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Ball State economist says tariffs will hurt Indiana's economy

June 28, 2018

Proposed tariffs on steel, aluminum, soybeans and corn are likely to have “small but meaningfully damaging effects” on Indiana’s economy starting within weeks, according to a new report from Ball State University economist Michael Hicks.

Hicks, who directs Ball State’s Center for Business and Economic Research, estimates that initial tariff-related job losses will total about 6,000 by the end of this year, rising to 14,000 in 2019 and declining to just under 11,000 jobs in 2025.

Hicks' said his study provides a rough estimate of the economic and employment effects in Indiana of the Trump administration's proposed tariffs on incoming steel and aluminum and retaliatory tariffs on outgoing soybeans and corn.

The tariffs, he said, will cause GDP losses each year between now and 2025, Hicks predicts, with the largest loss, $668 million, coming in 2019.

Stated another way, Hicks’ model shows the tariffs could reduce employment by 0.4 percent from where it would otherwise be by mid-2019, and they could reduce GDP by roughly 0.23 percent by the end of next year.

“This is certainly not an economic catastrophe at this point. But if you’re getting a noticeable impact in the first round of what looks to be an escalating trade war, I think everybody needs to be cautious,” Hicks said.

Indiana is especially vulnerable to tariffs, Hicks said, because of the importance that steel and agriculture play in the state’s economy.

Indiana employs about 22 percent of the nation’s steel workers, Hicks said, and accounts for about 13 percent of all automobile-related employment. Tariffs on steel have increased the price of U.S.-produced steel, which is good for the domestic steel industry but detrimental to the many industries that use steel in their own products.

The state also produced $6.2 billion worth of soybeans and corn last year, much of that sold to foreign customers.

Hicks said his policy statement, issued by Ball State on Thursday, represents his first attempt to analyze tariff impacts in Indiana. The situation is extremely difficult to quantify in detail at this point because the tariff discussion is ongoing and ever-changing, Hicks said.

This spring, the U.S. began imposing tariffs on foreign-made steel and aluminum. In response China imposed its own tariffs on U.S.-made products, including pork.

Both countries have since issued lengthy lists of additional proposed tariff items, and China’s list includes soybean and corn.

Other countries, including European Union members, Canada and Mexico, have also announced their own list of planned tariffs.
 

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