marked the peak during his first term.
On the other hand, his ideas on immigration and tariffs could slow the economy down and even re-ignite inflation. Minnesota is vulnerable on several levels.
The influx of undocumented immigrants across the nation’s southern border has affected Minnesota less, which is so distant from it. Estimates vary, but one that seems consistent is that around 30,000 people found their way this far north from the border in recent years. That amounts to 1% of the 3 million people working in the state.
Minnesota’s workforce hasn’t been damaged by their presence. In fact, the state’s workforce is smaller than it was before the pandemic shutdowns in spring 2020.
Vice President-elect J.D. Vance, as an Ohio senator and on the campaign trail with Trump, has repeatedly said millions of Americans were pushed to the employment sidelines because of competition from immigrants. That theory, if tested by mass deportations, may create more strain here. Minnesota, like many states in the northeast and Midwest with older populations, has a sizable number of people out of the workforce because they are retired, not because they are discouraged from seeking jobs.
In the last four years, Minnesota at times had the lowest rate of unemployment in the country and the highest rate of labor force participation. Those two things make for tight labor conditions. Today, Minnesota jockeys with a handful of other states for the nation’s tightest labor availability.
During Trump’s first term in office and in the years since, the real question in Minnesota has been: How can we get more workers?
“It’s very hard to grow an economy without a growing workforce,” Doug Loon, president of the Minnesota Chamber of Commerce, said Wednesday. “The only way you can accommodate that is through increased productivity, which requires investments in equipment, technology and automation.”
Minnesota’s economic output actually shrank in the first quarter of the year and grew less than 1.3% in the second quarter, which was the third-slowest rate in the country. Government spending in the first half of the year outpaced private sector growth, driven largely by a massive expansion of state government that the DFL-controlled Legislature and Gov. Tim Walz forged in 2023.
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Another one of Trump’s major campaign promises — the vow to place tariffs on all imported goods and particularly high tariffs on goods from China — may also pinch Minnesota more than other states.
It did in Trump’s first term, when tariffs he placed on China led that country to immediately curtail purchases of U.S. farm products. That harmed Minnesota’s exports of soybeans, corn and pork. Traders in commodities markets on Wednesday sent soybean prices lower, indicating they were most exposed to potential trade disruptions.
Tariffs will also complicate the sourcing and pricing of goods for some of Minnesota’s biggest companies, including agribusiness giant Cargill, retailers Target and Best Buy and wholesalers like Fastenal and DigiKey. They may help manufacturers like countertop maker Cambria that compete chiefly with products from China.
Trump didn’t win Minnesota on Tuesday, but he came closer than he did four years ago. He also got more votes from Minnesotans — about 1.5 million — than in the 2016 or 2020 elections.
Mike Tracy, a real estate agent in Falcon Heights, said Wednesday he voted for Trump because he wants to see a renewal of the 20% income exclusion for small business owners, which was part of the tax bill passed in 2017 by a Republican Congress and signed by Trump.
“It did stimulate a lot of growth in small businesses,” Tracy said. “And the people who run small businesses, or are self-employed and do their own taxes, they’re sensitive to that.”
Trump vowed to extend the 2017 tax cuts and, late in this fall’s campaign, said he would re-implement a deduction on state and local taxes that was wiped out in that bill. The so-called SALT deduction benefited taxpayers in Minnesota and other states with high local tax burdens.
However, even if Republicans win both houses of Congress, Trump may not be able to follow through with all the tax cuts and spending increases he proposed. Investors, particularly in the bond market, are likely to apply pressure to curb the federal government’s deficits and the national debt. On Wednesday, the likelihood that the government would need to issue more debt pushed the yield on the benchmark 10-year note above 4.4% for the first time since early summer.
The suits accuse the state of “arbitrarily” rejecting applications for preapproval for a cannabis business license.