Colorado stands to lose nearly $500 million as Trump’s trade war digs in

President Donald Trump’s trade war could shave $241 million of revenue from Colorado’s general fund for the fiscal year ending in June 2026, according to the Office of State Planning and Budgeting.

The revenue loss could grow to $448 million for the next fiscal year if tariffs as currently set stay in place, the office said, as they released a report detailing the impacts Trump’s trade war could have on Colorado’s economy. 

As of Aug. 12, the effective tariff rate in Colorado is 21 percent, a sevenfold increase from last year, according to the report.

Tariffs are a tax on goods crossing the border from overseas. That leads to higher prices as businesses try to offset the taxes by charging more for their products. 

Trump has made tariffs a cornerstone of his economic policy agenda. Economists are watching for signs that tariffs are weighing on the economy. They are expected to be a drag on the economy because higher costs mean that businesses and consumers will buy less to save cash. On top of that, Trump’s unpredictable approach to levying tariffs has made it hard for business leaders to plan for the future.

Taxes filtering through

The job market, in both Colorado and the U.S., has slowed in recent months. At the same time, import taxes are starting to filter through to shoppers for things like furniture and clothing, government data show.

“There are many factors that affect the economy so … whether there’s a recession or not doesn’t solely depend on tariffs,” Gov. Jared Polis said during a press conference about the report. “What [tariffs do] though is significantly decrease the economic growth rate. So let’s say you have very strong growth and otherwise would be at 3.5 percent, then we would just be at under 2 percent because of the tariffs … Tariffs alone are going to be a significant hit to the economy.”

The report from Colorado’s budget office stems from Polis’ executive order in July creating a Tariff Burden Reduction Task Force. The task force aims to develop strategies to reduce the impact of tariffs across different sectors of Colorado’s economy and come up with hard numbers to quantify economic damage caused by higher tariffs.

Key industries take hits

Tariffs hit just about every key industry in Colorado, ranging from agriculture and construction to energy and manufacturing, according to the report. The report highlighted an example from the aerospace industry. In 2024, Colorado imported $741 million in goods related to aerospace from Switzerland, which is now subject to a 39 percent tariff rate.

Individual income taxes are Colorado's largest revenue source, making up roughly two-thirds of the state’s general fund collections in the last fiscal year. That stream is expected to decline by $53.6 million, or 0.5 percent, for the current fiscal year. Sales and use tax, the second-largest revenue generator, will take a far larger hit from tariffs, according to the report. Such revenue is projected to fall by $122.9 million, or 2.7 percent.

Falling revenues for Colorado’s general fund means less money for things like housing, education, health care and transportation. At the same time, the cost of capital projects will go up due to tariffs on things like steel, aluminum and copper, according to the report. The cost of construction materials jumped 3.2 percent on average during the second quarter of this year, the report found.