This post originally appeared at https://www.badgerinstitute.org/political-rhetoric-on-trade-poses-risks-to-wisconsin/

Our large manufacturing sector thrives on international commerce and would suffer from a trade war

What do economists know that politicians don’t?

A recent University of Chicago Booth School poll gathered reactions from the nation’s leading economists across the political spectrum on the candidates’ policy positions in the national elections just concluded.

Though economists famously argue about almost everything, this panel strongly opposed tariffs, with 96% agreeing or strongly agreeing the costs would be borne by American consumers.

Yet in the election, there was bipartisan consensus for protectionist trade policies. Both president-elect Donald Trump and his erstwhile opponent, Kamala Harris, favored tariffs, export controls, and restrictions on foreign direct investment. They were joined by House and Senate candidates from both parties.

How might ignoring the economists affect Wisconsin’s economy? Let’s take a look.

Populist trade policy at the national level is especially dangerous for Wisconsin workers. According to the Office of the U.S. Trade Representative, Wisconsin was the 20^th largest exporter of goods in 2023 among the states. Wisconsin’s $28 billion in exports represents 6.8% of the state’s economy. Exports are responsible for more than 100,000 jobs for Wisconsinites.

Table 1 shows the leading products exported from Wisconsin. Notably, many of these categories have shown significant growth since 2013. As Wisconsinites peruse this list of product categories, many will recognize an industry that employs themselves, family members or friends.

Table 1: Top 10 products exported from Wisconsinⁱ

Table 2 reveals the top destinations for Wisconsin exports. President-elect Trump has recently discussed renegotiating the trade deal his administration struck in 2018 to replace NAFTA, which he called “the worst trade deal ever made.” About NAFTA’s replacement, the US-Mexico-Canada Agreement (USMCA), Trump said, “Upon taking office, I will formally notify Mexico and Canada of my intention to invoke the six-year renegotiation provision of the USMCA that I put in.”

Of course, tariffs imposed by the new administration would first affect Wisconsin businesses through their imports. These would become more expensive, as tariffs are simply a tax on imports. Interestingly, a number of Wisconsin’s primary import categories (industrial machinery, electrical machinery, non-rail vehicles) overlap with our exports. This isn’t surprising, as it reveals how the supply chains that Wisconsin businesses rely on are internationally coupled.

On the export side, Table 2 shows that Wisconsin sold $12.8 billion worth of goods to Mexico and Canada alone. The state’s exports to Mexico grew significantly over the past decade. Wisconsin’s workers and businesses would certainly suffer from higher tariffs among the three countries, as Wisconsin’s top import sources are also Canada and Mexico.

China, the state’s third largest export market, already is buying less from Wisconsin. This decline of almost 10% isn’t surprising in a climate of tariff wars and political saber-rattling in Trump’s first term and continuing under the Biden administration. While there are certainly reasons to be concerned about China — both militarily and economically — this only adds to the concerns that Wisconsin could be hurt by trade friction in our home North American market.

Table 2: Top 10 destinations for Wisconsin exportsⁱⁱ 

Wisconsin’s large manufacturing sector makes the state especially vulnerable to tariffs and protectionist policies. It’s not surprising that a recent survey by Wisconsin Manufacturers and Commerce identified tariffs as a concern for Milwaukee-area manufacturers of all sizes. With more than 480,000 jobs in the sector, Wisconsin ranks seventh among the U.S. states in manufacturing employment. Against this background, a recent study by two Federal Reserve Board economistsⁱⁱⁱ found that the U.S. tariff increases of 2018 and 2019 led to significant reductions in manufacturing employment. Wisconsin has a lot at stake in national trade policy.  

From the perspective of economists, positions touted by both major candidates during the campaign — price controls, refusing to address the time bomb in our nation’s entitlement programs, and completely ignoring the swelling deficits and national debt — made little sense. Many such policies will fade with little follow-up now that the election has passed. However, some tariffs and other populist trade policies can be implemented unilaterally by the president. 

The time for promoting solid free market policies didn’t end with the vote counting. There is still a role for Wisconsin’s citizens and constituents to demand free market-oriented policies that genuinely foster prosperity and human flourishing here and across the country.  

Scott Niederjohn is a professor and the director of the Free Enterprise Center at Concordia University Wisconsin, and he is a visiting fellow of the Badger Institute.

Any use or reproduction of Badger Institute articles or photographs requires prior written permission. To request permission to post articles on a website or print copies for distribution, contact Badger Institute President Mike Nichols at mike@badgerinstitute.org or 262-389-8239.

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ⁱ https://wedc.org/export-from-wisconsin/wisconsin-export-data/
ⁱⁱ https://wedc.org/export-from-wisconsin/wisconsin-export-data/
ⁱⁱⁱ https://www.aaronflaaen.com/uploads/3/1/2/4/31243277/flaaen_pierce_tariffs_manufacturing.pdf

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