May 29, 2018
Texas is hit hardest by trade war
A recent report from Moody’s Investor Service shows that even though Kentucky is middle-of-the-pack when it comes to international trade, the state is the second-most-at-risk from the effects of a trade war, because the trade we do is so much of our state GDP.
As Route Fifty explains:
“Implementation of U.S.-China tariffs or withdrawal from the North American Free Trade Agreement would have bigger economic effects on some states compared to the more limited impacts of other recent trade decisions, a new Moody’s Investors Service report found. … States with the greatest trade dependency on China, Canada and Mexico are at highest risk of seeing their tax revenues decline—namely Michigan, Kentucky and Louisiana.”
A large part of Kentucky’s gross domestic product (GDP) comes from auto manufacturing and related industries. A drop in that segment could have significant impact on our economy, and thus on such things as tax revenue.
As negotiations continue on NAFTA, and as President Trump continues to threaten a trade war with China, we in the Bluegrass State need to remember that even though those issues seem oceans away, they could have significant impact on our state. It also is a warning that we need to diversify our economy further, so that one segment does not have such a dramatic impact.
