The Economic Impact of the Trade Skirmish of 2018 on the Nation and Ohio

Ohio is front and center in the trade conflict sparked by the federal government’s initiation of tariffs in 2018 to protect the U.S. steel and aluminum industries. Ohio is also a state with much at risk if national security trade protection is extended to the motor vehicle assembly and parts industries. 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 it’s 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.

We have two objectives for this public policy briefing. The first is to document and clarify the moves and counter-moves in 2018’s international trade fight. The second is to discuss the economic impacts of the trade skirmish on the nation in general and Ohio in particular.

This policy brief proceeds in seven steps:

• The legal weapons the U.S. has deployed in the trade actions of 2018 are described in the first section.
• The second is a presentation of the trade actions: Who did what to whom and when.
• The third is a review of available economic estimates of the impact of the trade actions and possible additional measures. Evidence is presented on the impact of the 2002-2003 Bush steel tariffs, as are the results from four econometric models on the expected impact of the current ratcheting up of duties across the globe.
• The fourth portion of the brief examines the performance of the aluminum and steel, or metal-making, industries to determine whether the imposition of protective duties, or the anticipation of their imposition, had an economic impact. We present the metal-making industry data in sync with the way markets change—first looking for price movements that deviate from trend, then for changes in production levels, followed by increases in employment, culminating in potential investment in new or expanded plant and equipment.
• The fifth section is a review of the near-recession of 2015-2016 and its impact on the metals-making sector of the U.S. economy.
• Sixth, we look specifically at Ohio.
• The final section of the paper is our summing up.

Hill, Edward W. and Fran Stewart, The Economic Impact of the Trade Skirmish of 2018 on the Nation and Ohio. John Glenn College of Public Affairs and the Ohio Manufacturing Institute, March.