Donald Trump has pledged to impose burdensome tariffs on goods imported from Mexico and China if elected — actions that experts have warned could provoke economic retaliation with potentially severe consequences for American workers. A new report suggests one reason these dire forecasts have not fazed his supporters.
While workers across the country risk being put out of a job under Trump's policies, the report identifies several places where Americans would have the most to lose. Generally speaking, they are the major cities where Trump is especially unpopular.
The data illustrates the conflict that has caused chaos in the Republican Party this year, a conflict between urban business elites in fields such as software and banking and conservatives in many other parts of the country who are skeptical of global trade.
The report, published by the Peterson Institute for International Economics, forecasts the economic effects of foreign countries' possible responses to new tariffs imposed by a Trump administration. Overall, the predictions are grim. In a worst-case scenario, unemployment would increase to 8.6 percent by the end of Trump's first term if the Republican nominee incites a full-blown international dispute over trade policy.
However, the authors of the report say it's more likely that Beijing would retaliate against Trump's tariffs with measures targeted to injure specific sectors of the U.S. economy, without the diplomatic headaches that would result from a broad tariff on all U.S. exports.
While these tactics would have a more modest effect on the economy in general, they would be extremely detrimental for the affected sectors.
Crucially, the Chinese government could direct companies it owns to stop contracting with U.S. firms for the nebulous but lucrative sector of "business services." The varied firms that make up this sector — which includes much of both Silicon Valley and Wall Street — provide services of various kinds to businesses around the world, such as information, software and banking.
Many of the services these companies provide are intangible, making them easy to buy and sell across international borders. The sector is international by nature and dependent on free trade. These firms are also concentrated in major coastal cities.
Marcus Noland, one of the authors of the report, suggested that state-owned companies in China that rely on firms such as Bloomberg and Thomson Reuters for information could terminate those relationships. McKinsey could lose Chinese clients to consulting firms in Europe. For enterprise software, Chinese companies might choose SAP, a German company, over a U.S. firm such as Oracle.
Noland and his colleagues forecast that these maneuvers would put Americans out of work in Silicon Valley as well as other bastions of economic prosperity, including Los Angeles, New York, Boston, Seattle and Washington. Employment in the sector would decline by 85,000, relative to current projections.
Chinese retaliation would also negatively affect some blue-collar towns as well, depending on Beijing's response.
For example, if China stopped purchasing aircraft built in the United States, many residents of cities such as Seattle, Wichita and Hartford would be out of work. The researchers project that 179,000 fewer Americans would be working in the industry if Chinese buyers stopped purchasing aircraft.
American agriculture is another sector that is vulnerable to retaliation. For instance, employment along the Mississippi River in the area surrounding Memphis would be devastated by a Chinese embargo on U.S. soybeans. In Sharkey County, Miss., for instance, an embargo could reduce employment by 40 percent.
The researchers also considered the possibility that China retaliates in kind, with a broad tariff like the one Trump has proposed. The disruption from a retaliatory tariff would be more acute and more widespread geographically.
In terms of the number of workers put out of a job, the worst effects would be indirect as overall economic weakness forced consumers to stay at home. In retail and wholesale trade, almost 600,000 fewer people would be working. In restaurants, the total would approach 250,000 workers in the worst-case scenario. Hospital employment would decline by close to 200,000 workers.
"People have a stake in this, and they may not even know it," Noland said.
The ramifications of this kind of conflict would be especially severe in a few industries. For example, about 1 in 10 workers who make construction equipment, truck trailers, semiconductors or plastics would be out of a job, according to the forecast.
The consequences would be worst for workers who make high-speed drives and gears, 10.2 percent of whom would lose their jobs. This major industry produces components for dynamos in power plants. Metalworkers, aluminum producers and iron miners would also be negatively affected.
Besides the country's most prosperous cities, a range of other kinds of places would be negatively affected by a broad tariff. Midwestern, industrial cities such as Detroit, Pittsburgh, Cleveland and Louisville would record some of the greatest declines in employment in the worst-case scenario analyzed by the researchers.
So would Chicago, according to the results of the analysis, which Noland suggested could reflect the city's continuing importance to U.S. agriculture. Economic weakness would also affect Las Vegas and Miami, presumably as Americans put off their vacations.
Noland said that in the long term, as domestic manufacturers adjust to the tariffs on goods from China and Mexico and begin producing more goods that are now produced abroad, employment could expand in those sectors. But it is likely that fewer people would be working overall.
Noland also said the mathematical model of the economy that was the basis for his group's analysis was not suited for forecasting the uncertain the specific economic effects of a tariff very far in the future.
Moody's, the private-sector research firm, developed the model on which the forecasts are based. This model has been criticized by liberal economists, including J.W. Mason of the Roosevelt Institute in Washington, for exaggerating the negative consequences of tariffs. Mason argues that U.S. manufacturers would be able to meet domestic demand in response to tariffs more rapidly, keeping prices in check and the economy moving.
If so, the broader, indirect effects on restaurants and similar establishments would be limited — although there would still be disruptions in specific sectors such as aerospace and business services.