As lawmakers prep budget, economists warn tariffs may cost Michigan 13,000 jobs

• Economists project steel, aluminum and auto tariffs could cost Michigan 13,000 jobs across the next five years
• Officials predict Michigan lawmakers will have roughly $456 million less to work with as they try to finalize a new state budget
• The projections were revealed during the state’s Consensus Revenue Estimating Conference, held twice yearly in Lansing

LANSING — Michigan could lose out on 13,000 jobs across the next five years due to auto, steel and aluminum tariffs, economists warned Friday, predicting the state economy may grow nonetheless. 

Despite the projected tariff impact, which is expected to hit the state’s auto industry particularly hard, Michigan is still on track to “add jobs at a moderate pace” over the next few years because of growth in other sectors, experts said in Friday’s Consensus Revenue Estimating Conference in Lansing. 

The twice yearly meeting helps lawmakers better understand economic projections and how much money they have to spend as they develop a new state budget. 

“I do have to admit, the risk of a downturn is now substantially higher than we would prefer,” said Gabriel Ehrlich, director of the Research Seminar in Quantitative Economics at the University of Michigan.

In his forecast, Ehrlich anticipated significant job gains for Michigan in what he referred to as “non-technical industries,” such as private education, health  services, leisure, hospitality and government — “in that order,” he said. 

But with Trump administration tariff policies expected to hurt the state’s manufacturing industry, U-M expects Michigan’s 5.5% unemployment rate — which is already among the highest in the nation — to reach 6% next year. 

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As a result, state officials on Friday lowered tax collection and other revenue projections by $136 million for the current fiscal year, and by $320 million for next fiscal year. 

That means state lawmakers will have roughly $456 million less to work with as they try to finalize a new state budget by a self-imposed July 1 deadline and a constitutional Oct. 1 deadline.

“I think uncertainty was the word of the day,” Michigan Budget Director Jen Flood told reporters following the conference, referencing shifting federal policies and potential spending cuts that could impact the state. 

As that uncertainty lingers, here are some of the key takeaways from economists and state officials on Friday.

State revenues trending downward

The annual state budget process is off to a contentious start in the first year of Michigan's newly divided Legislature, where lawmakers and Gov. Gretchen Whitmer will have to agree to a balanced budget by Oct. 1 to avoid a government shutdown.  

With revenue projections down, state Rep. Ann Bollin, a Brighton Republican and chair of the House Appropriations Committee, said Friday she feels confident House Republicans are “on the right track” as they work to build their budget, which they have not yet finalized or revealed. 

The Senate, led by Democrats, approved an $84.5 billion budget plan earlier this week. The Republican-led House, meanwhile, is still reviewing its own proposals, though Bollin told reporters she was hoping to pass a budget for schools “soon.” 

“We’re going to be broke unless we make some cuts and really, mindfully, go through the budget line by line,” Bollin said, before noting the state had “over $2 billion in work projects that are sitting on the books.”

“I think that every department should be required to dig deep and look at those. … That’s a lot of money,” she said.

Officials project the state's general fund — a primary source for discretionary spending — would end next fiscal year with a $553 million deficit under the Senate Democrat’s budget plan. 

But Senate Appropriations Chair Sarah Anthony of Lansing said in a statement that Democrats "will continue to advocate for and promote fiscally responsible policies that make life better for the people of Michigan."

The new revenue projections could also complicate plans from House Republicans, who were already trying to fund a $3 billion road repair plan without raising taxes, largely through spending cuts. 

Bollin admitted she didn’t know “if we’re going to have enough” money to tackle everything, “but we’re going to work very hard to make sure that we meet our commitment of fixing the damn roads and making sure people are taken care of.”

House Speaker Matt Hall, R-Richland Township, made similar comments in a statement following Friday’s revenue conference. 

“House Republicans are going to do what we’ve promised from day one: truly evaluate state programs for performance, prioritize what works best and what's most important, and get much better value for the taxpayers in our budget,” Hall said. 

“Today’s revenue results show that was always the right path.”

‘Substantial uncertainty’ for vehicle sale performance

Michigan’s auto industry remains a key economic driver for the state. But “you can’t say uncertainty enough” when it comes to the near future of the Detroit Three, said Kristin Dziczek, a policy advisor in the Federal Reserve Bank of Chicago's research, policy, and public engagement division.

Though vehicle production costs were on the rise even before tariffs came into effect, national light vehicle sales are nonetheless off to a strong start for the year — though Dziczek warned supply chain disruption is imminent.

Light vehicle sales reached 15.8 million units in 2024, the strongest annual performance since 2019. In March and April of 2025, the sales pace surged past 17 million units, likely fueled by consumers rushing to make purchases ahead of the anticipated auto tariffs. 

However, economists are still anticipating a sharp decline in the coming months, projecting the sales pace to bottom out at 14.8 million units in the third quarter of 2025 before what they called “a modest recovery.” 

Ehrlich, the U-M economist, noted that tariffs could have a “medium-run” effect on domestic light vehicle production, anticipating they will move buyers away from an estimated 1.9 million imported vehicle purchases and instead towards domestically produced ones. 

President Donald Trump has touted aggressive tariffs as a method to boost domestic production. Among other things, he’s imposed a 25% tariff on cars and auto parts imported from most countries.

But experts said the tariffs could have a mixed impact on Detroit’s Big Three automakers – General Motors, Stellantis and Ford — because they also produce a significant number of vehicles outside of the US and source parts internationally. 

As a result, U-M economists are projecting a sales decline for Detroit automakers, from 5.4 million units sold in 2024, to 5.2 million in 2025 before hitting 5 million units in 2027. 

A look to the labor market

Michigan's 5.5% unemployment rate is pulling away from the national 4.2% rate in “the wrong direction,” said Ehrlich, and each of the state’s 83 counties had a higher jobless rate in January 2025 than at the same point in 2024.

Labor demand has also dipped below pre-pandemic levels, Ehrlich said, noting there are “now significantly more unemployed residents in Michigan than there are job openings in the state.”

All told, U-M economists project Michigan will gain a net total of 300 jobs in 2025 as the effects of federal trade policy begin to take hold, slowing job growth significantly for the remainder of this year. 

Yet, it’s not all bad:  Michigan is expected to pick up a possible 15,200 new jobs in 2026, economists estimate, with that tapering off in 2027 for a net gain of 16,100 anticipated jobs. 

That would leave Michigan’s payroll job count at around 2.4% above its pre-pandemic levels. 

As for specific sectors of the state’s economy, the U-M forecast projects:

• Construction: Despite high mortgage rates across the last three years, the industry has added between 6,400 and 7,000 jobs, though that is not anticipated to continue. Economists expect this sector to add an average of 800 jobs per year between now and 2027.
• Transportation manufacturing: It’s projected this industry will lose 7,000 jobs this year, only offset slightly by a small gain of 700 jobs in other manufacturing. It’s likely to add back nearly 3,000 jobs in 2026 and remain steady in 2027. However, forecasters warn every one job lost in this industry leads to nearly three additional job losses across Michigan, leading to a possible 13,000 jobs lost across the next few years.
• Government: Having finally made a complete recovery from the pandemic, this sector added 14,700 jobs in 2024. Job growth is expected to slow but continue, with  5,400 per year between 2025 and 2027. However, forecasters expect roughly 1,600 federal government layoffs and separations in Michigan as the Trump administration slashes federal workers.
• Leisure and hospitality: Modest job gains are expected in this sector. Economists anticipate roughly 5,500 jobs gained this year, with an additional 12,200 jobs across 2026 and 2027.
• Private education and health services: Deemed an “engine of growth for the state” by UM economists, these industries are projected to add 14,000 jobs this year before slowing significantly down in 2026, with a net gain of 3,000 jobs expected. It’s anticipated the sector will add another 2,100 jobs in 2027.