Commentary Type

Trade War Would Yield Ohio Casualties

Marcus Noland (PIIE)


Ohio stands to lose 190,000 private-sector jobs if Donald Trump is elected president and fulfills his campaign pledge to unleash trade wars with China and Mexico. The Columbus area alone could lose nearly 30,000, with the bulk of those losses in Franklin County. And this is just a small taste of what might happen nationally.

Trade issues have seldom reached the top of the US political agenda. For decades, a consensus in favor of an open US-led trade system held. But the 2016 election has marked a departure from this pattern. Both major candidates, Hillary Clinton and Donald Trump, oppose the Trans-Pacific Partnership (TPP), the single major trade initiative under consideration. This opposition is regrettable: TPP would deliver significant gains to the US economy, and its failure would be a blow to both the US economy and US standing in Asia.

But Trump goes much farther than Clinton, promising punitive tariffs on China and Mexico, at times advocating firm-specific tariffs (which are historically unprecedented, illegal, and probably unconstitutional); talking about abrogating “disastrous” free trade agreements; and even considering withdrawing from the World Trade Organization. That last move, if implemented, could undo 80 years of economic diplomacy and plunge the United States back into the Smoot-Hawley world of the Great Depression.

The sobering reality is that legal experts believe that under a variety of statutes, the president has considerable executive authority to do these things. Even if Trump were ultimately stymied by the Congress or the courts, that process would be time-consuming, giving him ample opportunity to wreak havoc.

Using conventional economic models based on national income, employment, and other macroeconomic variables, together with models capturing the sectoral linkages within the economy, the nonpartisan Peterson Institute for International Economics found that in a scenario in which the United States imposes tariffs on China and Mexico (which together account for one-quarter of US trade) and they respond in kind, the economy would experience a significant slowdown. The worst year would be 2019, before the economy slowly began recovering from the shock. (The job loss figures refer to 2019.) Hiring would subsequently pick up, but there is no guarantee that displaced workers would be reemployed at their previous level of wages or salary.

Capital goods industries would be hardest hit. The trade shock would then propagate throughout the economy, also destroying jobs in sectors such retail trade, restaurants, and temporary employment agencies. Millions of jobs that appear unconnected to international trade—many of them filled by lower-skilled and lower-wage workers—would be at risk.

Washington would be the worst-hit state, experiencing a loss of private-sector employment of more than 5 percent. However, a broad array of states, including Ohio, would suffer employment declines of more than 4 percent. Los Angeles County would be the worst-affected county in America (176,000 jobs lost), followed by Cook County, Illinois (Chicago) (91,000) and Harris County, Texas (Houston) (89,000).

In Ohio, the Cleveland area would see nearly 43,000 jobs disappear, with most of those coming in Cuyahoga County. Cincinnati could lose 17,000 private-sector positions.

Even scenarios in which retaliation is limited, Ohio could be hurt. For instance, if China were to stop importing US airplanes, the state that was first in flight could lose more than 8,000 jobs, 2,700 of those in Hamilton County. Another 2,000 jobs could be lost in Ohio if the government of China were to instruct its state-owned enterprises to stop buying US business services.

There’s a reason liberalizing international trade has been the policy of the United States for the past 70 years. Trade contributes to income and productivity growth. The last time the United States enacted protectionist trade policies, cutting itself off from the rest of the world, it worsened the Great Depression. While Clinton’s opposition to the TPP will cost America potential income gains and will undermine US leadership in Asia, Trump’s proposals could sink the US economy.

Clinton’s policies amount to a fender bender. Trump’s would be a head-on collision.

Clinton’s policies amount to a fender bender. Trump’s would be a head-on collision. When asked about trade wars, Trump insouciantly replied, “Who the hell cares about a trade war?” In these trade wars, American causalities will be numerous and disproportionately drawn from the ranks of lower-income citizens—many from Ohio.

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