Tariff hikes could mean fewer ships docking at Conley Container Terminal in Boston and other ports; BU researcher Mark Williams found high tariffs could cost Massachusetts $12.8 billion in economic growth. Photo via Unsplash/Ben Wicks

Economy

Massachusetts Could See Drastic, Cascading Economic Downturn from New Trump Policies, BU Study Finds

Questrom’s Mark Williams says a combination of tariff hikes, federal funding cuts, and crackdown on immigration could cost state billions in lost growth

In Massachusetts, a perfect storm is brewing. 

A combination of tariff hikes, federal funding cuts, and a crackdown on immigration by the Trump administration are poised to have an outsized effect on the state’s economy, according to new research by Mark Williams, a Boston University Questrom School of Business master lecturer in finance. His study finds the president’s policies and actions could cost the Bay State billions of dollars in lost revenue and tens of thousands of job losses as early as 2026. 

Compared to many other US states, the Massachusetts economy depends disproportionately on sectors such as life sciences, higher education, trade, and tourism, Williams says—all of which will be affected by economic measures proposed, and in some cases, already enacted, by the Trump administration. 

“Here in Massachusetts, we really have a knowledge-based economy,” Williams says. “We’re a top-20 economy by size of GDP, but yet we’re the third-largest recipient of National Institutes of Health (NIH) funding. We have the fifth-largest percentage of immigrants in the country—larger than Texas as a percentage of our immigrant population to the overall population. And because of our maritime past, 9 percent of our GDP is tied up with trade.” 

In his study, which was done over the course of four months, Williams analyzed the effects of three of President Donald Trump’s signature policies: tariff hikes, cuts to federal funding, and a severe reduction in immigration. An expert on risk management, Williams has been a ​​senior trading floor executive, a Federal Reserve bank examiner, and a president of the Boston Economic Club. For the study, he created computer models of various likely economic scenarios to analyze their financial impact in Massachusetts. BU mathematical finance and financial technology graduate student Jennifer Langley (Questrom’26) helped Williams with the project.

Trump has threatened, enacted, rescinded, postponed, and reenacted various tariffs, a key campaign issue, on countries around the world. While many of the harshest import taxes have been postponed for now, their threat still looms and Wall Street volatility remains. At the same time, Trump has moved swiftly on a cornerstone campaign promise: to reduce immigration and deport undocumented immigrants. And under his administration’s direction, the NIH and other federal funding agencies have begun canceling or pausing research (or proposed future research) into a variety of topics. 

Given Massachusetts’ disproportionate economic reliance upon sectors that would be deeply affected by any one of those three policy changes, Williams warns: “I think the governor’s office should be very concerned about this—and I think they are.” 

Tariffs Could Cost Massachusetts More Than $12 Billion in Lost Growth

High tariffs stand to shrink the Massachusetts economy more drastically than the other two policy changes, Williams found. By 2026, tariff hikes could cost the commonwealth $12.8 billion in economic growth, almost $1 billion in lost tax revenue, and up to 79,000 lost jobs, his research showed. The greatest impact would come from tariffs on the state’s three biggest trade partners: Canada, Mexico, and China. Trump’s proposed 25 percent tariffs on Canada would also spike electricity costs in Massachusetts by $100 million to $200 million annually—between 5 and 10 percent of New England’s electricity comes from a hydropower plant in Quebec. 

Williams, who recently studied Massachusetts’ outmigration trends, also gamed out a few “stress-test” scenarios, which showed clear cascading effects if a full-blown trade war takes hold. If a US recession occurs, then Massachusetts could lose $19.1 billion in GDP, $2.2 billion in tax revenue, and nearly 100,000 jobs by 2028. If a global recession occurs, then those figures become even more bleak: $25.5 billion in lost GDP, $2.7 billion in tax revenue, and nearly 118,000 jobs. 

But the state’s economy isn’t vulnerable only to tariffs. Cuts to federal funding, including from the NIH, would impact the economy even in a best-case scenario of low tariffs and no recession, Williams found. There are 15 Massachusetts hospitals, universities, or other research institutions that receive $50 million or more, annually, from NIH funding—if that money is cut without a viable replacement, Williams says, “Massachusetts risks losing its lead position in life sciences, harming an industry that has been an important economic driver.” 

Cuts to NIH funding alone could result in a $1.4 billion to $2.2 billion reduction in economic activity in the state by 2026, as well as the loss of 14,000 jobs. If those cuts extend into 2028, Williams found that the cumulative economic cost could range from $5.4 billion to $9 billion, with more than 60,000 jobs lost. 

Trump’s anti-immigration policies could affect labor force size, a key driver of economic growth, and present clear challenges for Massachusetts and other states. Locally, Williams’ research suggests the administration’s crackdown on immigration could cost Massachusetts $2.5 billion to $3.7 billion in lost spending, upwards of $481 million in lost tax revenue, and 45,500 fewer workers by 2026. 

State Leaders Need to “Stand Up, Fight”

The way Williams sees it, the Massachusetts economy is under attack, and state leaders need to be prepared to “stand up, fight, and aggressively defend against the economic threat posed by Trump administration policies.” At the state level, he suggests elected officials work with state business, academic, and community leaders to develop a coordinated action plan and pass state policies to buffer some of the worst-case scenarios. He envisions state leaders working arm in arm with other states whose economies are disproportionately affected by these policies, such as California, Illinois, and New York, and he also suggests state leaders initiate independent trade negotiations with countries such as Canada, China, and Mexico. 

On the whole, though, what is most clear to Williams about any of these economic policies is how they eventually create what’s called “spillover risk,” unintended consequences that cascade down from the original policy. The administration’s hard-line approach to immigration could dissuade international students from attending Massachusetts colleges and universities, could (and already has) reduce tourism and destabilize the state’s economy such that its bond rating is reduced, which would make borrowing more expensive. 

“All of the economic sectors are interconnected like a mycelium network. If one gets harmed, they all get harmed,” he says. “We’ve created a vibrant, innovation-driven ecosystem in Massachusetts, and that model has made our economy stronger. But it also presents serious challenges now.”