Wednesday, March 21, 2018

Smaller metro areas, which lag economically behind rural, could have most to lose from tariffs, liberal analysts say

President Trump defends his tariffs imported goods as a defense of "forgotten" American workers, but liberal columnist Greg Sargent of The Washington Post questions whether the president's actions will have the advertised effect. To start his argument, he uses from the Brookings Institution, shows that areas "that continue to capture and drive the largest share of the nation’s prosperity, amid the digital and information revolution, are the ones that, generally speaking, did not support Trump for president. The areas of the country that supported Trump overwhelmingly are the ones that continue to get left behind economically — even with Trump in office."

The data show that rural areas lag, as usual, but small metropolitan areas, those with fewer than 250,000 people, lag even more behind large metros, those of 1 million of more. Here's a chart:

"Hillary Clinton won big in areas with more than 1 million people," Sargent notes. "Trump won, but just barely, in areas with 250,000 to 1 million people. And Trump won huge majorities in areas with fewer than 250,000 people and in rural areas — the areas that are being most dramatically left behind, even with Trump in office. When you dig to the county level, the trend is even clearer. . . . Clinton counties produced almost two-thirds of the country’s new jobs and nearly three-fourths of its economic growth in recent years."

Sarget acknowledges that many “forgotten Americans” are economically stranded, but notes other Brookings research, that shows the divide "is being largely driven by the digitalization of the economy. And this, too, overlaps with the Clinton-Trump divide." He quotes CNN political analyst Ron Brownstein: "Clinton won preponderant majorities in the communities where the highest share of workers perform jobs that require intensive use of computerized technology — most of them larger cities, many along the two coasts. Trump overwhelmed her in the mostly smaller interior places that haven’t attracted nearly as many well-paying, information-savvy jobs."

Sargent adds, "So the Trumpist narrative is right, in the sense that many of the yields of economic progress are being unevenly distributed along regional lines, and the non-urban areas are on the losing end." But he says Mark Muro of Brookings "believes that there isn’t any particular reason to think that these tax cuts — or the new tariffs — will make a big dent in these regional disparities. For one thing, he argues, digitalization is having a profoundly polarizing effect on the economy. As he put it recently, this is producing 'deep economic and technological long waves. And while we are in the midst of this long wave, we are not near the end of it.'"

If this is right, then even boosted growth and investment don’t ensure that the yields will be adequately distributed to mitigate that trend.

Moreover, Trump’s tariffs are narrowly targeted toward the steel and aluminum industries, and many economists believe that more workers in other industries that use those materials will be hurt. What’s more, as Jim Tankersley points out, a trade war produced by tariffs could actually harm small metro areas — that rely heavily on exports — in states that went for Trump. The combination of job losses in other industries and trade war dislocations could also hurt the export-reliant Rust Belt — i.e., Trump country.

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