The trade war is escalating with more and more threats and harmful actions. Tariffs are becoming more widespread, and prices for both imports and domestic products are rising. Even though a small number of jobs may be saved or created, the consequences overall are bad for Illinois, its residents, and its businesses. The same is true nationally.
Tariffs not only raise prices for imported goods, they also permit domestic companies to raise prices as well. At the same time, however, retaliatory tariffs depress exports. While a few companies may benefit from higher prices, many more will be harmed by higher costs. The few job gains in industries that benefit will be more than offset, perhaps massively offset, by job losses in all of the industries that are harmed. And, of course, Illinois residents will ultimately pay the price for this through higher prices and job losses.
Illinois is the sixth largest exporter in the country. Important exports are machinery, computers, chemicals, transportation equipment, and agricultural products. Let’s consider agricultural products. Leading exports are soybeans, corn, pigs, cattle, wheat, oats, sorghum, and sheep. Because of the trade war, export sales are depressed and prices are falling for these products. For example, soybean prices are down 15 percent. There are 25 billion pounds of meat stored, and prices and exports are both falling.
Illinois farmers are being severely damaged by this. The administration has just announced a $12 billion aid program for farmers, recognizing the harm that is being inflicted on agriculture by its trade war, but this won’t really help. First, it’s too small and does not cover all products that are affected, but second, and most importantly, the rest of us have to pay for this one way or another. We’ll have less money left for other purchases, so both farmers and other companies will be harmed when we cut back.
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Also consider Illinois manufacturing. Major exports include machinery and transportation equipment. Both tariffs on imports by other countries and higher prices for steel and aluminum that raise costs and prices hurt exports as purchasers can and will turn to other countries. Other major export sectors are chemicals and computers, and they will be harmed as well as exports fall due to cost and price increases and tariffs on their sales.
Construction and farm equipment, along with machine tools, are major sources of employment in Illinois. Tariffs are increasing costs for these companies, making them less competitive and curtailing sales. While exports may be reduced, cost increases and domestic price increases will also cause declines in domestic sales. General Motors, for examples, announced that because of steel and aluminum price increases resulting from tariffs, they were reducing their profit forecast. The same is true for other companies such as appliance manufacturers. Coke just announced what it identifies as an unusual mid-year price increase due at least in part to tariffs on imported metals. These will not be isolated cases.
All of these price increases leave less money for consumers to spend. As the effect of this ripples through the economy, it will cause lower sales and profits. If the trade war escalates, these effects will increase, and there will be an economic slowdown or recession. In that case, even the few industries that may have benefited will, in the end, be harmed. There are no winners in a trade war, only losers, and those losers will include Illinois residents and businesses.