Minnesota’s economy slowed sharply in the third quarter of 2025 as energy sales to Canada fell and trade tensions hit state exports.
According to data released January 29th by the Department of Employment and Economic Development (DEED), Minnesota’s exports of agricultural, mining, and manufactured goods fell to $5.7 billion—a 14% decline compared to the same period last year. Specifically, energy-related exports significantly impacted this drop, as the nearly $1 billion loss highlights the challenges the state faces amid shifting federal tariffs and strained international partnerships.
The most dramatic hit came from our state’s largest trading partner, Canada. Exports of mineral fuel and oil collapsed from over $500 million in the third quarter of 2024 to just $16 million in the same quarter in 2025. Energy exports are notoriously volatile. However, DEED Commissioner Matt Varilek noted that the decline isn’t happening in a vacuum.
“Federally-imposed tariffs and strained international relations with our traditional partners continue to impact Minnesota’s trade,” Varilek said, highlighting concerns about how ongoing trade tensions could influence future export growth and economic stability.
The decline in trade extends beyond oil. Manufacturing sectors and agricultural exports to Mexico and China—Minnesota’s second- and third-largest markets—dropped by more than 20%. This suggests that not only energy markets, but multiple key industries are struggling.
Despite the broader downturn, pockets of growth emerged. Agricultural sectors, particularly dairy, eggs, and honey, saw exports surge by 69%. Fertilizer exports rose by 39%. Minnesota’s aerospace industry posted a 3% gain, while electrical equipment exports edged up 2%, indicating resilience in these specific areas while others struggled.
For Minnesota factory workers and farm families, these numbers mean continued uncertainty.
While North American trade faltered, sales to Europe grew by 7%.
A massive 46% jump in exports to Switzerland and a 60% surge to Turkey led this growth. Gabrielle Gerbaud, Executive Director of the Minnesota Trade Office, emphasized that the state is actively working to bridge these gaps through recent trade missions to Germany and Ireland, aiming to reassure global partners that Minnesota remains ‘open for business.’
As the state moves into 2026, all eyes will be on whether these “niche” growth areas in Europe and the Middle East can offset the continued friction with our neighbors to the north and south. For now, Minnesota businesses are in a season of “holding the line.” They are waiting to see whether the trade climate will thaw or if a more extended “economic winter” is in store.
