Texas Economy Hits a Snag as Tariffs Drive Up Costs

A new report from the Federal Reserve Bank of Dallas highlights the early effects of tariffs on Texas’ economy during their first year of implementation. According to the report, the state’s economy, which accelerated over the summer, appeared to slow down in the fall.

Rising prices were the most notable consequence of tariffs imposed on global trade under the Trump administration, FOX 4 reported.

Of the 279 Texas businesses surveyed, nearly half reported higher input costs directly attributed to tariffs, and more than a quarter said they had increased selling prices as a result. The report notes that firms raising prices were among those negatively affected, while businesses unaffected by tariffs saw the opposite trend.

“Input prices continue to increase as duties and tariffs take effect and remain in place,” said a respondent in textiles. “We are unsure of demand and will also need to increase our prices due to rising costs.”

Beyond tariffs, the report identifies policy uncertainty, declining immigration, and other risks as factors weighing on Texas’ economic outlook. 

Oil prices fell below $65 per barrel, generally considered the threshold for profitable new drilling. The historic 43-day federal government shutdown also disrupted economic activity, furloughing 96,000 Texas federal employees, delaying $307 million in SBA loans and $675 million in infrastructure funding, and temporarily suspending SNAP benefits for 3.5 million Texans.

The report additionally notes concerns over declining immigration amid increased enforcement. One surveyed contact summed up the sentiment: “Overall uncertainty about the strength of the economy is our largest concern.”

Looking ahead, the report cites potential relief from federal tax legislation. A third of surveyed firms expect benefits from the Trump administration’s One Big Beautiful Bill Act, with many already planning or implementing increased capital expenditures in line with its investment incentives.