Mark Sanchez: It could very well impact the state, not in a good way. You know, we've done a number of stories between us here in Grand Rapids and our sister publication, Crain’s Detroit, about the tariffs that are now into effect, went into effect Tuesday this week, 25% on Canada and Mexico, another 10% on China. What we're talking about is basically higher costs for things that come in, and anybody who's ever traveled in Ontario, driving across those highways, if you go to Toronto or anywhere east, there's some big auto plants in Ontario and it is for the auto industry a global supply chain. There are components in vehicles that cross the border two, three, four times before it goes into the final product and that's all going to add cost. What the economists are saying is this is going to cause some pain. Gentlemen, Matt Ross, he's an associate professor at Western Michigan's Haworth College of Business down in Kalamazoo. His take was pretty simple. He's not sure if it's going to be bad or it's going to be really bad. It's going to be somewhere in that range. There's an estimate a few weeks ago from the Anderson Economic Group out of Lansing that 25% tariffs on Mexico and Canada will drive up the cost of vehicles produced in North America by $4,000 to $12,000 each. Depends on the type of vehicle and the number of components it carries that are produced across the border. Obviously that much higher cost for a vehicle, that's going to cause people to pull back. It's a situation that folks really need to watch because your manufacturers are concerned about it. And we've seen some data, both from Grand Valley State University and University of Michigan, as well as some of the other economists, talking about that we're already seeing, even before these tariffs went into effect, we're already seeing some consequences to this in the terms of less hiring. In terms of businesses are beginning to kind of pull back their expansion plans, growth plans, capital investment, because tariffs create a lot of uncertainty. And there's one thing I've learned in 30 years as a business writer, it's CEOs hate uncertainty. They want clarification. They want a clear field for them to look forward to the future and do their business planning and do their budgeting and do their capital expenditures planning for the long term. So, when you start putting uncertainty into the mix, businesses tend to pull back. So do consumers, by the way. So, this clearly has some ramifications for the U.S. economy. It has a lot of ramifications for the Michigan economy. A lot of economists believe Michigan is going to get hit harder by this economically than most other states. So, they're in effect and now it's, we'll have to see how it all plays out.
Patrick Center: And now that there is certainty, we know the tariffs are in place, how much conversation is there now, a discussion about a potential for a recession?
Mark Sanchez: Quite a bit. There was a Federal Reserve report the other day from the Atlanta Federal Reserve talked about, believe it was negative 2.8%. I’d have to double check it, but looking at there could very well be a negative GDP in the first quarter of 2025. You know, when I spoke a week or so ago with Paul Isely there at Grand Valley State University, he reminded and he and other economists reminded me of ,go back many, many years, a couple of generations to the Great Depression almost 90 years ago. Tariffs was one of the causes. There were tariffs put in on imports and there were retaliatory tariffs and that was a contributor to causing the Great Depression. So yeah, there's a lot of worry about what this is going to mean for the economy across America. And again, I'll just keep saying that we'll have to see how this plays out and hope for the best.
Patrick Center: We don't want to be an alarmist here, but we do have history that gives us a sense of where this could potentially go.
Mark Sanchez: Yeah, that's one of the reasons why economists generally don't like tariffs. You start a trade war, you do it, there's retaliation, and where does it end? You understand, you know, the president's mission is to improve border security, drug trafficking, human trafficking, illegal immigration. That's the end game. So, there's a lot of speculation that part of the rationale is just to get better agreements, not only better trade agreements and give them leverage for negotiations and getting better trade agreements, but also some agreements with Mexico and Canada for better border security.
Patrick Center: We're talking with Crain's Grand Rapids Business staff writer, Mark Sanchez. The Corporate Transparency Act, that has been struck down.
Mark Sanchez: Struck down here in Grand Rapids. A little background, this is a law that was passed as part of an omnibus budget bill in 2021. And the Corporate Transparency Act basically says any business entity registered with the state must report beneficial ownership. All sorts of data on who owns the company. The idea is to have some insight into corporate ownership and small business ownership to kind of fight illegal activities, money laundering, drug trafficking, things like that, tax fraud. But the view of the business advocate and business groups out there is that this is really overreaching. It's going to cause quite a burden on all sorts of businesses, big and small. There's an organization in the U.S. Department of Treasury called FinCEN, the Financial Crimes Enforcement Network. And FinCEN alone estimates that the cost of complying with this, 32.6 million business entities affected, a $21.7 billion cost initially for compliance and then $3.3 billion each year afterward. And part of the provision is in this law, if you have any change in your business ownership, such as somebody sells a minority stake in the business or even to the point one of your owners moves and changes their address, your business must file an updated report. So, there's been a lot of litigation on this. There have been preliminary injunctions against enforcement that have come and gone. And finally, FinCEN a couple of weeks ago said March 21st (2025) is the deadline for businesses to file their beneficial ownership information reports. During all this in the last year, there's been a lawsuit here in Grand Rapids in the federal district court filed by the Small Business Association of Michigan and the Chaldean Chamber of Commerce over in Farmington Hills. And we finally got a ruling on that. Judge Robert Jonker of the Western District of Michigan basically said, this is a clear Fourth Amendment violation against unreasonable search and seizure. This law, the federal government is saying, you must give us your private information. And it was a really interesting opinion he issued late Monday afternoon on this in siding with SBAM and ruling this law unconstitutional and a Fourth Amendment violation. Where he talked about the government's collecting this data just to have it just in case law enforcement ever needs it. And he said that is basically an overreach by the federal government and clearly a violation against unreasonable search and seizure. Now, his ruling only affects the parties in this case, which is SBAM, a small business association, which has about 30,000 members, the Chaldean Chamber of Commerce, plus the four businesses over in the southeast Michigan that were also plaintiffs in this case. So, it's a limited effect right now. It only affects those plaintiffs, but talking to folks the morning after this ruling came out, there's an expectation that federal government, U.S. Department of Treasury, and FinCEN will appeal it. And ultimately, this could also go up to the U.S. Supreme Court. But another big thread that's entered this issue here in the last week has been a weekend announcement by the Department of Treasury that it was basically not going to enforce the provisions of this law for right now. There's been numerous court challenges and now the Department of Treasury said it would not enforce penalties and fines for failing to report beneficial ownership information under the existing deadline. And that the agency is going to look at changing the rules. Enter a new proposed rulemaking process that will narrow the scope of the law to only require foreign companies to report their ownership. So that's a big dramatic change. And again, we're going to have to see how this plays out. But for now, for businesses in Michigan affected by this, that if you're an SBAM member, the court has put this law on the back burner and ruled it unconstitutional.
Patrick Center: And in healthcare news, Blue Cross posting a loss.
Mark Sanchez: And it was a big loss. Let's keep in mind, all this is all going to affect health insurance rates. We saw double-digit increases here in 2025 from 2024, at least in the small group policies. And we heard a lot that even mid and large groups also got hit with these double-digit increases. A lot of it to do with these JLP-1 weight loss drugs, this high cost of specialty drugs, higher utilization rates, more people going in. So bottom line, this was reported Monday by Blue Cross Blue Shield of Michigan. Dustin Walsh, my colleague over at Crain’s Detroit, has the story that we picked up on our website at crainsgrandrapids.com. Basically, Blue Cross Blue Shield of Michigan paid out $20.7 billion in medical claims last year. When you put administrative costs in there, there were about $26.4 billion in expenses. And they collected $24.7 million in insurance premiums and administrative fees. So even I can do that math. Bottom line, Blue Cross Blue Shield, selling health policies, had a $1.7 billion operating loss. That's a sizable loss, and I believe it was the third or fourth year in a row that Blue Cross lost money by paying out more in medical claims than it did in collecting premiums. So, the attention now turns to, you know, and anybody who pays a payroll out there knows what the cost of health care has been doing for several years in this country. So now, let's pay our attention to what’s coming up this spring. It'll be sometime in May, I believe, that your health insurance carriers in Michigan file their rate plans for the next year. There's a lot of expectations that those rate increases for next year are going to be probably double-digit again, if not larger than what we saw here in 2025.
Patrick Center: Crain’s Grand Rapids Business, staff writer Mark Sanchez, thank you so much.
Mark Sanchez: Thank you, Patrick.