“Marketplace Morning Report” is breaking down the overall picture of the U.S. economy by zooming in on different regions and getting a closer look. Marketplace’s senior economics contributor Chris Farrell reports from St. Paul, Minnesota, about what’s happening in the Federal Reserve’s Ninth District — which includes most of the upper Midwest.

He spoke with host David Brancaccio, and the following is an edited transcript of their conversation.

David Brancaccio: You may have heard I was out there the other day at the huge Minnesota State Fair, and it seemed like there was a ton of economic activity. It felt busy. But I like to put data to feelings. How's it really going in Minnesota and the upper Midwest?

Chris Farrell: Well, you'd be glad to know, David, that data supports your feelings. When you look at Minnesota and the upper Midwest, the region, it's highly competitive with the rest of the country when you use measures like unemployment, wage growth and labor force participation rates. Yet, like the rest of the country, economic cracks are starting to emerge.

Brancaccio: Well, what are you worried about?

Farrell: Since you were at the State Fair, and I assume that you enjoyed yourself — maybe you went to the cow barn or you saw some pigs — let's start with agriculture, because it's really a vital regional industry. You know, think wheat, corn, soybeans, much more. And the Federal Reserve Bank of Minneapolis in its latest ag credit survey reports that farm incomes are down. And lenders in the survey say that spending on capital equipment, that's dropped.

Brancaccio: What are some of the factors there? I understand — I was doing some reading on this. Apparently the weather was too good?

Farrell: This is the hard thing about being a farmer, right? Yes, the weather was too good. You have abundant crops, and that's pressuring commodity prices lower. And also weighing on much of the farm economy is President Trump's on-again, off-again, on-again trade war, as well as the administration's accelerating mass deportation campaign. And the latter looks particularly important to the region's economy. For example, the Dakotas and Montana rely on immigrant labor in dairy, meatpacking, construction industries. And mass deportations would worsen what are already existing labor shortages.

Brancaccio: Now I like to keep my ear to the ground. That's my thing. What do you keep your ear to there in Minnesota?

Farrell: Speakers.

Brancaccio: Speakers?

Farrell: Speakers. Specifically MISCO speakers. Now this is a family-owned company. It's been making speakers in the Twin Cities for 75 years now. David, you go through that fast food drive-thru, you look into an airplane cockpit or — and I know you would like to do this — you visit the International Space Station, you'll see MISCO speakers. And Dan Digre — he's the company CEO — says tariffs are a real challenge.

Digre: It's an import tax. It's applied at the port, and then the parts come into our factory, so we're already paying the tax upfront. So how do we become competitive when we have that?

Brancaccio: I mean, there's the challenge. Chris, Minnesota has a strong manufacturing foundation, I suppose.

Farrell: Well, it does. It's the second-largest sector. It makes up 12% of the state's total economy. Digre emphasized the opportunities he's pursuing. Some customers now want products made in the USA, Misco is investing in automation and, in some cases, they're getting business by bypassing the U.S.

Digre: We have a lot of customers who moved part of their assembly also out of the United States, and so they're asking us to build our products outside of the United States and then ship to their factories, and therefore bypass the U.S. completely. Now that's not our preference. I've got an American factory. I want to build things in America, but our customers are forcing an economic reality.