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Introduction

1. Main Findings
2. Red States vs. Blue States
3. Ask the Experts
4. Methodology

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/31888/geochart.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2kNC9pe;  

Overall Rank	State	Total Score	Effective	Annual	Difference	Annual	Adjusted
1	Alaska	5.69%	$3,066	-46.85%	$4,237	6
2	Delaware	6.02%	$3,246	-43.74%	$3,830	1
3	Montana	6.92%	$3,728	-35.37%	$3,561	3
4	Wyoming	7.45%	$4,015	-30.40%	$4,312	2
5	Nevada	7.72%	$4,161	-27.86%	$4,028	7

 

Red States vs. Blue States

 

Ask the Experts < >

• David E. Kaun Professor of Economics at University of California-Santa Cruz
• Antonio V. Saravia Assistant Professor of Economics and Director of the BB&T Center for Undergraduate Research in Public Policy and Capitalism at Mercer University
• Malcolm Fairbrother Lecturer in Global Policy and Politics in the School of Geographical Sciences at the Cabot Institute-Centre for Multilevel Modelling at University of Bristol
• Robert Dayley Professor in the Department of Political Economy at The College of Idaho
• Harlan Holt Visiting Assistant Professor of Economics at Union College

David E. Kaun Professor of Economics at University of California-Santa Cruz Who in the US will be most affected by a trade war with Mexico? First off, consumers in both countries, with either fewer choices of goods or higher prices on remaining options for both consumers. Mixed bag regarding producers - those competing with imports clearly would benefit; those using imports in producing final products losing. Bottom line is that net effects for both countries would be clearly negative. And this says nothing about other non-trade relations. What would be the economic impact to the US of pulling out of NAFTA? Probably hard to disentangle the economic from political impacts. Both, as is the case with two country trade wars (see above) - there may well be some firms and workers whom might benefit from the added protection, but net effect is clearly negative for the US. And again, given the very significant interrelationship between the economic and political, an easy and obvious call. What is the likelihood that a trade war with Mexico puts either country into a recession? Not sure about the impact on Mexico, but a trade war alone would likely not have much impact on the overall economy, as distinct from some relevant sectors and consumers. But in this case, a trade war with Mexico seems more likely the result of a broader set of semi-insane, or at least inexplicable policies under way with the recent US election. And these combined, certainly don't bode well for our short term economic viability. What is the best way to encourage companies to keep production facilities in the U.S., other than a tax on imports? This in a sense is pretty easy, and not likely to be an overnight solution. Simply put, make the hiring of American workers an economic advantage to the business community - at least a much larger portion of this community than is the case now. And the quality of American workers isn't something willed by government. It begins a good bit before the individual enters the workforce. That is, the experiences that the young among us face both in their families and in their schools. The latter is at least to a significant extent within the purview of government and the support, both local and national, provided to our entire school system. Alas, another way to answer this question is to find a way to change the dominant mode of thinking that abounds in governments at all levels, and most obviously at the national level. The denigration that seems alive and well of late regarding our public school system is an unmitigated tragedy. Antonio V. Saravia Assistant Professor of Economics and Director of the BB&T Center for Undergraduate Research in Public Policy and Capitalism at Mercer University Who in the US will be most affected by a trade war with Mexico? Everybody will be affected. Start with the wall. If less Mexican immigrants cross the border because of a wall at the border, the supply of labor in the US will decrease and, consequently, the price of labor will increase. As a result, the price of everything manufactured or produced in the US using labor will increase. This will reduce sales and hurt both producers and consumers. If, on top of that, we use a 20% tax on Mexican goods to pay for the wall, then the negative effect will be even bigger. Part of that tax will be transferred to consumers (mostly Americans, not Mexicans) and part will be absorbed by companies. Both will be worse off. If, the wall and the tax on Mexican goods generate a retaliatory action from Mexico in terms of tariffs or other trade barriers, then the negative effects will increase further. Yes, American producers who produce substitutes to Mexican imports will sell more and perhaps hire more workers, but the overall net effect will continue to be negative. What would be the economic impact to the US of pulling out of NAFTA? It would be disastrous. Mexico and Canada have always been among the top 5 major US trading partners. Mexico and Canada account for about 34% of US exports and 26% of US imports. Pulling out of NAFTA would affect American producers who will sell less in these two countries and American consumers who will have to pay higher prices for goods imported from these two countries. That would mean that we will have less resources to buy goods from the US and other countries as well as to save and invest. Pulling out of NAFTA will diminish the ability of the US economy to grow. What is the likelihood that a trade war with Mexico puts either country into a recession? Total trade with Mexico and Canada reached about $982 billion for 2016, representing about 30% of US’s total trade with the rest of the world. It is significant. A trade war with Mexico will definitely reduce those numbers. It is difficult to say if the countries will fall into a recession. The US is an $18 trillion economy. It does take a lot more to generate a recession in the US, but a trade war with Mexico will not be a good signal and will generate uncertainty as to the future of other trade agreements. What is the best way to encourage companies to keep production facilities in the U.S., other than a tax on imports? The important question here is: Why do we want companies to keep production facilities in the US? For example, if the US does not have comparative advantage in manufacturing (because the cost of production are higher than in other countries), why do we want to keep manufacturing here? It will be better for the economy to use our scarce resources to do something else in which we do have comparative advantage (financial services, movies, etc.) and import manufactured goods from other countries. In cases in which we do have comparative advantage and it makes sense to make it in America, the best way to keep those companies here is to make their lives easier. Reduce taxes, don’t charge “exit fees” when companies intend to leave, reduce regulatory burden and continue to embrace international trade. Malcolm Fairbrother Lecturer in Global Policy and Politics in the School of Geographical Sciences at the Cabot Institute-Centre for Multilevel Modelling at University of Bristol Who in the US will be most affected by a trade war with Mexico? In the short run, the owners and employees of firms that export to Mexico. If the Mexican government were to raise barriers against U.S. goods or services, producers of those goods and services would lose profits and/or their jobs very quickly. In the longer run, consumers - that is to say, everyone in the United States - would lose out, because the things they buy would get more expensive. The only net beneficiaries in the U.S. would be people who produce goods and services that compete directly with Mexican imports - like, say, avocado growers. What would be the economic impact to the US of pulling out of NAFTA? Nobody can say precisely - it's important to acknowledge that uncertainty, above all. There would certainly be substantial adjustment costs in the short- to medium-term. Firms would have to reorganize themselves in a post-NAFTA world, closing down facilities in some parts of the U.S., Mexico, and Canada, and opening new ones elsewhere. In the longer term, the earnings of lower-skilled workers in the U.S. might rise a bit, given that they would not be competing as much with counterparts in Mexico. What is the likelihood that a trade war with Mexico puts either country into a recession? Very high for Mexico, given that its economy is so much smaller. Harder to say for the U.S.; it would depend on the severity of the conflict. In general, trade does not have big impacts on macroeconomic conditions - other factors, like monetary policy, are much more consequential. What is the best way to encourage companies to keep production facilities in the U.S., other than a tax on imports? Improving the quality of the U.S. education system and physical infrastructure would be a good start. There will likely be some out-migration of firms given the unwelcoming stance of the Trump Administration towards immigrants, who provide essential workers for many firms and industries. More generally, it's important to keep in mind that the U.S. economy has been growing in recent years, and the unemployment rate has been declining; for manufacturing specifically, employment is down but output is up. Stopping the outflow of facilities is not necessarily a great way to improve the circumstances of American workers or businesses. Robert Dayley Professor in the Department of Political Economy at The College of Idaho Who in the US will be most affected by a trade war with Mexico? What would be the economic impact to the US of pulling out of NAFTA? In Idaho and the Pacific Northwest a trade war with Mexico will create observable harm to agriculture. Over 20% of Idaho’s GDP is in agriculture. Policies to expand trade have benefitted Idaho in the past. The TPP would have boosted Idaho’s economy. Now we are headed in the other direction. Over 60% of agricultural exports from Idaho go to Canada and Mexico. If those markets start to dry up due to retaliatory tariffs in a US-Mexico trade war or blowing up NAFTA, just where does that 60% of Idaho product get sold at current prices and profits? Combined with a trade war, increased immigration enforcement would severely harm the state’s agricultural sector. Upwards of 70-80% of all workers in Idaho’s dairy industry, for example, are undocumented migrants. Behind Wisconsin and California, Idaho is the country’s third largest dairy producer. Fruit production in Idaho and the Northwest is also wholly dependent on seasonal labor from Mexico and Latin America. Growers and dairy farmers want nothing to do with checking for immigration documents. They benefit from the migrant labor and have no hope in attracting Americans to work in such heavy labor jobs were pay is low and seasonal. The idea of “sanctuary cities” is sort of a misnomer in rural Idaho. We are talking about “sanctuary farms” where seasonal workers come and go throughout the year depending on the work availability. Will the Trump Administration also threaten federal funding to rural communities where undocumented workers live in sanctuary agricultural labor arrangements? Will they remove subsidies for the dairy industry in the Farm Bill if the dairy industry doesn’t assist in deporting their own workers to Mexico? A trade war combined with strict immigration enforcement and deportations has little hope of improving Idaho’s agricultural industry (see more here). What is the likelihood that a trade war with Mexico puts either country into a recession? Somewhat likely. However, the forecasted effects are so well understood by key stakeholders that I doubt the Trump Administration can successfully pull it off if they try. The idea of a 20% tariff with Mexico will never get through a Republican-controlled Congress. The blowback from big business will be so swift - before and during such a trade war with Mexico - that it is likely to never happen or be short-lived. What is the best way to encourage companies to keep production facilities in the U.S., other than a tax on imports? A radical idea: Nationalize health care to help corporate America. In Sweden, Norway and Denmark, globally competitive industries and firms persist in part because their governments keep corporate taxes low and also support big business by taking on the costs of public health care, pensions and benefits as a state expense. Corporations don’t have to bear the costs of public goods if the government provides them. These governments also invest in R&D and support entrepreneurship through government programs. Imagine how much a nationalized single-payer health care system in the US would free up corporate balance sheets. Firms could operate more competitively without the responsibility of paying for the health insurance premiums of their employees. A robust and universal nationalized healthcare system could be a pro-business proposition. Harlan Holt Visiting Assistant Professor of Economics at Union College Who in the US will be most affected by a trade war with Mexico? Trade barriers protect local industries by shielding them from helpful foreign competition. This means that older, inefficient firms will be allowed to continue to produce and the primary effect will be higher prices on consumers. Our largest imports from Mexico are automobiles and machinery. Even "American" car brands such as Dodge and GM have at least some of their production based in Mexico. So you can expect the consumers in these markets to be harmed the worst in a trade war. Of course, as with any policy that causes prices to rise, it's the poor who will suffer the greatest burden. In addition, Mexico is also the second largest market for US exports in the world. So you can expect US exporters and their employees to feel the pain as well. What would be the economic impact to the US of pulling out of NAFTA? NAFTA has led to increases in the trade sectors of all three North American partners. Because the US is such a huge and well diversified economy however, its impact on US GDP by most estimates has been rather small (but still positive). So the direct economic impact on the US is likely negative (higher prices, lower GDP), but only modestly so. It's important to note that trade with Mexico won't completely go away if we pulled out of NAFTA. It would just be more difficult and more costly. Mexico would likely be harmed more than the US given that trade with the US is a more important part of its economy. What is the likelihood that a trade war with Mexico puts either country into a recession? Very unlikely. A trade war would be harmful for us, especially for consumers and the poor, but hardly the kind of cataclysmic event that would cause a significant recession. While the effects would be more harmful for Mexico, which depends on the US to place its exports, it's still pretty unlikely that this would cause any kind of extreme event like a recession. What is the best way to encourage companies to keep production facilities in the U.S., other than a tax on imports? It's very frustrating that the obvious and best solutions are scorned by the left and ignored by the right. If we want companies and jobs to stay in America, we should give them incentives to do so. The corporate tax should be eliminated completely, capital gains and other similar taxes on capital should be reduced, the US tax code (all ~75,000 pages of it!) should be overhauled and greatly simplified, and the regulatory burden which requires firms to hire vast armies of tax accountants, lawyers and compliance officers should be dramatically lessened to allow US companies (especially small businesses) to compete again. Finally, poor labor policy has been making US labor more expensive to hire since the Great Depression. If we want our workers and production to be competitive against low-priced foreign labor, then stop making US labor more expensive. Higher minimum wage laws should be resisted, union shop laws should be repealed with right-to-work legislation, and payroll taxes should be eliminated. All of these things are reasons why we lose production to other countries.

Methodology

 

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