Wednesday, March 07, 2018

Trump's steel and aluminum tariffs could help some state and local economies, hurt others

Brookings Institution chart; click on the image to enlarge it.
Local and state lawmakers may be wondering how their economies will be impacted by President Trump's announced tariffs on steel and aluminum.

The tariffs could help metro areas and states that produce steel and aluminum.  "The argument in favor of the tariffs is that they are a counterweight against foreign producers of aluminum and steel that have flooded the U.S. market, putting American companies at a disadvantage. And for those metro areas and states that concentrate steel and aluminum production, this may represent a welcome relief," Max Bouchet and Joseph Parilla report for the Brookings Institution.

The tariffs could hurt state and regional economies in two different ways. First, because of retaliatory tariffs on key American exports. Canada, China and the European Union have already indicated that they will respond to U.S. steel and aluminum tariffs by increasing tariffs on American-made products. Second, because higher prices on imported steel and aluminum could hurt industries that rely on them, like auto manufacturing, brewing and construction, as well as the state and regional economies that benefit from those industries.

"The states that rely most on steel and aluminum imports as a share of their total import base cut an interesting economic geography. In Missouri, Louisiana, Connecticut, and Maryland, aluminum and steel imports account for at least 5 percent of total state imports, double the share of the nation’s 2 percent total," Bouchet and Parilla report. "The impact of these tariffs on the U.S economy would be the strongest if Trump’s Monday tweet signals the inclusion of NAFTA. Canada and Mexico supply together 32 percent of U.S aluminum and steel imports. Canada alone accounts for one-fourth of U.S imports in these commodities."

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