Hildreth Institute in The Boston Globe

‘The Commonwealth’s business model is at risk’: Trump 2.0 is hitting Massachusetts harder than expected

The president’s agenda has exposed how vulnerable the region’s economy is to punitive, ideologically driven federal policy

This article originally appeared in The Boston Globe.

From higher education to hospitals, from retail shops to tourist destinations, employers across the state are bracing for the fallout from President Trump’s campaign to upend global trade, immigration, and “woke” universities.

Even before a single executive order was signed, many feared his agenda would hamstring a local economy built not on manufacturing might — the president’s obsession — but on brainpower.

Four months into Trump 2.0, the reality is worse.

Massachusetts isn’t just collateral damage; it’s a primary target as the White House slashes funding essential to an ecosystem of education, health care, and life sciences that supports 1 in 5 jobs in the state.

Meanwhile, the ripple effects threaten to derail growth in emerging tech sectors such as clean energy and robotics — industries the state has counted on to offset slower job growth elsewhere.

Trump’s agenda has exposed how vulnerable even the most dynamic regional economies are to punitive, ideologically driven federal policy.

“The reality is that the Commonwealth’s business model is at risk,” said Jeff Bussgang, general partner in Boston at venture firm Flybridge Capital.

After the November election, the concern was that Trump would overstimulate the economy — cutting taxes and deregulating aggressively, even at the risk of inflation. Tariff-driven price hikes are still on the table, but the bigger threat is a recession.

Why? The White House’s erratic policymaking — particularly seesawing tariffs and threats of economic retaliation — has created deep uncertainty.

Early warnings

The US economy shrank in the first three months of the year as consumers pulled back spending and businesses stocked up on imports, likely diverting domestic purchases, to get ahead of Trump’s tariffs. And in Massachusetts, hiring was tepid even before Trump launched his trade war and ordered freezes and cuts to research spending and federal contracts.

Beyond tariffs, Massachusetts faces more lasting risks from federal budget cuts and policy shifts, according to the editors of MassBenchmarks, an economics journal published by the Donahue Institute at UMass Amherst. With 18 percent of its jobs tied to private nonprofits such as universities and hospitals — nearly double the national rate — the state is particularly exposed.

Massachusetts could lose as many as 100,000 jobs in 2026 if the US economy slides into a recession, a study by Boston University finance professor Mark Williams estimated.

Target: Higher education

Harvard has been Trump's primary target in higher education.Suzanne Kreiter/Globe Staff

Much of Trump’s fire has been aimed at Harvard, where he is demanding changes to admissions policies, hiring, and academic programs, severing ties with federal agencies, and seeking to eliminate its tax-exempt status.

But the threats reach beyond Harvard Yard.

A proposal to jack up the endowment tax — contained in the “big, beautiful bill” approved by the House — would hit Harvard’s $53 billion endowment hard, but also cost millions a year for schools such as MIT and Wellesley College. Boston University and Northeastern have thousands of foreign-born students whose legal status is in danger.

Smaller schools that depend on tuition — Emerson or Berklee College of Music, for example — need international students who pay full-price to balance the budget.

But community and public state colleges, which educate the majority of Massachusetts students, will absorb the brunt of the pain, said Bahar Akman Imboden, managing director of the Hildreth Institute, a Boston higher education research organization.

Those are the schools that may face considerable financial challenges and plummeting enrollment if Pell Grants for low-income students are restricted and other federal grant funding is cut, as some in Congress are proposing, Imboden said.

“It will increase the burden on the state considerably,” Imboden said. “The problem, of course, is that we don’t know how many of these proposed cuts will actually go through.”

Brain drain threat

The Massachusetts economy has thrived because it can attract people such as Rana el Kaliouby to study and work here.

El Kaliouby arrived at MIT from Egypt in 2006 as a postdoctoral researcher with a National Science Foundation grant.

She worries the administration’s funding cuts and hostility toward international students will disrupt the cycle of training, experimentation, and entrepreneurship that fuels breakthroughs in science, medicine, and tech.

Moving from Egypt was the “kind of career move that basically changed the trajectory of my life,” said el Kaliouby, cofounder and general partner of Blue Tulip Ventures, a Boston investment firm focused on artificial intelligence.

“But it also had this ripple effect: I started my company out of MIT, I hired about 100 people, and then we sold the company [and] now I invest in early-stage companies coming out of the Boston startup ecosystem.”

Immigrants were founders of more than half of all startup companies in the United States valued at $1 billion or more, the National Foundation for American Policy, a nonprofit think tank, said in a 2022 report. In Massachusetts, prominent startups including Moderna, Leader Bank, HubSpot, and Care.com were cofounded by foreign-born entrepreneurs.

Uncertainty clouds planning

While Trump’s attack on Harvard has stunned academia, the business world has been upended by tariffs and other policy priorities.

Trump is opposed to wind farms, like this one, off the coast of Rhode Island.David L. Ryan/Globe Staff

New England’s clean energy sector is running into stiff headwinds, as Trump’s “drill baby, drill” approach to energy has injected uncertainty into nearly every corner of the climate economy.

Offshore wind — once central to Massachusetts’ decarbonization strategy — is now in limbo. A federal halt on new leases and the temporary freeze of the $2.5 billion Empire Wind project off New York have spooked investors, said Dustin Varnell, a director at Spirit Advisory, a Providence-based consulting firm.

Clean tech startups are already feeling the pinch. New investments in energy-related startups fell to $2.1 billion in the first three months of the year, the lowest point in five quarters, according to Crunchbase.

Georgina Campbell Flatter, CEO of Greentown Labs, said many young companies are going quiet — a trend she calls “green hushing” — to avoid attention in a politically fraught environment. That silence, she warns, masks real damage to growth in energy storage, carbon capture, and advanced materials. She said she is encouraging her colleagues to talk more about their work and the good they believe it is doing.

The broader clean tech economy is also under pressure. John Hensley, who leads market and policy analysis at the American Clean Power Association, said the inconsistency at the federal level is delaying critical infrastructure and threatening the reliability of the electric power grid — a risk not just to climate goals, but to the growth of AI and data centers that depend on clean, stable power.

Confidence slipping

The Massachusetts economy shrank by 1.1 percent in the first quarter, following an increase of 1.9 percent in the final three months of last year, MassBenchmarks reported. Unemployment hit 4.6 percent in April, up from 3.3 percent a year earlier.

While tariffs haven’t yet shown direct effects, the Benchmarks report warns that economic uncertainty is weighing on business and consumer confidence. “All the uncertainty... has left businesses and consumers wondering if prices will go up,” it said.

As a result, activity is stalling. Businesses are delaying long-term investments, focusing instead on stockpiling imports. Consumers, worried about price hikes, are front-loading major purchases like cars.

Consumer-facing industries are already seeing behavioral shifts. New Hampshire restaurant owner Evan Hennessey says diners are pulling back on spontaneous plans: “Reservations made far out are honored, but last-minute bookings have dropped significantly.”

On Cape Cod, summer bookings are softer as Canadian and European travelers cancel or shorten stays. “There’s more availability later in the season than we’ve seen in years,” said Paul Niedzwiecki, chief executive of the Cape Cod Chamber of Commerce.

Retailers say they will be squeezed by tariffs.Jonathan Wiggs/Globe Staff

Retailers, too, are feeling the squeeze. While GOP-backed tax cuts could boost spending, tariffs are creating planning headaches. “If you go too far and too fast on tariffs, it’s going to hurt the consumer — and retailers,” said Jon Hurst, CEO of the Retailers Association of Massachusetts.

He said stores are using the current reprieve amid court cases and temporary suspensions to stock up for the holidays. But if tariffs persist, they’ll need to rethink sourcing to keep prices in check — or pass costs onto consumers.

Tariffs take a toll

For local tech companies, tariffs have caused the biggest worries even though the effects have been muted so far.

In April, medical device maker Boston Scientific told analysts it expected a $200 million hit to annual earnings because of “Liberation Day” tariffs. But after Trump put the levies on hold, the company said their impact would be significantly smaller.

Hasbro, the Rhode Island-based toy company, is scrambling to diversify its supply chain, which relies heavily on China. Yet, prices are still increasing and will be passed down to consumers.

“Ultimately, tariffs translate into higher consumer prices, potential job losses as we adjust to absorb increased costs, and reduced profits for our shareholders,” CEO Chris Cocks said during an earnings call in April.

Endurance test

Massachusetts has long prided itself on resilience — on being smarter, faster, and better prepared than the rest of the country.

But Trump’s second-term agenda is testing that premise.

The state’s knowledge economy depends on open borders, federal dollars, and global trust — all now in jeopardy. While some industries are hunkering down or hedging bets, others may not survive the uncertainty. And the longer the disruption drags on, the harder it will be to rebuild what’s lost.

“If we don’t know what game we’re playing, it’s impossible to move forward,” said Mac Hay, owner of Mac’s Seafood, which operates restaurants and retail and wholesale markets on Cape Cod. “That’s the part that is the most frustrating and concerning, because we’re just not sure what’s going to happen tomorrow. Almost every day, there’s something rather earth shattering.”