in the most recent Milwaukee Sentinel article (via Pulitzer) Rick Barrett noted that “manufacturing is coming back” in Wisconsin. Does the data support this?
April 2021 [anti-dumping] The U.S. International Trade Commission's ruling became a seminal moment in the business trend of “reshoring,” the return of jobs from overseas to a company's home country. Reasons may include trade wars and tariffs.
Reshoring may be happening and manufacturing may be booming.At the national level, this appears to be the case, as discussed in this article postal.
For Wisconsin, the data is murkier. Regardless, I would be cautious in attributing any rebound to tariffs. First, the data are normalized to June 2018, before the implementation of Section 301 (Market Access/China) tariffs.
figure 1: Manufacturing hours worked (blue), manufacturing employment (tan), and manufacturing real value added (green), all in logarithmic form, 2018M06=0. Hours worked are calculated by multiplying the number of people employed by the average number of hours worked per week. The 2017 value added is spliced with the 2012 value added using the 2018 ratio. NBER-defined recession peak-to-trough dates appear gray. Red dotted line at 2018M03, notice of Section 232 and Section 301 actions. The green dotted line when the Inflation Reduction Act was passed. Source: BLS, BEA, NBER, and author's calculations.
Note that employment and value added were rising before the Trump administration imposed tariffs. Likewise, all series were rising ahead of the 2021 anti-dumping action mentioned in the article.Value added peaked in Q4, the same month Stoughton plant expands production capacity, this may be coincidental timing. Since then, the added value has declined. (Value added is calculated based on factor payments in Wisconsin, but price cost profits and taxes are calculated at the state (sector) level – so extrapolating too much from this series of changes is a bit problematic. There is no “manufacturing production” ” index at the state level as the counterpart to the national-level series calculated by the Federal Reserve).
Overall, it's difficult to tie increased manufacturing activity in Wisconsin to specific trade policies. As the article points out, it may happen as supply chain issues mask or even drive trends in manufacturing, outsourcing (I myself think the dollar value and domestic macro effects may be equally important).
What about Wisconsin exports (remember, the statistics do not capture all value added from Wisconsin)?
figure 2: Wisconsin manufactured exports, $ billion, seasonally adjusted by the authors at an annual rate (blue) using X-13. Nominal exports divided by the manufactured goods export price index. NBER-defined recession peak-to-trough dates appear gray. Source: BEA, BLS, NBER, and author's calculations.
Wisconsin's manufactured exports are indeed (reportedly) about 10% higher than before the pandemic. But after the tariffs were imposed, exports actually declined for a period of time—possibly due to other countries' retaliation for Trump's tariffs.
One issue to note when considering how tariffs can lead to increased employment is to recognize that while tariffs on certain goods, such as steel, may lead to increased employment in the steel industry, the resulting increase in steel costs (whether domestic Produced or produced abroad) will increase costs. Reduced production in downstream industries (such as washing machines and automobiles) will tend to reduce employment there. This is true even if our trading partners do not retaliate.
BTW, given the steel tariffs, we don't produce raw steel in Wisconsin, but we do (or did) produce some vehicles (like mine-resistant and ambush-resistant vehicles).
This reasoning (based on empirical estimates) is why Cox and Russ concluded that the net effect of Trump’s tariffs was to reduce overall employment.
In the above, I did not provide a comprehensive answer to whether tariffs lead to increases in employment and output. In order to do this, one must use an input-output model to track how tariffs increase the input costs of Wisconsin production (manufactured goods, etc.) and take into account other factors such as domestic demand, exchange rate fluctuations, and economic growth in other parts of the world . One might wonder how much exports fell as a result of trade retaliation triggered by our tariff actions.
