President Donald Trump on Wednesday, April 2, declared sweeping tariffs on imports from most nations, escalating a trade war that state officials and business leaders have warned could have dire consequences for Vermont’s economy.

At a glance, the Green Mountain State was spared the worst of what Trump has called “Liberation Day,” owing to Canada’s exemption from the president’s comprehensive reciprocal tariff package. In the early weeks of his presidency, Trump declared — and then postponed — expansive 25% tariffs on most imports from Canada and Mexico, a decision that threatened to upend Vermont’s economy, which relies heavily on Canada for many commodities, including electricity, gasoline timber and aluminum.

But on Wednesday, Trump announced that Canadian goods falling under the umbrella of the 2020 USMCA trade pact — which represent the bulk of Vermont’s imports from Canada — are exempt from his comprehensive tariff package. (The United States-Mexico-Canada Agreement is the successor to the North American Free Trade Agreement, or NAFTA, negotiated during the first Trump administration.) Trump has also excluded USMCA-compliant energy products, including Canadian electricity, natural gas and fuel products like propane and kerosene, on which the president had briefly imposed a 10% levy.

Although the decision could mitigate the worst of the impacts that state officials anticipated from a trade war with Canada, Vermont consumers and businesses can hardly breathe a sigh of relief.

In what he called “a declaration of economic independence,” Trump imposed blanket tariffs on virtually every other one of the U.S.’s major trading partners, a move that officials have warned could violently shake up the state’s economy, as well as the U.S. economy more broadly.

“The bottom line is that consumers across the entire country are going to see their prices go up,” said State Treasurer Mike Pieciak. “Businesses not just in Vermont, but around the country, are going to be feeling the effects of this broader trade war, and those effects are largely going to be passed down to consumers.”

Although Canada is by far Vermont’s largest trade partner, the state also imports hundreds of millions of dollars of goods collectively from countries like China, Taiwan and Germany — all of which are now subject to levies ranging from 10% to over 50%. Like consumers across the country, moreover, Vermonters purchase goods from American companies that are manufactured overseas, whether that be food, cars, or clothing.

According to data from the Yale Budget Lab, price increases from the latest round of tariffs would cost the average American household about $3,800 per year. The state treasurer’s office estimates that the tariffs would collectively cost Vermont households approximately $1 billion annually.

“President Trump needs to get real: this half-baked trade war will only raise prices for consumers,” Sen. Peter Welch, D-Vt., said in a statement before Wednesday’s tariff announcement. “Trump’s so-called ‘liberation day’ will throw the global economy into turmoil and leave Americans holding the bag.”

In Vermont’s business community, specific anxieties about tariffs on Canadian goods have largely given way to fears over price shocks from a broader trade war. Matt Cota, a lobbyist representing car dealerships in Vermont, said dealerships across the state were bracing for the potential long-term impacts of the 25% tariff that Trump has imposed on imported vehicles.

“What happens when you get your first truckload of new vehicles, what does that look like?” Cota said. “I suspect you’ll be hearing stories from across the country when those first new manufactured vehicles from overseas come in, and what that’s going to do to the sticker price.”

Tariffs on foreign building materials like tile imported from India and plastics imported from China could also threaten to raise homebuilding prices in a state already experiencing an acute housing crisis. Levies on Canadian steel and aluminum, meanwhile, have also gone into effect.

“This is a whole new approach and a whole new kind of domino effect that we’re looking at, and that’s very disconcerting,” said Sarah Mearhoff, a spokesperson for the Associated General Contractors of Vermont, a trade group representing homebuilders in the state.

At their most extreme, disruptions to the U.S. economy more broadly could also threaten the state’s general fiscal well-being.

On April 3, following Trump’s announcement, the S&P 500 index and the Nasdaq composite index saw their largest single-day drop since 2020, when the Covid-19 pandemic caused stock markets to plunge. According to Pieciak, that kind of market volatility could cause long-term harm to Vermont’s state-run pension funds, like the Vermont State Employee Retirement System.

And in the case of a nationwide recession, Pieciak said, a general decline in Vermont’s revenue streams could also disrupt the state’s ability to cover costs of operation. “When that happens, obviously that’s not a good thing,” he said. “But when that happens in conjunction with federal policy that may be putting pain on Vermonters and could also be eliminating federal funding to Vermont, it’s just not a good position to be in.”