Tariffs, Michigan, and the Perils of “Political Protectionism”

Scott LincicomeConventional wisdom among the D.C. punditocracy is that protectionism, while likely bad economics, is good politics because it can boost critical “Rust Belt” swing states that have large manufacturing sectors and have been hit hard by globalization. A new St. Louis Fed study, however, shows why this rudimentary calculus is misguided.Examining the effect of President Trump ’s “trade wars” (i.e., tariffs and foreign retaliation) on U.S. manufacturing industries and states that are disproportionately dependent on imports or exports, authors Ana Maria Santacreu and Makenzie Peake find that several such states — including Michigan and Ohio — experienced weaker economic growth and employment in 2018 than their less‐​exposed neighbors. In particular, they make the following findings:First, the U.S. manufacturing industries that more heavily rely on imported intermediate products (and are thus “exposed” to potential U.S. tariffs) are (i) Coke and petroleum; (ii) Motor vehicles and trailers; (iii) Other transport equipment; (iv) Basic metals; and (v) Rubber and plastic products. The U.S. states that most heavily specialize in these trade‐​exposed industries (and are thus “exposed ” too) are (i) Louisiana; (ii) Michigan; (iii) Hawaii; (iv) Washington; and (v) Ohio. For Michigan, in particular, the authors note that it “is one of the top U.S. producers in the Motor vehicle and trailers industry, which accounts for 43 percent of its total...

Source: Cato-at-liberty - October 23, 2020 Category: American Health Authors: Scott Lincicome Source Type: blogs