The main street in a small Texan city is lined with family-owned restaurants, boutiques selling handmade jewellery, and, around the corner, the “smallest little honky tonk” in the state.
It’s as all-American a scene as you can find, and exactly the sort of place that President Trump might have had in mind when he said last week that he was raising tariffs to “stand up for Main Street, not Wall Street”.
However, look closer, and the people and businesses in Tomball, an hour’s drive northwest of Houston, are far more tightly bound to the global economy than it seems at first glance. It’s not just that they spent the week watching the value of their pension savings, closely linked to the stock market, fluctuate wildly. It’s also that the roses at the florists are from Colombia, the parts in the pick-up trucks are from Mexico and the straw cowboy hats, the syringes at the dentist’s office and the plastic backs of the “handmade” earrings are all from China.
That puts these businesses in the thick of Trump’s trade war, which has imposed 10 per cent tariffs on almost all foreign imports and resulted in 145 per cent tariffs on most Chinese goods, a tax that economists say in effect amounts to an embargo with America’s third-biggest trading partner.
Melissa, who runs a children’s clothing shop in Tomball, said 95 per cent of her stock comes from China. “We’re going to have to raise prices,” she said. “We’re in between seasons, so we’re putting shipping on hold and seeing what happens.”
At Laya’s Flower Shop, Marz Bennaceur, a co-owner, said her prices were going up by about 10 per cent because of the tariffs. “I am guessing he [Trump] is trying to keep doing things all pro-American but he forgets all our main factories are not here,” she said.
Even diehard Trump supporters in the Republican-leaning city were taken aback by the tariffs. Blake was loading up pallets outside his business selling promotional material to clients around Texas. “I support Donald,” he said. “It’ll all work out in the end. This country has been taken advantage of.”
All of his stock comes from China. When told about the 145 per cent tariffs, he looked momentarily downcast. “Oh man,” he said. “Are you sure?”
Texans have voted for a Republican candidate in every presidential election since 1976. They are proud of the wealth, clout and historic defiance of their huge state, which broke away from Mexico in 1836 and existed for almost a decade as an independent republic before it joined the United States in 1845.
Today, the Lone Star state is deeply interlinked with global trade. It is the country’s top exporting state, and has the second-biggest economy after California.
“Texas wins when we trade more, and Texas has more to lose when we trade less,” said Glenn Hamer, chief executive of the Texas Association of Business. But he added: “While we are more trade dependent than any other state, we also, far and away, have the healthiest economy in the United States, and that certainly makes us more resilient towards any sort of trade or other economic disruption that might hit the United States or the world.”
Companies from Tesla to Apple to Chevron have been moving to Texas for years to take advantage of the tax breaks, lack of regulations and, for some, the state’s freedom-loving, anti-woke reputation.
At the port in Houston, great cranes lift crates on and off ships that sail Texan products across the world. As well as producing nearly 45 per cent of the US’s oil, and much of its gas, Texas has a huge manufacturing sector, exporting more than $100 billion worth of computers, electronic products, and chemical products last year. (In the other direction, many Chinese-made consumer electronic products will be exempt from Trump’s tariffs it has now emerged.) Its biggest markets are Mexico and Canada, but it also does a lot of trade with Beijing: last year its exports to China were worth $25 billion.
Jason Feer, head of business intelligence at Poten & Partners, a consultancy in Houston, said tariffs on imported metals, particularly steel and aluminium would have a major impact on the energy sector. Residential and commercial projects will also be hit. Houston is one of the fastest-growing cities in the US, and rumours were swirling last week that building projects were being paused. According to a survey by the Dallas Fed, Texas Business Outlook, released this month, service and manufacturing sector growth has largely trended lower since last year.
“There’s just a tonne of uncertainty,” said Casey Christman, executive director of the Houston Contractors Association.
Politicians in the state are already trembling at the prospect that the tariffs could destroy Texas’s “economic miracle”, which has seen its GDP growth outpace the American average for years. Ted Cruz, the Texas senator, who Trump crushed on his path to the Republican presidential nomination in 2016, has warned that the trade war could “hurt jobs and hurt America”, as well as result in the largest tax increase for a “long, long time”. In a rare rebuke of the White House from inside the party Cruz, usually a Trump loyalist, said a recession next year could result in a political “bloodbath” for the Republicans in the midterm elections.
Elon Musk, who moved the headquarters of SpaceX and Tesla from California to “gigafactories” outside Austin, the state capital, has joined the chorus of Trump’s supporters condemning the tariffs as Tesla’s share price drops and supply chain costs rise for SpaceX and his other ventures.
Democrats, who have long dreamt of peeling Texas and its 40 electoral college votes, second only to California, away from the Republicans, sense a political opportunity. Sara McGee, a director of radiology at a hospital in Houston who is running for Congress next year in a Republican-controlled district, said she believes that tariffs will hit all working Americans alike, whether they voted for Trump or against him.
“This is just a terrible self-inflicted blow,” she told me, in a restaurant outside Houston. “And there is going to be backlash, there just has to be.”
At her workplace, she said, they have been holding meetings to figure out how to respond to the price increases coming to goods bought from China, which include nearly all their medical equipment. They have been changing suppliers to save money.
“We’re going for those lower quality products, unfortunately,” she said. “It’s a terrible situation.”
In Tomball, shops on Main Street were still adjusting to their new economic reality. At Professional Welding Supply, James Sparkman, the manager, said customers were trying to “buy as much as they can” before prices rose.
“The worst thing is telling the customer, look, this disc you buy every week is not going to be five dollars now, it’s eight,” he said. “We are going to be hit with it.
“Everybody says it’s supposed to get better but there’s going to be some horrible things before it gets better.”
