In a recent Milwaukee Journal Sentinel article (via Pulitzer) Rick Barrett notes that “manufacturing is coming home” to Wisconsin. Does the data support this?
The U.S. International Trade Commission’s April 2021 antidumping ruling became a pivotal moment in a business trend called “reshoring,” which is the return of work from abroad to a company’s home country. . Reasons could include trade wars and tariffs.
Relocation could take place and the manufacturing sector could be booming. At the national level this appears to be the case, as noted in this paper. job.
For Wisconsin, the data is more ambiguous. And in any case, I would be careful not to attribute the possible rebound to customs tariffs. First, the data, normalized to 2018M06, just before the implementation of Section 301 tariffs (market access/China).
Figure 1: Hours worked in the manufacturing sector (blue), employment in the manufacturing sector (tan) and real value added in the manufacturing sector (green), all in logs, 2018M06=0. Hours worked calculated by multiplying employment by average weekly hours. Value added in 2017 dollars coupled with value added in 2012 dollars using the 2018 ratio. The NBER has defined the peak to trough dates of the recession in gray. Red dotted line at 2018M03, notification of actions under Sections 232 and 301. Green dotted line upon passage of the Inflation Reduction Act. Source: BLS, BEA, NBER and author’s calculations.
It is worth noting that employment and value added were increasing before the imposition of tariffs under the Trump administration. Likewise, all series were up before the 2021 anti-dumping action discussed in the article. Value added peaked in the fourth quarter, the same month when Capacity increase at Stoughton plant, which could be a coincidence. Since then, the added value has decreased. (Value added is calculated based on factor payments in Wisconsin, but price-cost margins and taxes at the national (sectoral) level — so it is a bit problematic to infer too much from movements in this series. It does not There is no “manufacturing production” index at the state level compared to the national-level series calculated by the Fed).
In general, it is difficult to associate increased manufacturing activity in Wisconsin with specific trade policies. As the article notes, this could be an offshoring due to supply chain issues that are obscuring – or even driving – manufacturing industry trends (I myself think the value of dollar and national macroeconomic influences could be equally important).
What about Wisconsin exports (keeping in mind that the statistics do not reflect all the value added coming from Wisconsin)?
Figure 2: Wisconsin manufacturing exports, billions of 1999 dollars, seasonally adjusted by the author using X-13, at annual rates (blue). Nominal exports divided by the manufactured export price index. The NBER has defined the peak to trough dates of the recession in gray. Source: BEA, BLS, NBER and author’s calculations.
Wisconsin’s manufactured exports (as reported) are indeed about 10% higher than before the pandemic. But after the tariffs were imposed, exports actually fell for a time – perhaps due to other countries retaliating against Trump’s tariffs.
A caveat regarding how tariffs would lead to an increase in employment is to realize that although tariffs on certain products (e.g. steel) could lead to an increase in employment in the steel industry, the resulting higher cost of steel – both produced domestically and abroad – would increase costs. of production in downstream industries (think washing machines, cars), which tends to reduce employment there. This is true even if there is no retaliation from our business partners.
As a side note, regarding steel tariffs, we do not produce raw steel in Wisconsin, but we do (or have manufactured) some vehicles (MRAP for example).
This reasoning (based on empirical estimates) explains why Cox and Russ concluded that the net impact of Trump’s tariffs was to reduce overall employment.
In the above, I have not provided a complete answer as to whether employment and production are higher due to tariffs. This would involve using an input-output model to track how tariffs have increased input costs in Wisconsin production (of manufactured goods, etc.), and taking into account other elements such as domestic demand, exchange rate fluctuations, and economic growth in the rest of the world. We would probably want to know to what extent exports have declined due to trade retaliation caused by our tariff measures.
