Rhode Island Faces Economic Uncertainty Amid Tariff Policies

News Summary

Rhode Island’s economy is under scrutiny as economists highlight concerns over slowing job growth and rising prices linked to President Trump’s tariff policies. During the recent Revenue and Caseload Estimating Conference, experts warned that tariffs have adversely impacted job growth and wages in the state, contributing to a challenging fiscal outlook. Additionally, federal funding cuts and a declining population pose significant risks. Despite these challenges, Rhode Island’s job market remains relatively strong compared to national averages, but future economic recovery hinges on potential changes to tariff policies.

Rhode Island is facing concerns over slower job growth and rising prices as a result of President Trump’s tariff policies, according to a recent presentation by economists from Moody’s Analytics. Kumael Bilgrami and Emily Mandel delivered their analysis during Rhode Island’s biannual Revenue and Caseload Estimating Conference, held at the State House on April 29, 2025. This conference assists state lawmakers in developing the fiscal budget for 2026, which begins on July 1, 2025.

Mandel emphasized that tariffs will be a predominant theme affecting the state’s economic landscape. She warned that Rhode Island’s financial future is uncertain, primarily due to potential reductions in federal funding and ongoing international trade disputes, indicating that “recession risks remain very high.” The economists remarked that the local economy may feel “somewhat recession-adjacent,” pointing to a projected stagnation in job growth and wages as consumer and business costs escalate due to increased tariffs.

Currently, the average tariff rate in the United States stands at 21%, the highest since 1909, largely driven by tariffs imposed on China and several other countries. This rise in tariffs is expected to adversely impact job growth in Rhode Island, alongside stagnant wage conditions as costs to consumers and businesses rise. The economists noted that if President Trump decides to ease his tariff policies, there may be a chance for economic recovery starting in 2027.

The impending cuts to federal funding, particularly in Medicaid, present a considerable risk to Rhode Island’s economy, as the state heavily relies on federal assistance—more than half of its annual Medicaid expenses come from federal support. Economists forecast potential Medicaid funding cuts nationwide, which could reach $880 billion, contributing further to Rhode Island’s budgetary challenges.

Rhode Island’s economic difficulties are compounded by a declining population, as residents increasingly seek more affordable living situations in southern or mid-Atlantic states, as well as in neighboring New England areas such as Maine and New Hampshire. Although direct connections between income tax policies and migration patterns were not specified, the introduction of a millionaire’s tax in Massachusetts in 2023 has led to some residents relocating to Rhode Island, where legislation is also pending for a 3% surtax on the top 1% of state earners.

A recent report from The Institute for Policy Studies highlighted a significant rise in both the number and wealth of top earners in Massachusetts following the enactment of the “Fair Share Amendment” in 2022. Meanwhile, wage growth in the greater Boston area has decelerated compared to Providence, attributed to the high living costs in the region.

In addition to these factors, Rhode Island is contending with a critical housing shortage which has elevated costs for both buyers and renters. Tariffs are further exacerbating this issue by driving up the costs of building materials, negatively impacting demand for residential permits and complicating workforce retention in the construction sector due to stringent immigration policies.

Notably, despite these economic challenges, Rhode Island’s job market continues to reflect robust employment growth when compared to national averages. As of March 2025, the state registered its highest employment figures, with 515,600 jobs recorded. The unemployment rate, however, increased to 4.8% in March 2025 and is anticipated to reach 5% by the year’s end. Rhode Island’s job market benefits from a diverse mix of industries, notably in finance, education, and healthcare, which provides some stability against the adverse effects of tariffs.

The economists noted that projections for job growth and housing supply in the state have not substantially changed since the previous Revenue Estimating Conference in November 2024. The ongoing Revenue and Caseload Estimating Conference will continue until May 9, 2025, revisiting the expectations for budget surpluses or deficits for fiscal 2026 and beyond.

Deeper Dive: News & Info About This Topic

• Rhode Island Current: Recession-Adjacent Economic Slowdown
• Wikipedia: Economic Slowdown
• The New York Times: Senate Vote on Trump Tariffs
• Google Search: Trump Tariffs
• Providence Journal: Trade War Impact on RI
• Encyclopedia Britannica: Recession
• CBS News: Senate Vote on Tariffs
• Google News: Rhode Island Economy