Ohio Is Still The Front Line Of Trade Skirmish, But Tariff Effects 'Confusing'

Last week U.S. Trade Representative Robert Lighthizer launched what Politico called a charm offensive on Capitol Hill amid high-profile trade deals being sought with China, and Canada and Mexico, among others. Some Democrats in the House majority have voiced concerns over the deal to replace NAFTA, especially over labor and environmental regulations.  

Ohio Republican U.S. Senator Rob Portman took to Bloomberg to say the deal has items the Democrats could like.

"There are new environmental standards, there are labor standards for the first time, there are changes again to intellectual property protection, and other things that I think lead in the end to this inescapable reality that this is a lot better than the status quo," he said.

The NAFTA replacement deal, known as the USMCA, is only one piece of the Trump administration's trade puzzle now. In the background of an on-going trade skirmish, we shouldn't forget tariffs in place.

"There are tariffs all over the place!" says Ned Hill, an economist and professor at the Ohio State University, and co-author on a policy brief looking at the effects of the trade skirmish nationally and locally.

Tariffs have been assessed on steel and aluminum imports into the U.S., which for many countries were suspended initially, but still ultimately prompted retaliatory tariffs. Hill says the biggest impacts are from Mexico, Canada, the European Union, and China.

"Independently, there was a series of tariffs on a broader spectrum of goods imposed against China," he adds. "And there's a proposed fourth-wave against China which would put a tariff against everything China brings into the United States."

There are also tariffs on washing machines, solar panels, soft wood lumber--the list is long.

And we can already see effects of this trade skirmish.

"We can, but it's confusing," Hill says. "Part of what's going on in the background to this is consumer confidence and consumer spending has just been incredibly strong. And then we had the tax cuts of January 2018, and we ran up a deficit of $1.5 Trillion. That deficit is bigger than the entire stimulus we put in place to counteract the Great Recession. So what's happened is that stimulus and consumer spending have done two things: one is it has powered the economy so that it offset the negative effects of the tariffs; and secondly it blew the deficits way out of proportion."

Hill says a lot of companies loaded up on inventory before the tariffs took place, thinking the tariffs would be a short-term reality. He says costs have also been passed along to customers, and supply chains are being rethought.

"We're now getting evidence that the future is a lot rockier," he says, but still, "a recession is not imminent."

Hill calls Ohio the front line of the trade war, as seen with Canada's response to tariffs which affected things like preserves (hitting Smucker's in Orrville), and soaps and detergents (there's a big P&G bottling plant in Lima.)

"It was very carefully constructed to give Ohio a dope slap," Hill says. "And we're now beginning to feel it."