Michigan economists warn tariffs could shave production, cost jobs in state auto sector

University of Michigan economists and a Federal Reserve Bank of Chicago Detroit-branch policy adviser said at the May 2025 Consensus Revenue Estimating Conference that new tariffs and retaliatory measures are likely to slow U.S. growth and will impose a tangible cost on Michigan's auto-dependent economy.

The warning came as Yinyu Zhang, a U.S. forecasting specialist at the University of Michigan Research Seminar in Quantitative Economics (RSQE), summarized the national outlook: “It contracted by 0.3% in the first quarter,” she said of U.S. real gross domestic product, adding that the pullback was driven by a surge in imports that subtracted 4.8 percentage points from growth.

Those national data, Zhang said, combine with RSQE policy assumptions that include substantial, sustained tariff rates and a fiscal package that raises tariff revenues. The RSQE joint outlook projects tariffs will raise consumer prices and restrain consumption and investment late in 2025, with core inflation expected to poke up in mid-2025 before later easing.

Why it matters: Michigan's economy remains closely tied to light-vehicle production and parts supply chains. RSQE director Gabe Ehrlich and his colleagues modeled tariff impacts…