Trump administration tariff announcements, threats, and revisions are popping off daily, and some 21,000 U.S. firms are seeking exemptions from the newly imposed steel and aluminum tariffs. It’s painfully obvious that playing games with trade policy — if that’s what’s really going on — is hurting workers in affected industries and stiff-arming consumers who ultimately must pay higher, tariff-induced prices on goods and services.
Already, we are seeing announcements about layoffs in industries that rely on steel and a realignment of world production by firms seeking to maintain profitability in a highly uncertain global economy.
Nothing is simple in all of this. For example, the newly imposed tariffs on Canadian timber products, done in the spirit of “making America great again,” are credited with raising U.S. lumber prices by 20 percent. It turns out that one of the largest timber product producers in the United States is owned by Interfor Forest, which is — you guessed it — a Canadian firm. At least a few Canadians stand to make out like bandits from a back-breaking tariff on Canadian lumber.
Those who rail against China for meeting U.S. consumer demand for Chinese goods — thereby running a large trade surplus — somehow fail to celebrate the nearly complete $500 million Volvo manufacturing plant near Charleston, S.C. The plant will eventually employ 5,000 workers. It’s possible this stems from the fact that many think Chinese-owned Volvo is still a Swedish firm.
No one can say with certainty who owns what in this world. Yes, firms may be legally domiciled in a particular country, but their ownership consists of constantly shifting shares of stock. What may be a majority U.S.-owned firm today can have an Indian majority tomorrow.
Keeping track of product nationality is just as confusing. When President Trump says Americans are buying too many German cars, is he speaking of Mercedes made in Alabama, BMWs produced in South Carolina, or VWs from Chattanooga? Would it be better to buy Buicks made in China or Jeep Renegades assembled in Italy? Or is he just interested in cars produced in Rust Belt states?
While products’ nationalities aren’t always so black and white, we can observe which U.S. counties, states, and regions have the greatest unemployment-from-tariffs risk. The National Association of Counties, for example, used U.S. Commerce Department data to produce the accompanying map identifying how many jobs depend on exports in different counties. In a bitter trade war, these are the likely casualties.
Examining the data generates some interesting observations. North Carolina and South Carolina, for example, are high-exporting states, as well as two of the strongest state economies east of the Mississippi. County levels of export-supported employment are spread out across both. In 2017, North Carolina’s three leading export destinations were Canada, China, and Mexico. South Carolina’s top three were China, Germany, and Canada. The current administration has had few kind words to say about trade with these countries, and the pushback from those destinations is beginning to sound painful.
A quick look at the northeastern quadrant tells us that West Virginia has little to worry about when it comes to export-supported employment, but Pennsylvania, Ohio, Indiana, and Michigan are not so secure. It turns out these four states share the same top three export destinations: Canada, Mexico, and China — again, three countries that seem to suffer the president’s wrath most.
It’s interesting to recall that Trump’s surprising election victory was partly triggered by voters in West Virginia, Pennsylvania, and Ohio. Two of those states would have a lot to lose in an all-out trade war. Saying this, however, is not the same as saying Trump’s protectionist payoffs are a political mistake. Smaller, highly organized interest groups (like the steel, aluminum, or auto industries) are often far more effective than larger, more highly dispersed groups (like the much-broader steel-consuming industries, or American consumers in general).
In other words, we can choose to serve the “forgotten men” of the Rust Belt, but that’s going to put some of their neighbors — and lots of other, slightly less forgotten workers — on the street.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
