A trade war triggered by President Donald Trump’s tariffs to protect U.S. steel and aluminum producers hasn’t hurt Ohio because its economy got enough of a boost from the 2017 tax bill to compensate for any harm, according to a new Ohio State University report.
But growing trade tensions with China, threats of additional trade actions against Europe, continued actions against Canada and Mexico, and a softening domestic economy could contribute to a future recession, says the report from the John Glenn College of Public Affairs and the Ohio Manufacturing Institute.
Because of the tariffs, the report says Ohio’s workers, businesses, and consumers face the prospect of higher prices for domestic consumer goods, lost international markets for manufactured and agricultural products, and higher prices for purchased parts that are made with metal and imported materials.
The report says Ohioans don’t understand why the the U.S. has “gone to the mat” with its closest trade partners and historic allies—Canada, Mexico and the European Union—when the nation’s main trade problems are with China. Ohio’s Development Services Administration estimates that 260,000 full-time equivalent jobs depend directly or indirectly on trade, the report says.
“Ohio’s manufacturers also do not understand assertions that charging them tariffs is good public policy and how increasing their costs improves their competitive position,” says the report, titled The Economic Impact of the Trade Skirmish of 2018 on the nation and Ohio.
A co-author of the report, OSU professor Edward (Ned) Hill, said a recent poll of Ohio manufacturers indicated more were harmed by the trade actions than benefited from them. Hill said his research couldn’t find signs of major benefits from tariffs, except to metal-making industries.
“The drag from the current trade skirmish is just not large enough to cause an immediate downturn in the economy,” Hill said in an email. “However, economic decline will likely occur if the sanctions on China are ratcheted up and the U.S. imposes a new global duty against automobile imports and parts.”
Hill said another reason there hasn’t been more impact is the duties are relatively new, and trade statistics show an accelerated flow of shipments into the U.S. from China in advance of the threatened increase in duties that were to take place on Jan. 1, 2019, and are now postponed to at least March 1. So, supply chains are not yet disrupted.
“Our third response is that deficits associated with the tax cuts that took effect in 2018 generated enough consumer spending to offset the economic drag associated with the tariffs imposed from June through September,” said Hill. “This source of stimulus will diminish in 2019.”
The report said Ohio is at great risk if national security trade protection is extended to the motor vehicle assembly and parts industries. It said that under the regime of retaliatory tariffs in place at the end of 2018:
• Ohio had the largest exposure of any state to retaliatory tariffs imposed by Canada;
• China is the largest international destination for Ohio’s soybeans;
• Ohio is the nation’s second-largest production location of motor vehicles and parts, before GM shuts-down its Lordstown assembly plant;
• Ohio is the nation’s largest production location of motor vehicle engines;
• Ohio is the location of a major Chinese industrial investment;
• Ohio is a major supplier state to both Boeing and Airbus’s U.S. assembly operations;
• Ohio is a production center for appliances; and
• Ohio’s iron and steel mills produce the third highest value of output among the states.