President Donald Trump’s new tariffs on Canada, Mexico and China went into effect Tuesday, which could have a “severe” impact on Colorado’s economy, according to a new report.

Trump placed 25% tariffs — or a tax on imports — on products from Mexico and Canada, with a caveat for Canadian energy with tariffs set at 10%. For China, Trump doubled the tariff he placed last month to 20%.

There’s more tariffs on steel and aluminum products for all countries set to take place March 12.

The White House has framed the president’s tariff policy as part of a larger drug war and not as an attempt to reshape existing trade relationships with U.S. allies.

Chinese officials, the White House said, have failed to stem the flow of precursor chemicals to known cartels, while the Mexican government has “afforded safe havens for the cartels to engage in the manufacturing and transportation of dangerous narcotics, which collectively have led to the overdose deaths of hundreds of thousands of American victims.”

The administration has also complained about America’s trade deficit, which Secretary of Agriculture Brooke Rollins described, while visiting Denver on Sunday, as “devastating to our American farmers and ranchers.”

All together, Colorado could pay an extra estimated $1.4 billion annually on tariffs, according to a report released on Tuesday from U.S. agricultural lobbying group Farmers for Free Trade and the World Trade Center Denver.

Before Trump’s tariffs took effect, Colorado paid $459 million on imports from all countries in 2024. With the additional tariffs, it would quadruple the tariffs the state pays on its imports, the report said. 

The president has described tariffs as “a very powerful weapon” to tackle issues like drug trafficking and illegal immigration at the nation’s borders, as well as push manufacturing jobs to rebound in the U.S.

The trade war between Colorado’s largest trade partners is sparking concerns from business leaders who worry consumers and local companies will face the brunt of the paying for the tariffs.

When plans for the tariffs were initially disclosed a month ago, Colorado businesses with an international presence expressed worries. Now, they’re in effect, with several fearing effects could make it tougher to operate. 

At a town hall titled ”Tarriflation” at the World Trade Center Denver office on Tuesday, Kishore Kulkarni, economist at the Metropolitan State University of Denver, said the tariffs can get out of hand if retaliation between the nations escalates.

The economist said he expects prices to go up for producers and consumers.

Under the previous U.S.-Mexico-Canada Agreement, Colorado’s tariff rate was about 0.12%. Colorado paid $7.4 million in tariffs from Mexico and Canada for about $6.5 billion in imports. The state previously paid more in tariffs for imports from China, about $263 million, when tariffs averaged about 14.5%.

The largest impact would come from the tariffs on Canada, according to the report. Canada is Colorado’s largest trade partner.

Canada makes up about 30% of Colorado’s imports, the Farmers for Free Trade said. Retaliatory tariffs would also impact the large chunk of exports Colorado businesses send to Canada.

“The new 10% tariff on energy imports and 25% tariff on everything else would have added an estimated $817 million in new taxes based on 2024 data, or over $2.0 million per day,” the report said.

The products that could face the most tariffs are crude oil, lumber, aircraft gear, beef and acyclic hydrocarbons, according to the report. Even though crude oil tariffs are lower at 10%, rather than 25%, it could cost Colorado importers about $330 million a year.

Tariffs on China could cost Colorado over $362 million a year, according to the report, and Mexico tariffs would total about $254 million, or about $700,000 per day.

Nicholas Colglazier, executive director of the Colorado Corn Council, said the self-imposed tariffs would hurt America’s competitiveness, especially for the U.S. agricultural industry that relies on international sales.

Beef, plant products, dairy, wheat and feed were the largest exports out of Colorado, according to federal data.

Colglazier explained countries like Brazil and Argentina, which are already competitive on quality and price, will get an advantage on the world stage.

“Once you lose that market share, it is very, very difficult to get that back,” Colglazier said.

Colorado-based Identity Pet Nutrition, founded by Jeremy Petersen, makes its pet food in Canada after struggling to find a U.S. maker that can meet their healthier standards.

The tariffs could raise prices for their customers more than 32%, he said, as distributors and retailers are very strict about charging a target percentage of sales.

Gail Ross, the chief operating officer of Boulder-based apparel shop Krimson Klover, also said they expect to pass on costs to consumers.

“The question is when,” Ross said.

Ross spoke out during Trump’s first term against the tariffs he placed then, saying the business raised prices in 2019 to accommodate the increased tax. But with 20% increases coming fast, Ross said, they’re still wrestling with what to do.

Karen Gerwitz, CEO of World Trade Center Denver, said she worries what a trade war could mean for the North American economy.

Because the supply chain is already so integrated, Gerwitz said products can be tariffed multiple times as materials can enter and leave the country throughout different phases of production, meaning the cost of tariffs could be substantially higher than 25% by the time it hits shelves.

While Gerwitz said she agrees with Trump’s claims that the U.S. gets stiffed in some trade agreements, she added the U.S. isn’t a victim as the leading economy of the world — and attacking close trade partners can do more harm for everyone than good.

“It is so intertwined,” Gerwitz said. “It’s almost impossible to unwind it.”

During her visit on Sunday, Rollins acknowledged worries over the tariffs and said the White House is working to ensure it has all of the data to understand the implications of decisions being made.

She also outlined an “aggressive” plan to help Colorado’s agricultural industry.

“I am planning to be very aggressive, with President Trump’s permission, go out into the world and look to expand our markets and also make capital easier, especially for our younger farmers, as we begin to build the next generation of our leaders in agriculture,” Rollins said.