Monday, 30 January 2017

Trump Country Might Suffer More in a Trade War, Study Says

In World Economy News 31/01/2017

Should the U.S. get embroiled in a trade war, communities that voted for Donald Trump are likely to take a bigger hit than those that voted for Hillary Clinton, according to a study by the Brookings Institution.
Brookings measured what it called the export intensity of urban areas around the country — meaning local goods and service exports as a percentage of local GDP in 2015 — to get a picture of those places most dependent on access to the global economy. The most export-intensive places tended to be smaller cities in the Midwest and Southeast — solid Trump country — rather than the big metropolitan areas that went heavily for Mrs. Clinton.
“Trump communities are relatively more reliant on trade,” said Mark Muro, head of Brookings’s metropolitan policy program. “They are smaller communities with less flexibility” to adapt to a cutoff in trade.
“Disruption could be especially troubling for those places,” he said. Brookings said it traces exports back to the point where value is added via production, rather than where goods and services are shipped. The latter gives too much weight to big ports.
Columbus, Ind., a center of machine-making, is the most export-reliant city in the country, Brookings found. The GDP of the city of 46,000, which voted 2 to 1 for Mr. Trump, is 50.6% dependent on exports. Three other Indiana cities — Elkhart, Kokomo and Lafayette — are among the top 10 cities dependent on exports.
The work by Brookings researchers is in some ways the complement to the better-known work of economists David Autor, Gordon Hanson and David Dorn, who identified the localities most vulnerable to Chinese import competition.
Both the export-intensity analysis and the China-import-vulnerability research look at the impacts of trade on localities rather than treating trade as a single, nationwide phenomenon. The job gains and losses from trade often seem minor compared with a job market of 145 million, but changes in trade flows can impoverish or enrich individual communities, especially those that depend on one or two industries.
In some cases, small cities that are export powerhouses are also fending off Chinese competition. Decatur, Ala., a center for steel, refrigerator, chemical and rocket manufacturing, is No. 7 on the Brookings export-intensity listing, with exports accounting for 29.1% of local output. But it’s also in the top 5% of localities affected by Chinese competition.
These trade crosscurrents help explain why voters in export-dependent areas often turned out so heavily for Mr. Trump. Many voters focused on the job loss from imports rather than job gains from exports, when their communities had both.
“A lot of these small communities have maintained export specialization in the face of significant competition,” said Brookings researcher Joseph Parilla. “They have had their export base erode but are still disproportionately reliant on global markets.”
The nation’s biggest export hubs are large cities with highly diversified economies, which would make it easier for them to adapt to disruptions caused by a trade war. According to Brookings, the biggest exporters are New York, Los Angeles, Houston, Chicago, Dallas and Seattle. The think tank estimates that Mrs. Clinton carried counties accounting for 58% of the nation’s exports, compared with 42% for President Trump.
But measuring export intensity provides a very different look at the impact of trade, with smaller communities dominating the list. Places that voted for Mr. Trump had an overall export-intensity of 13%, Brookings found, compared with 10% for counties that voted for Mrs. Clinton.

Source: Dow Jones