Pence coming to Minnesota to plug exchange with Mexico, Canada
The Iron Range Squeeze: How Tariffs and War Are Crushing Minnesota's Economy in 2026
Let's be honest: if you're a Minnesotan in 2026, you're probably feeling like you've been drafted into an economic war you never signed up for. The state that gave the world Prince, SPAM, and the phrase "uff da" is now getting squeezed from two sides—tariffs from Washington and a war in the Middle East that's sending fuel and fertilizer prices through the roof. And if you think that sounds like a bad joke, just wait until you hear about the Iron Range drill-bit factory that's closing because tariffs were supposed to help the Iron Range. (Spoiler: it didn't.) Welcome to the great Minnesota economic squeeze of 2026, where the only thing more unpredictable than the weather is the trade policy. Grab a hotdish and settle in, because this is going to be a bumpy ride across the tundra.
The numbers tell a story that's hard to sugarcoat, even with a pound of butter. Minnesota exports of mining, agricultural, and manufactured goods were valued at $23.5 billion last year—a drop of $3.4 billion, or about 13%, from 2024[reference:0]. State officials pointed directly to tariffs and "aggressive foreign policies" as the culprits. Meanwhile, Minnesota companies paid a staggering $3.68 billion in import fees from March 2025 to February 2026, according to census data[reference:1]. And as if that weren't enough, the Middle East conflict—yes, the one involving Iran, Israel, and the Strait of Hormuz—is driving up fuel and fertilizer costs for farmers and truckers alike[reference:2]. "Every new development these days seems to add another barrier and complication," said DEED Commissioner Matt Varilek, in what might be the understatement of the decade[reference:3]. So let's break down exactly how Minnesota became the canary in the coal mine for America's trade wars—and whether there's any light at the end of this frozen tunnel.
"What's happening right now with the tariffs is really concerning for our small businesses. We need stability and a little predictability."
The Tariff Tsunami: $3.68 Billion and Counting
Let's talk about the elephant in the room—or rather, the elephant that's been stomping all over Minnesota's economy for the past year. When President Trump imposed sweeping tariffs on nearly every nation starting in early 2025, the promise was simple: resurrect U.S. manufacturing and lower costs for consumers. That... didn't happen. Instead, Minnesota businesses found themselves on the hook for billions in extra costs, with the average American household paying about $1,000 more for goods and services thanks to the levies[reference:5]. The Supreme Court eventually ruled in February 2026 that Trump didn't have the authority to impose those tariffs under the International Emergency Economic Powers Act, but by then the damage was done—and the administration simply pivoted to new tariffs under different legal authorities[reference:6].
The impact on Minnesota has been, to put it mildly, not great. Exports to Canada and Mexico—the state's two largest trading partners—have plummeted. In the third quarter of 2025 alone, Minnesota exports were down 14%, or $964 million, compared to the same period in 2024[reference:7]. Vehicles exports dropped 19%, machinery fell 10%, and optic and medical products declined 5%[reference:8]. The state's manufacturing workforce has shrunk by about 100,000 jobs since "Liberation Day" in April 2025[reference:9]. And while some sectors like electrical equipment, dairy, and pharmaceuticals actually saw export growth, those bright spots have been drowned out by the broader carnage[reference:10].
Small businesses have been hit especially hard. At Mischief Toy Store in St. Paul, owner Dan Marshall watched his costs climb by about $10,000 last year as tariffs on Chinese goods—which account for 80% to 90% of his inventory—fluctuated wildly between 25% and 145%. "We can't absorb that kind of increase, so we had to pass it along," he said, raising prices on everything from resin lizards to puppets[reference:11]. At Kiddywampus, another Minnesota toy business, owner Amy Saldanha said even if tariffs disappeared tomorrow, it would take six months to a year for prices to drop because so much inventory is already in the pipeline[reference:12]. And at Barrett Lawn Care in Hopkins, owner Steve Mura called the cascade of higher prices a "death by 1,000 cuts"—from lawnmowers to snowplows to motors for the company's 20 trucks, everything keeps going up, and "we are told that tariffs are in that"[reference:13].
Perhaps the most Kafkaesque development of all? Thousands of businesses, including at least a dozen in Minnesota, have filed for tariff refunds since the Supreme Court ruling. MedSource Labs, a Chanhassen-based medtech company, saw its total tariff bill jump sevenfold last year. Hormel, Arctic Cat, Mischief Toy Store, and Normark (which sells Rapala fishing lures) have all sued the federal government in trade court seeking their money back[reference:14]. But the refund process is a bureaucratic quagmire, and no one knows when—or if—the money will actually come. "At the end of the day, we're at the whim of the system," said MedSource founder Todd Fagley[reference:15]. Meanwhile, the Tax Foundation estimates that the Trump tariffs represent the largest tax increase in more than 30 years[reference:16]. Happy Liberation Day, everyone. Pass the lutefisk.
The Iron Range Paradox: Tariffs That Were Supposed to Help Are Hurting
If there's one place in Minnesota where the tariff story gets truly twisted, it's the Iron Range. This is the region that produces 80% of the nation's iron ore, the raw material for steel that goes into ships, skyscrapers, and automobiles[reference:17]. For decades, the Range has been the beating heart of Minnesota's industrial identity—a place where generations of miners have gone underground to feed America's steel mills. So when President Trump imposed tariffs on foreign steel, ostensibly to protect domestic producers, you'd think the Iron Range would be popping champagne. And for the big mining companies like Cleveland-Cliffs, the tariffs did provide some shelter. But here's the twist: the tariffs are also crushing the very communities they were supposed to save.
Case in point: Minnesota Twist Drill. This 74-year-old company, with operations in Chisholm and Hibbing, imported steel blanks from China to make drill bits. It was exactly the kind of manufacturing diversification the Iron Range desperately needed—a way to create jobs beyond the boom-and-bust cycle of iron mining. In 2019, the company employed 135 workers and was still adding people, with plans for a factory expansion[reference:18]. Fast forward to April 2026, and the company is permanently closing, laying off 77 workers. The reason? Tariffs. "A year ago, David Wedge, who managed the company for parent Walter Surface Technologies at the time, said the Trump administration's tariff policies created 'utter havoc' for the operations," the Star Tribune reported[reference:19]. The company had made a key decision in 2024, before Trump increased most steel tariffs from 25% to 50%, to terminate a key heat-treating operation and import all of its steel blanks from China. Then tariffs on Chinese goods hit as high as 150%, and retaliatory tariffs from Canada piled on top[reference:20]. The result: a factory that was supposed to represent the Iron Range's diversified future is now a casualty of the trade war.
Chisholm Mayor Adam Lantz called the closure "devastating." The company was the city's second-largest employer. "It's a foundry. It's a plant. It has 77 jobs, and the majority of them are in the manufacturing side here in Chisholm," he said. "It's terrible news"[reference:21]. The closure comes on top of a brutal year for the mining industry itself. Cleveland-Cliffs idled both its HibTac and Minorca mines in 2025, laying off about 600 workers, and then announced another 45 layoffs in early 2026[reference:22]. All told, about 650 Iron Range workers have been impacted by layoffs in the past year[reference:23]. Iron Range Resources and Rehabilitation, the area's economic development board, said Minnesota Twist Drill's closure "is another difficult development for the region," noting that "the circumstances differ from what we've seen in the mining sector, but the impact is the same: more individuals and families facing job loss and uncertainty"[reference:24].
And yet, there are glimmers of hope on the horizon—if they don't slip away. Mesabi Metallics, a $2.4 billion iron ore mine and pellet plant in Nashwauk, is expected to open this summer, creating nearly 350 full-time jobs and becoming the first new iron ore mine in Minnesota in 50 years[reference:25]. Boosters are also eyeing the next chapter: mining copper, nickel, cobalt, and lithium—critical minerals for electric vehicles, AI infrastructure, and the green energy transition[reference:26]. Talon Metals is pushing forward with its Tamarack nickel-copper-cobalt project in central Minnesota, which has a deal to supply 75,000 metric tons of nickel concentrate to Tesla over six years once it begins commercial production[reference:27]. But these projects face fierce opposition from environmental groups and tribal communities, and permitting battles could drag on for years. As one advocate put it, "Someday we're going to have a mine up here. Every geologist says it. It's a matter of time"[reference:28]. The question is whether the Iron Range can hold on long enough to see that day.
The War Next Door (Well, 6,000 Miles Away): Middle East Chaos Hits the Midwest
As if tariffs weren't enough, Minnesota is also feeling the shockwaves from a conflict half a world away. The U.S.-Israeli war against Iran has disrupted the Strait of Hormuz—a chokepoint for about 20% of the world's oil and 30% of global fertilizer supply[reference:29]. Even with a fragile ceasefire in place, the strait remains effectively closed, and energy prices have spiked. For Minnesota farmers, this is a gut punch. "This affects everybody," said Thom Petersen, commissioner of the Minnesota Department of Agriculture. "It couldn't come at a worse time for farmers"[reference:30].
The numbers are stark. Minnesota's 67,000 farms export about $10 billion annually of soybeans, corn, and other produce to China, Mexico, Canada, and other countries[reference:31]. But with China turning to Brazil for its soybean supply and fertilizer costs soaring, many farmers are in survival mode. "If you're a young beginning farmer, without much equity, it's going to be pretty hard to survive this," said Gary Wertish, president of the Minnesota Farmers Union[reference:32]. "You know the farmers are like, 'We're in an economic crisis now.' Working with their lenders to get their line of credit and see if they can even operate next year"[reference:33]. A National Corn Growers Association report issued on April 8 warned that "for every one farmer expressing greater concern this year, there will be two more next year"—and 2027 could be even worse[reference:34].
The pain isn't limited to farmers. Fuel surcharges caused by the war are hitting truckers, manufacturers, and consumers alike. "Energy prices are higher for truckers, farmers and all of us," Varilek said. "The assertion that, 'Well, we don't need the strait to be even opened,' I think ignored the fact that the oil market is a global one"[reference:35]. In the hospitality industry, restaurants and hotels are reporting declining profits, fewer customers, and growing uncertainty—with immigration enforcement adding to staffing concerns and rising costs[reference:36]. It's a perfect storm of bad news, and Minnesota is right in the crosshairs.
The USMCA Cliffhanger: Will North American Trade Survive July?
If there's one more thing keeping Minnesota business owners up at night, it's the U.S.-Mexico-Canada Agreement (USMCA). The trade pact that replaced NAFTA is up for its first six-year review in July 2026, and the outcome is anything but certain. Under the agreement, leaders of all three nations must begin a formal review by July to determine whether to renew. If renewed, the deal continues for another 16 years. If not... well, let's just say the phrase "trade chaos" gets thrown around a lot[reference:37].
For Minnesota, the stakes couldn't be higher. Over 238,000 jobs in the state are directly tied to trade with Canada and Mexico[reference:38]. The state exported $14 billion in goods and services to its North American neighbors in 2024, and since 2015, goods exports to Canada and Mexico have surged by 74%[reference:39]. Some sectors rely almost exclusively on this trade: 98% of Minnesota's petroleum and coal product exports go to Canada and Mexico; 91% of motor vehicle parts exports; and 81% of grain and oilseed milling products[reference:40]. An astounding 88% of Minnesota's imports used as inputs for finished goods—the raw materials that keep factories running—come from Canada and Mexico[reference:41].
Agricultural groups are sounding the alarm. A new coalition of 40 major farm organizations has launched the American Coalition for USMCA, promoting the agreement's benefits and urging a clean review[reference:42]. According to their analysis, Minnesota has gained more than $2.1 billion due to the USMCA's enactment[reference:43]. "The USMCA provides the certainty businesses need to invest and hire," the coalition argues[reference:44]. But that certainty is under threat. President Trump has privately weighed quitting the trade pact he signed during his first term, a move that would worsen trade tensions in North America[reference:45]. And with the formal renegotiation window opening on May 25 and the final deadline on July 1, the clock is ticking[reference:46].
For Minnesota's agriculture commissioner, Thom Petersen, the message is clear: "We've created sort of this regional, this North American trade powerhouse that is really the envy of, I think, a lot of places around the world."[reference:47] Whether that powerhouse survives July will depend on whether cooler heads prevail in Washington, Ottawa, and Mexico City. Given the current political climate, that's about as safe a bet as predicting a mild Minnesota winter.
The Refund Mirage: Will Businesses Ever Get Their Money Back?
One of the more surreal subplots of 2026 is the great tariff refund saga. After the Supreme Court ruled Trump's tariffs illegal, businesses that had paid billions in import fees understandably wanted their money back. The high court didn't address refunds, and Treasury Secretary Scott Bessent punted the issue to lower courts[reference:48]. A federal judge gave the administration 45 days to set up an automated refund system, but as of April 2026, the process remains a bureaucratic black hole[reference:49].
In the meantime, businesses are left in limbo. "There's a general idea this will be reimbursed," said MedSource's Fagley, but "we're at the whim of the system"[reference:50]. For consumers, there's even less hope. University of St. Thomas economist Tyler Schipper put it bluntly: "Americans who were already paying higher prices, we don't get the refunds, and certainly prices are not coming down with these new tariffs replacing them"[reference:51]. The Budget Lab at Yale estimates that tariffs could cost families at least an extra $1,700 each year[reference:52]. So while corporations duke it out in trade court, the average Minnesotan is left holding the bag—and a more expensive bag, at that.
Even if refunds eventually flow, the disruption has already taken its toll. "We can finally start planning for the future," one business owner thought after the Supreme Court ruling. "Then, not so much"[reference:53]. The on-again, off-again nature of the tariff regime has made long-term planning nearly impossible. "It's not a good environment to plan, when things change so frequently," said entrepreneur Jack Tomczyk, who saw the cost of a controller from China jump from $3 to $10 after tariffs and shipping[reference:54]. "So, it'd be nice to have a consistent system of lower or no tariffs." From your lips to the trade gods' ears, Jack.
The Political Fallout: Bipartisan Frustration in an Election Year
If there's one silver lining in all this economic gloom, it's that the frustration is increasingly bipartisan. In a rare rebuke from the GOP-controlled House in February 2026, six Republican members joined all but one of the Democrats to approve a resolution blocking Trump's Canadian tariff[reference:55]. While the vote was largely symbolic—it's not veto-proof—it showed the constituent pressure politicians are feeling in an election year. Senator Amy Klobuchar, who is running for governor, has been a vocal critic, co-sponsoring a bill to eliminate tariffs on imports from Canada and bringing a small business owner impacted by tariffs as her guest to the State of the Union[reference:56][reference:57].
But the political calculus is complicated, especially on the Iron Range. Klobuchar's family ties to mining heritage—her grandfather worked 1,500 feet underground—have long bolstered her appeal in northern Minnesota[reference:58]. Yet her stance on copper-nickel mining, which carries different environmental risks than traditional iron mining, has put her in a delicate position. She plans to vote against a Senate resolution that would remove a 20-year ban on mining near the Boundary Waters Canoe Area Wilderness—a move that has drawn fire from Republicans like Rep. Pete Stauber, who accused her of "betrayal" of the Iron Range's mining heritage[reference:59][reference:60]. Meanwhile, Republican House Speaker Lisa Demuth, her likely opponent in the governor's race, supports the Twin Metals project and other copper-nickel mining[reference:61]. As the election approaches, the battle for the Iron Range—and for Minnesota's economic future—will be fought on multiple fronts.
The Road Ahead: Can Minnesota Weather the Storm?
So where does all this leave Minnesota in 2026? The state's budget picture is, surprisingly, not terrible. The February budget forecast projected a $3.7 billion surplus in fiscal year 2026-27, $1.3 billion higher than November estimates[reference:62]. But warning lights are flashing. Spending continues to outpace revenue, with annual revenue growth projected at 1.9% while baseline spending grows at 2.9%[reference:63]. And the broader economic outlook is mixed at best. The Federal Reserve Bank of Minneapolis's Beige Book reported that consumer spending increased, but residential real estate, construction, and manufacturing activity decreased. "On balance, industry contacts were neutral in their expectations for 2026, with roughly equal shares reporting optimistic and pessimistic outlooks"[reference:64].
The path forward will depend on three unpredictable variables. First, the tariff war: will the administration find a stable, predictable trade policy, or will the whiplash continue? Second, the Middle East: will the ceasefire hold, and will the Strait of Hormuz eventually reopen? And third, the USMCA review: will the three nations agree to extend the pact for another 16 years, or will North American trade descend into chaos? For Minnesota businesses, the watchword is resilience. "We just continue to stay on our tiptoes and stay agile, that's the best we can do," said one coffee shop owner[reference:65]. It's not a strategy, exactly, but it's survival. And in this economy, survival is its own kind of victory.
The Iron Range has weathered booms and busts before—the 1980s nearly hollowed out these communities, and they came back. But the current squeeze, with tariffs hitting from one side and war-fueled inflation from the other, feels different. "There's going to be tumbleweeds blowing through these towns pretty soon if they're not careful," one union leader warned, "and it's going to be like the 80s, kids are going to have to leave and not stay around where they love to be"[reference:66]. Whether that grim prediction comes true will depend on decisions made in Washington, Beijing, and the Middle East—places far removed from the pine forests and open-pit mines of northern Minnesota. But for the people who live there, the stakes couldn't be closer to home. The Iron Range squeeze is real. The only question is how long it lasts—and who gets crushed before it lets up.
Key Takeaways: Minnesota's 2026 Economic Squeeze
- Tariffs have cost Minnesota businesses $3.68 billion in import fees from March 2025 to February 2026: The average American household has paid about $1,000 to $1,700 more for goods and services, and the state's manufacturing workforce has shrunk by 100,000 jobs since April 2025.
- Minnesota exports dropped 13% ($3.4 billion) in 2025, with vehicles down 19% and machinery down 10%: Exports to Canada and Mexico—the state's two largest trading partners—have been especially hard hit.
- The Iron Range is caught in a tariff paradox: steel tariffs help mining companies but crushed Minnesota Twist Drill, a manufacturing plant that imported steel from China: The 74-year-old company closed permanently in April 2026, laying off 77 workers. Combined with mining layoffs, about 650 Iron Range workers have lost jobs in the past year.
- The Middle East war is driving up fuel and fertilizer costs for Minnesota farmers and truckers: With 30% of global fertilizer supply moving through the Strait of Hormuz, the disruption "couldn't come at a worse time" for agriculture.
- The USMCA is up for review in July 2026, and over 238,000 Minnesota jobs depend on trade with Canada and Mexico: The state has gained more than $2.1 billion from the agreement, but its renewal is uncertain amid trade tensions.
- Businesses are seeking refunds for illegal tariffs, but the process is a bureaucratic quagmire: At least a dozen Minnesota companies have filed lawsuits, but consumers are unlikely to see any money back.
- Despite the headwinds, Minnesota's state budget projects a $3.7 billion surplus: But spending continues to outpace revenue, and the economic outlook remains deeply uncertain.
- The 2026 election will be a referendum on trade policy, with the Iron Range and its mining future at the center of the political debate: Candidates are split on copper-nickel mining near the Boundary Waters, setting up a defining battle for the region's economic future.
Sources & Further Reading
- Star Tribune: "Tariffs taxed Iron Range firm that's now closing, laying off 75" (April 22, 2026)
- KAAL TV: "DEED reports drop in exports for many major goods" (April 15, 2026)
- Austin Daily Herald/Star Tribune: "A year in, Trump's tariffs take toll on Minnesota companies" (April 3, 2026)
- Star Tribune: "Rash: Economic headwinds blow from the Mideast to the Midwest" (April 13, 2026)
- Valley News Live: "Klobuchar visits Moorhead to discuss tariff concerns with small business owners" (Feb. 16, 2026)
- Star Tribune: "Minnesota businesses line up for refunds on illegal tariffs" (March 11, 2026)
- KSTP: "Changes in Trump tariffs have Minnesota consumers, farmers and entrepreneurs feeling uncertain" (Feb. 22, 2026)
- CBS News Minnesota: "Trump's renewed tariff fight is keeping Minnesota businesses, consumers in limbo" (Feb. 23, 2026)
- CBS News Minnesota: "Minnesota auto, toy businesses evaluate Supreme Court ruling against Trump tariffs" (Feb. 20, 2026)
- Sun Herald: "Canadian tariffs hit Minnesota hard. Congressional support for them is waning" (Feb. 12, 2026)
- Northern News Now: "Cleveland-Cliffs' new cuts add to growing mining uncertainty on the Iron Range" (Jan. 10, 2026)
- Sun Herald: "Mining boosters see a golden opportunity for Minnesota's Iron Range, if it doesn't slip away" (April 1, 2026)
- AgriNews: "As USMCA review approaches, trade predictability is top concern" (Feb. 4, 2026)
- Insight News: "Minnesota trade at stake as USMCA review looms" (March 9, 2026)
- Star Tribune: "Vote on mining ban could test Klobuchar's Iron Range appeal" (Feb. 27, 2026)
Note: This article draws on reporting from the Star Tribune, CBS News Minnesota, KAAL TV, Valley News Live, KSTP, and other sources. All data and quotations are attributed to their original publications. For more economic analysis and news, visit Top Economic News and Trendao.
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