How Trump agenda, from budget cuts to tariffs, is changing battle between U.S. states for business

CNBC

11-06-2025

What does it take for a state to attract businesses and jobs in 2025? President Trump has turned many states' well-worn economic development playbooks upside down.
As the administration seeks to drastically cut the size of the federal government, states that previously could count on Washington for federal jobs, grants and contracting dollars are suddenly out of luck. Meanwhile, the states that are less reliant on the federal government are looking smart.
And then there are the tariffs. Some states have built large parts of their economies on international trade, which the Trump trade war is disrupting.
"Something affecting one country or one product might really hurt the companies in one state, and the state next door would be unaffected," said Dan Anthony, president of Trade Partnership Worldwide, a Washington, D.C.-based economic research firm.
But all those changes are also creating new opportunities, said Tom Stringer, a principal and the leader of the site selection and incentives practice at Grassi Advisors in New York. "For myself and my colleagues, this has been one of the busiest periods that we've had in our 30 year careers, which is exciting," he said.
Stringer said that he is already working with foreign companies that are seeking to establish manufacturing operations in the U.S. to avoid the tariffs, even though the ultimate makeup of the tariffs has yet to be determined.
"Businesses crave certainty," he said. "I think it's fair to say that none of us, except for one person, really has any knowledge as to where the tariffs are going to go or finish up. And so, the way to deal with that has been to strategically start to place some capacity here in the U.S."
Domestic companies are on the move, too, he said, especially in burgeoning industries like artificial intelligence, quantum computing and the rapidly changing and growing defense sector.
Which states have the edge in this new environment? America's Top States for Business is back to find out.
The exclusive CNBC study, now in its 19th year, rates all 50 states in ten categories of competitiveness. From the start, we designed our tried-and-true methodology to account for the rapidly changing nature of economic development, placing the heaviest weight on the factors that matter most to business from year to year.
In 2025, the category that matters most is Economy. State economic development marketers are touting their state's economic strength and stability more than ever, in the face of recession fears.
This year, in addition to traditional metrics impacting the Economy category, such as economic growth, job growth, and state finances, we are also factoring in the risks each state faces from the many changes coming via policies from Washington, D.C., including budget cuts and tariffs.
That impact is being felt much differently across the states.
"You look at a state like Kentucky, its goods trade. Exports and imports are about 50% of its GDP. It's the highest in the country," Anthony said. "Contrast that with a state like Virginia, where it's less than 10%."
Trade Partnership Worldwide compiled some of the data on tariffs for the CNBC study. "The big thing that we start out looking at is just really exposure to international trade, and particularly the goods trades," said Anthony.
The study also looks specifically at a state's exposure to China, which is at the heart of the trade war.
"If you think China is an area where trade barriers are likely to go up, both on the U.S. side and the foreign side, then you know those states with that China exposure are at a much greater risk, regardless of what the actual levels are," Anthony said.
Infrastructure remains critical in 2025, as companies seek to capitalize on the drive to revitalize domestic manufacturing, as well as the push for data dominance.
The latter requires massive amounts of affordable and reliable electricity, said Rachel Peterson, vice president of data centers for Meta. The parent company of Facebook and Instagram chose Louisiana as the site of a $10 billion data center complex, now under construction in rural Richland Parish.
"We need to be able to have fiber connectivity to the site, access to the site — so roads, and water, wastewater, etcetera, are important parts of putting a data center there," Peterson said. "And then we look at really reliable grids, because we use a lot of power."
This year's CNBC study looks closely at the reliability of each state's power grid within the Infrastructure category, along with roads, bridges, ports, airports, broadband connectivity and computing power. We are also evaluating state programs to deliver shovel-ready, "certified" sites, using data compiled for CNBC by the Site Selectors Guild, an international organization of site selection consultants. And, we consider states' resiliency in the face of extreme climate events, using data provided by property data firm Cotality and by non-profit First Street Foundation.
The climate crisis is exacerbating a nationwide insurance crisis. Rising premiums factor in the Cost of Doing Business and Cost of Living categories, which rise in importance this year as inflation fears persist. Business Friendliness carries more weight this year as foreign and domestic companies seek the quickest path to the U.S. market. And the Technology and Innovation category rose to reflect the growing battle for dominance in fields like AI.
Other categories include Workforce (which states are attracting and retaining the best qualified and most productive workers?), Quality of Life (where can those employees be safe, secure, healthy, and enjoy the most freedom?), Education (which states are most effectively turning out the next generation of skilled workers and business leaders?), and Access to Capital (where can companies find funding through venture capital, state grants and loan guarantees, and bank lending?).
In the coming weeks, we'll highlight the rapidly changing story of state business competitiveness in 2025. Then, see where your state ranks as we reveal America's Top States for Business on July 10.
And join the conversation on your favorite social media platform using the hashtag #TopStates.