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‘Export-intense’ communities in Midwest have much at stake with talk of more tariffs

by Ilene Grossman ~ April 2018 ~ Stateline Midwest »
When President Trump announced that he intended to levy a 25 percent tariff on imported steel, and a 10 percent tariff on imported aluminum, U.S. trade partners were surprised — and angry. 
His actions came after a U.S. Commerce Department report found that the unfair “dumping” of steel and aluminum (exporting these products to the United States at below domestic market value) by other countries was leading to plant closings and job losses. This has been deemed by the Trump administration a threat not only to domestic manufacturing, but also to national security.
At first stating that there would be no exceptions to the tariffs, Trump stepped back from that position by the time of his formal declaration. He exempted Canada (the largest exporter of steel and aluminum to the United States) and Mexico from the tariffs, at least temporarily.
For the many integrated industries in the Midwest that rely on cross-border trade, such as the auto sector, this exemption was particularly important.
Trump tied the exemptions for Canada and Mexico to the need for changes in the North American Free Trade Agreement. He later exempted, through at least May 1, the European Union, South Korea, Australia, Argentina and Brazil. 
As members of the World Trade Organization, countries have a formal way to challenge tariffs, but this process takes time. Until a WTO challenge is concluded, some affected nations have talked about imposing tariffs of their own on U.S. imports.
Trump also recently announced that the U.S. could impose up to $150 billion worth of tariffs on China, in part to retaliate for the theft of intellectual property by Chinese firms. China immediately matched that amount with proposed tariffs on products such as pork, soybeans and corn. (Pork exports in Iowa alone accounted for $1.1 billion in 2017. In Illinois, 60 percent of all soybeans are exported.) And though the tariffs have not yet been implemented, commodity prices have dropped in futures markets.
The potential impact of foreign tariffs, too, extends well beyond agriculture-reliant communities.
“If you measure exports as a share of total economic activity, export intensity is highest in smaller energy- and manufacturing-oriented areas,” says Joseph Parilla, a fellow at The Brookings Institution’s Metropolitan Policy Program.
For example, the Indiana town of Columbus — home to the engine company Cummins as well as a manufacturing cluster based around machinery manufacturing — was most dependent on export activity as of 2015, according to Parilla’s analysis of federal data.
Several other communities in the Midwest are heavily reliant on exports (see table). They tend to have clusters of companies involved in sectors such as RV manufacturing, food and chemical production, paper and the marine industry. If these sectors had foreign tariffs placed on their products, their home communities could face negative consequences relatively quickly.
But export dependency can work both ways, Parilla notes. “Smaller cities have also seen some of the most damaging effects of globalization” due to the loss of manufacturing plants and jobs to lower-cost countries.

 

Article written by Ilene Grossman, staff liaison to the Midwestern Legislative Conference Midwest-Canada Relations Committee.