Minnesota restaurants, hotels profits drop after immigration enforcement and tariff increases

Twin Cities restaurants impacted by increased ICE presence

The ICE surge is turning vibrant shopping areas into ghost towns, particularly affecting Hispanic-owned businesses in Minneapolis and St. Paul.

(FOX 9) - Many businesses in Minnesota’s hospitality industry are facing a tough start to 2026, with businesses across the state reporting declining profits, fewer customers and growing uncertainty economically.

Survey shows hospitality businesses struggling

What we know:

A survey by the Federal Reserve Bank of Minneapolis and Hospitality Minnesota found that more businesses reported declines in revenues and profits than those who saw growth this winter.

Of the 125 respondents to the survey, more than half said customer traffic and profits fell in the last quarter of 2025 compared to the year before.

Business owners pointed to rising labor costs, new taxes and higher wholesale prices as major challenges. Nearly 60% said tariffs negatively affected their operations, especially those who import goods.

Many businesses have reported that customer demand dropped during recent immigration enforcement actions and protests, with more than half reporting their operations were negatively impacted – 30% said they had to temporarily close or reduce hours as a result.

Currently, only 17% reported they were hiring for new positions as a result.

The backstory:

Winter and its cold weather have historically slowed business, but challenges this year were increased by economic changes and new policies – with some owners citing Minnesota’s new paid leave policy, which started in January 2026, as adding to staffing concerns and rising costs.

Twin Cities businesses more pessimistic than Greater Minnesota

Big picture view:

The survey found that businesses in the Twin Cities metro to be more pessimistic than those in greater Minnesota. 

However, businesses in greater Minnesota also reported feeling the ripple effects of similar macroeconomic concerns.

The overarching hospitality and tourism industry remains a major part of Minnesota’s economy, supporting jobs and local businesses across the state.

What's next:

Those surveyed say the overall outlook for the next six months poses challenges, with 45% saying they were "pessimistic" and only 27% labeling themselves as "optimistic."

Owners report a cautious approach towards how changes in policy, pricing and customer demand will affect business.