Chinese Tariffs Hit US Car Sales, Jobs in Trade-Heavy Counties
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In the trade war with the U.S., China’s tariffs have targeted agricultural goods for a couple main reasons: They make up a large proportion of U.S. exports to China, but also because they strike at the heart of President Donald Trump’s base of support in farm country.
Beijing’s targeted strategy has hit consumption and jobs in the areas of the U.S. most exposed to trade with China such as the agriculture-dependent states, according to new research, but had a much lower or almost zero impact on other parts of the nation. Due to the tariffs, economist Michael Waugh estimates in his paper that there was about $9.3 billion in lost U.S. car sales alone, with $2.3 billion of that in the quarter of counties most affected by the higher punitive Chinese measures.
Waugh, a professor at the Stern School of Business at New York University, shows that when China raised its retaliatory taxes, a quarter of counties saw the tariffs on their export rise an average of about 4 percentage points, while the lowest quarter of counties barely saw a change.
According to Waugh’s research, those counties that were hit with highest tariffs have more than twice the level of exports to China compared with the average U.S. county, meaning that they were more reliant on China’s market and thus damaged more when it disappeared.
“For counties relatively more exposed to Chinese tariffs, it was hard for them to replace these lost export opportunities. And these lost export opportunities are one force that would lead to the reductions in consumption,” he wrote.
Using data on nationwide car sales in 2018 as a substitute for consumption, he estimated that auto sales growth in the worst-affected counties were about 2.5 percentage points lower than in low-tariff counties. However, that may underestimate the effect, as while some consumers may still have bought a car, it may have been a cheaper model than what they otherwise would have purchased.
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