Montana is expected to be acutely affected by tariff uncertainty into 2026 with an economic slowdown likely on the horizon, a top state economist reported Thursday. 

“Probably the biggest issue with the tariffs right now is this volatility,” Dr. Jeffery Michael, director of the Bureau of Business and Economic Research at the University of Montana, said at the 2025 Midyear Economic Update at the Hilton Garden Inn in Kalispell. 

According to Michael, damages to the U.S. economy brought by tariffs have been overstated, “However it’s also my view that they’re somewhat more damaging to Montana than they are to the economy as a whole." 

Montana’s robust construction sector is expected to be hit the hardest, he added, because builders rely on sourcing materials globally.  

“It’s sort of a cost situation without the ability to benefit,” he said.  

While manufacturing is forecasted to benefit from increased tariffs, Montana is not a manufacturing-heavy state.  

“We have about half the economic reliance on manufacturing as other states do,” he said. 

The average Montanan spends 36% more on trucks, cars and motor vehicle parts than the average American, and those goods are expected to rise in price due to tariffs. 

“I expect we’ll see price increases about 10% or so in this particular sector over the next 12 months,” Michael said.   

Agriculture, which remains an economic force in Montana, is also expected to see negative impacts due to potential disruption of foreign markets, Michael said. 

While job growth stalled in Montana in the first half of the year, the state’s unemployment rate of 2.8% remains below the 4.1% national average. The state also entered its fourth consecutive year of average wage growth surpassing the U.S. average 

“So we are making progress on something that’s really been the economic problem for generations in Montana,” Michael said.  

But small businesses, most of the Montana market, are expected to be negatively impacted by tariffs, according to Brigitta Miranda-Freer, executive director of the Montana World Trade Center, who also spoke at Thursday’s event.  

Tariffs will put higher prices on shipments that will “have a real impact on their business. It might be the end of their business,” she said.  

Smaller companies aren’t able to leverage deals with foreign entities like large corporations are, she said.  

Interest rates have remained high this year, “and they did not come down in the way some people were projecting a year ago,” Michael said. Ten-year bonds are over 4% and mortgage rates remain in the high 6% range.  

“They are pretty stable there and I expect that any movement down will come very slowly over the next year or two,” he said.  

Home prices have also stagnated at a high level.   

Canadian border crossings are down about 25% across the country, but because 90% of Montana visitors are U.S. residents, Michael said he does not see the loss as a worry. Montana airport passengers were up 12%, while national passenger numbers fell.   

“People are still coming here,” Michael said about tourism. 

Montana Chamber of Commerce President Todd O’Hair criticized tax policies that came out of the state Legislature this year, particularly the second-home tax bills that shifted the tax burden to some large businesses and utilities. The so-called Homestead Exemption was opposed by the Montana Chamber of Commerce. 

“In a state that is trying to recruit business to the state, we raised property taxes on large property taxpayers,” he said.  

O’Hair suggested pitching a sales tax as a replacement tax, not an additive one, that would lower property taxes across the board. 

“I think that if we don’t have an adult conversation about our economy today and where it’s going in the next 10 years, we will never catch up. We will rob our children and our future because of the tax policy in the state that is not conducive to the economy that we have,” he said. “So, all options need to be on the table.”  

“This is where the business community has to start having these honest conversations about the need for a reform of our tax structure,” he said.  

Reporter Jack Underhill can be reached at 758-4407 and [email protected].