Trade War’s Pain May Deepen Even as Tensions Abate

Still, the factory sector remains the centerpiece of Mr. Trump’s economic appeal to voters, especially in the industrial states that lifted him to the White House in 2016. “This is a blue-collar boom,” Mr. Trump said on Tuesday in a speech in Davos, Switzerland. “We have created 1.2 million manufacturing and construction jobs — a number also unthinkable.”

Only 197,000 of those jobs were created last year, however, a sharp deceleration from the first two years of his administration. The United States created 1.1 million manufacturing and construction jobs in the three years before he took office.

There are signs that in the places most exposed to the trade war — particularly Wisconsin and other Midwestern states — those effects have spread beyond the industrial sector and begun to affect consumers. In a recent working paper, Michael E. Waugh, an economist at New York University, found that automobile sales were growing significantly more slowly in the counties most affected by the tariffs than in the rest of the country. Those places have also seen slower job growth in their retail sectors.

“Things are spilling over in these communities that are relatively more affected,” Mr. Waugh said. “New York is all fine. But there are places in the U.S. that are really struggling.”

The Midwest went through a similar economic soft patch in 2015 and 2016, when falling oil prices and other factors caused a mini-recession in the industrial sector. Mr. Waugh said he saw parallels — although it isn’t clear how they will play out given that this time Mr. Trump is the incumbent.

“Those places slowed down” in 2016, Mr. Waugh said. “Those places influenced the election. And now what do you have today? You have those same places slowing down, and they’re looking pivotal in the election again.”

While some of the effects of the trade war could soon be reversed, others may last longer.

“A lot of customers moved their production out of Asia to Europe and some of them moved their production from Asia to Mexico, so there’s a migration,” said Lidia Yan, the chief executive and co-founder of Next Trucking, a start-up that matches shippers and truckers.

Article source: https://www.nytimes.com/2020/01/22/business/economy/trade-economy.html?emc=rss&partner=rss