President-elect Donald Trump’s proposal for sweeping new tariffs—a 60% tax on imports from China and 10% on all other imports—has sparked national debate, with Kentucky emerging as one of the states poised to feel the greatest impact.
According to a new analysis by the Tax Policy Center, these tariffs could reshape the economic landscape for the Commonwealth, where imports play a critical role in the state’s economy.
Kentucky is uniquely exposed due to its heavy reliance on imports, which accounted for 27% of the state’s gross domestic product (GDP) in 2023—the highest share in the nation. This dependence, combined with the proposed tariff hikes, would increase tariff payments as a share of state GDP by a staggering 4.1 percentage points, the largest increase nationwide.
In total, tariff payments under Trump’s plan would amount to nearly 5% of Kentucky’s GDP, far outpacing other states.
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Why Kentucky?
Much of Kentucky’s vulnerability stems from its manufacturing sector, which relies on imported parts and materials. The state is a hub for industries like automotive and aerospace, where international supply chains are integral. Higher tariffs would likely raise production costs, which could lead to increased prices for consumers or cutbacks within industries that drive Kentucky’s economy.
Historically, tariffs have been passed on to American businesses and consumers, rather than being absorbed by exporting countries. For Kentuckians, this could translate to higher prices on goods, from everyday consumer items to larger-ticket products like vehicles. Businesses could also face higher costs, potentially curbing growth and job creation in key sectors like EV battery plant workers.
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A National Policy with Uneven Costs
While Trump’s proposal is expected to raise $3.7 trillion in revenue over the next decade, the burden won’t be evenly shared across states. Kentucky, along with other Midwestern and Southern states, would shoulder a disproportionate share of the economic impact.
By contrast, states like South Dakota, where imports make up only 2% of GDP, would see minimal effects.
Kentucky’s dependence on imports makes it a prime example of how Trump’s tariff proposal could fundamentally alter state economies.
This article appears in Nov 20 – Dec 3, 2024.
