A trade war is an economic conflict which is the result of protectionism where the Countries that participate impose tariffs to the other party. The increasing of protection leads the parties’ output to move toward an autarky position.
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How Did the U.S-China Trade War Affect the State of Illinois?
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US-China Trade War:
Since 2018 the U.S and China are in a trade war by imposing tariffs between them.
On March 22, 2018, Trump signed a memorandum instructing the USTR to apply tariffs of $50 billion on Chinese goods because of Chinese theft of U.S intellectual property. In response to this, China’s Commerce Ministry imposed similar tariffs to US imports which started on July 6, 2018.
Top Industries in Illinois:
Geographic area name
2007 NAICS code
Meaning of 2007 NAICS code
Meaning of Type of operation or tax status code
Year
Number of establishments
Value of sales, shipments, receipts, revenue, or business done ($1,000)
Illinois
111
Crop Production (Corn)
Total
2012
36,898
8,258,574
Illinois
111
Crop Production (Corn)
Total
2007
38,668
7,073,343
Illinois
212
Mining (except oil and gas)
Total
2012
198
2,413,727
Illinois
212
Mining (except oil and gas)
Total
2007
222
2,039,202
Illinois
311
Food manufacturing
Total
2012
1,163
42,536,141
Illinois
311
Food manufacturing
Total
2007
1,149
33,717,737
Illinois
324
Petroleum and coal products manufacturing
Total
2012
82
43,034,784
Illinois
324
Petroleum and coal products manufacturing
Total
2007
85
34,692,899
Illinois
325
Chemical manufacturing
Total
2012
660
44,936,661
Illinois
325
Chemical manufacturing
Total
2007
714
34,289,623
Illinois
621
Ambulatory health care services
All establishments
2012
24,214
32,606,714
Illinois
621
Ambulatory health care services
All establishments
2007
22,585
26,994,829
Illinois
622
Hospitals
All establishments
2012
224
36,209,420
Illinois
622
Hospitals
All establishments
2007
223
30,691,406
Source: United States Census Bureau.
Top U.S. Exports (Origin of Movement) from Illinois
(Values in millions of dollars)
Rank
HS Code
Description
2017 Value
2018 Value
2017 % Share
2018 % Share
% Change, 2017 – 2018
—
—
Total Illinois Exports and % Share of U.S. Total
65,187
65,415
4.2
3.9
0.4
—
—
Total, Top 11 Commodities and % Share of State Total
22,021
22,070
33.8
33.7
0.2
1
271012
LT OILS, PREPS GT=70% PETRO
2,957
3,156
4.5
4.8
6.7
2
851762
MACH FOR RECP/CONVR/TRANS/R
1,338
1,508
2.1
2.3
12.7
3
300490
MEDICAMENTS NESOI, MEASURED DOSES, RETAIL PK NESOI
1,395
1,290
2.1
2
-7.6
4
870410
DUMPERS DESIGNED FOR OFF-HIGHWAY USE
1,275
1,280
2
2
0.4
5
851712
PHONES FOR CELLULAR NTWKS OR FOR OTH WIRELESS NTWK
1,235
1,238
1.9
1.9
0.3
6
300212
ANTISERA AND OTHER BLOOD FRACTIONS
669
1,222
1
1.9
82.6
7
880000
CIVILIAN AIRCRAFT, ENGINES, AND PARTS
1,036
1,154
1.6
1.8
11.4
8
120190
SOYBEANS, NESOI
2,066
1,070
3.2
1.6
-48.2
9
870324
PASS VEH SPK-IG INT COM RCPR P ENG > 3000 CC
1,204
1,030
1.8
1.6
-14.4
10
870899
PARTS AND ACCESSORIES OF MOTOR VEHICLES, NESOI
998
976
1.5
1.5
-2.2
11
100590
CORN (MAIZE), OTHER THAN SEED CORN
433
831
0.7
1.3
91.7
Source: United States Census Bureau
Total U.S. Exports (Origin of Movement) from Illinois
Top 5 Countries Based on 2018 Dollar Value
(Values in millions of dollars)
Rank
Country
2017 Value
2018 Value
2017 % Share
2018 % Share
% Change, 2017 – 2018
Total Illinois Exports and % Share of U.S Total
65,187
65,415
4.2
3.9
0.4
Total, top 5 Countries and % Share of State Total
58,143
58,560
89.2
89.5
0.7
1
Canada
17,695
17,636
27.1
27
-0.3
2
Mexico
9,876
10,188
15.1
15.6
3.2
3
China
5,271
3,438
8.1
5.3
-34.8
4
Germany
3,439
3,307
5.3
5.1
-3.8
5
Australia
2,614
3,181
4
4.9
21.7
Source: United States Census Bureau
Top U.S. Imports (Origin of Movement) from Illinois
Rank
HS Code
Description
2017 Value
2018 Value
2017 % Share
2018 % Share
% Change, 2017 – 2018
Total Illinois Exports and % Share of U.S. Total
136,099
157,402
5.8
6.2
15.7
Total, Top 10 Commodities and % Share of State Total
65,516
80,708
48.1
51.3
23.2
1
270900
CRUDE OIL FROM PETROLEUM AND BITUMINOUS MINERALS
20,190
25,487
14.8
16.2
26.2
2
851712
PHONES FOR CELLULAR NTWKS OR FOR OTH WIRELESS NTWK
11,829
15,089
8.7
9.6
27.6
3
880330
PARTS OF AIRPLANES OR HELICOPTERS, NESOI
6,849
7,942
5.0
5.0
16.0
4
847130
PORT DIGTL AUTOMATIC DA
3,721
5,797
2.7
3.7
55.8
5
300490
MEDICAMENTS NESOI, MEASURED DOSES, RETAIL PK NESOI
3,090
4,951
2.3
3.1
60.2
6
220300
BEER MADE FROM MALT
2,834
3,102
2.1
2.0
9.5
7
851762
MACH FOR RECP/CONVR/TRANS/R
1,800
2,597
1.3
1.7
44.3
8
841112
TURBOJETS OF A THRUST EXCEEDING 25 KN
1,787
2,312
1.3
1.5
29.4
9
853710
CONTROLS ETC W ELECT APPR
1,426
1,463
1.0
0.9
2.6
10
271121
NATURAL GAS, GASEOUS
1,317
1,256
1.0
0.8
-4.6
Source: United States Census Bureau
Total U.S. Imports (Origin of Movement) from Illinois
Top 5 Countries Based on 2018 Dollar Value
Rank
Country
2017 Value
2018 Value
2017 % Share
2018 % Share
% Change, 2017 – 2018
Total Illinois Imports and % Share of U.S Total
136,099
157,402
5.8
6.2
15.7
Total, top 5 Countries and % Share of State Total
129,131
150,258
94.9
95.5
16.4
1
China
31,994
40,883
23.5
26
27.8
2
Canada
32,039
38,056
23.5
24.2
18.8
3
Mexico
12,424
13,154
9.1
8.4
5.9
4
Japan
10,575
10,829
7.8
6.9
2.4
5
Germany
5,571
6,505
4.1
4.1
16.8
Source: United States Census Bureau
Products that the U.S has imposed a new 10%-25% tariff and are in the top industries in Illinois.
– Agriculture Industry
0709.99.45 Sweet corn, fresh or chilled
0710.40.00 Sweet corn, uncooked or cooked by steaming or boiling in water, frozen
1005.90.20 Yellow dent corn
1005.90.40 Corn (maize), other than seed and yellow dent corn
1102.20.00 Corn (maize) flour
1103.13.00 Groats and meal of corn (maize)
1104.23.00 Grains of corn (maize), hulled, pearled, clipped, sliced, kibbled or otherwise worked , but not rolled or flaked
1108.12.00 Corn (maize) starch
2005.80.00 Sweet corn, prepared or preserved otherwise than by vinegar, acetic acid or sugar, not frozen
Unemployment Rate – Agricultural and Related Private Wage and Salary Worker
Series Id: LNU04035109Not Seasonally AdjustedSeries title: (Unadj) Unemployment Rate – Agricultural and Related Private Wage and Salary WorkersLabor force status: Unemployment rateType of data: Percent or rateAge: 16 years and overClass of worker: Private wage and salary workersLabor force experience: ExperiencedIndustry: Agriculture, forestry, fishing, and hunting
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2018
10.0
9.6
9.7
9.0
5.8
7.2
5.9
7.2
4.1
4.1
6.7
8.6
2019
14.1
11.1
11.5
7.3
Source: Bureau of Labor Statistics.
As can be seen in the graph, Illinois’ Unemployment Rate in Agriculture reached its peak with 14.1 % of unemployment by January 2019.
– Manufacturing Area:
2007.10.00 Homogenized cooked preparations of fruit put up for retail sale as infant food or for dietetic purposes, in cont. not over 250 grams, net
2007.91.10 Citrus fruit pastes and purees, being cooked preparations
2007.91.40 Orange marmalade
2007.99.05 Lingonberry and raspberry jams
2007.99.10 Strawberry jam
2008.11.02 Peanut butter and paste, subject to gen. note 15 of the HTS
2008.19.25 Pecans, otherwise prepared or preserved, nesoi 2009.50.00 Tomato juice, concentrated or not concentrated
2103.10.00 Soy sauce
NSA:
Not
Current
Seasonally
Month:
Adjusted
March
Jobs
2019
Illinois Jobs:
Area
Industry Title
Series Code
Current Month(March 2019)
Previous Month (Feb 2019)
Year Ago
OTM Change
OTM Change %
OTM Change
OTY% Change
00000
Manufacturing
30000000
593,400
591,300
583,600
2,100
0.4
9,800
1.7
Source: Current Employment Statistics Program
The number of Jobs in the area of Manufacturing in the State of Illinois increased by almost 10 000 from March 2018 to March 2019.
– Mining:
2701.11.00 Coal, anthracite, whether or not pulverized, but not agglomerated
2701.12.00 Coal, bituminous, whether or not pulverized, but not agglomerated
2701.19.00 Coal, other than anthracite or bituminous, whether or not pulverized, but not agglomerated
2701.20.00 Coal, briquettes, ovoids and similar solid fuels manufactured from coal
2702.10.00 Lignite (excluding jet), whether or not pulverized, but not agglomerated
2702.20.00 Lignite (excluding jet), agglomerated 2703.00.00 Peat (including peat litter), whether or not agglomerated 2713.11.00 Coke, petroleum, not calcined
2713.12.00 Coke, petroleum coke, calcined
2713.20.00 Petroleum bitumen 2901.21.00 Ethylene 2901.22.00 Propene (Propylene)
2902.20.00 Benzene
2902.30.00 Toluene 2902.41.00 o‐Xylene 2914.11.10 Acetone, derived in whole or in part from cumene 2926.10.00 Acrylonitrile
2707.91.00 Creosote oils, from dist. of hi‐temp coal tar or wt. of aromatic exceeds nonaromatic
2707.99.59 Phenols, nesoi
2710.19.16 Kerosene type jet fuel from petroleum oils and oils of bitumin minerals (o/than crude) or preps. 70%+by wt. from petroleum oils.
2711.12.00 Propane, liquefied
2712.10.00 Petroleum jelly
2714.10.00 Bituminous or oil shale and tar sands 2714.90.00 Bitumen and asphalt, natural; asphaltites and asphaltic rocks 2712.90.20 Mineral waxes (i.e., paraffin w/ 0.75%+ oil, microcrystall. wax, slack lignite & peat waxes, ozokerite), obtained by synthesis
NSA:
Not
Current
Seasonally
Month:
Adjusted
March
Jobs
2019
Illinois:
Area
Industry Title
Series Code
Current Month
Previous Month
Year Ago
OTM Change
OTM Change%
OTM Change
OTY% Change
00000
Mining
10000000
7,300
7,300
7,500
0
0.0
-200
-2.7
Source: Current Employment Statistics Program
The number of Jobs in the area of Mining in the State of Illinois decreased by 200 from March 2018 to March 2019.
Products that China has imposed a new 10%-25% tariff and are in the top industries in Illinois.
5 27011100 Anthracite coal, not agglomerated7 27011290 Other bituminous coal, not agglomerated8 27011900 Other coal, not agglomerated9 27012000 Coal, briquettes, and similar solid fuels10 27021000 Lignite coal11 27022000 Lignite coal, agglomerated12 27030000 Peat13 27040010 Coke and semi coke14 27040090 Coke by-product62 27132000 Petroleum bitumen69 29012100 Ethylene70 29012200 Propene17 27071000 Benzene18 27072000 Toluene19 27073000 Xylene22 27079100 Creosote oils23 27079910 Phenols32 27101911 Aviation kerosene54 27121000 Petroleum jelly64 27141000 Bituminous or oil shale and tar sands66 27149020 Emulsified bitumen and asphalt76 29141100 Acetone78 29261000 Acrylonitrile56 27129010 Microcrystalline petroleum wax60 27131210 Petroleum coke, calcined, containing by weight less than 0.8 percent of sulfur.61 27131290 Other petroleum coke, calcined.
– Has Illinois been negatively affected by the Chinese 25% tariffs on Soy Beans, coffee, whiskey and pork?
Soybeans
Illinois is the No. 1 producer of Soybeans in the U.S. The tariff of 25% imposed by China the last year made Soybean Exports from Illinois drop by 50% which represented a loss of $1 billion for Illinois. By knowing this, the U.S Department of Agriculture interfered and helped Illinois Soybeans producers by offering a 12$ billion national aid packages.
Whiskey
Whiskey has also decreased in sales by the imposing of tariffs by China. The 25% of tariffs represent the 60% U.S Whiskey Exports. By the second half of 2018, the sales dropped down considerably. In 2017, before the trade war started, the overall growth of whiskey exports was of 16% but by 2018 the growth was only 5%
Pork:
The tariff imposed on pork by China also affected Illinois since U.S farmers have gotten more efficient at raising pigs through the years. This meaning that the production of pigs has increased but the demand not. Because of this many Illinois pork farmers had to reduce the price of the porks that they sell resulting in a loss for them.
Tariffs on import of Aluminum and Steel
Tariffs on steel and the tax on aluminum didn’t affect Illinois as much as their neighbor states as demonstrated in the graph above. The reason for this is because Trump administration has granted hundreds of companies’ permission to waive some of these taxes on imports. In 2018 after tariffs were introduced a lot of companies put requests for tariff exemption to avoid paying the 25% tariff on steel and taxes on aluminum from which 370 companies nationwide were approved. This exemption allowed 4.1 million tons of foreign steel to be imported, about 8 percent of the total coming from China and 30% from japan. In Illinois 64 companies requested the tariffs waiver but for the moment only 37% of those 64 have been approved the other are pending. One of the companies that was given the waiver was Shelbyville Sta-Rite which is a manufacturer of hair accessories and could import 40,000 kilograms of steel from China. According to the CEO of Sta-Rite is hard to find good quality products for their need in United States for that reason they go shopping out the country.
Illinois is the second largest importer of steel and aluminum. 41% of their steel comes from Brazil and 29% of its aluminum comes from China. However, some states production relies more on steel and aluminum measured by the share of those products that account for total imports. The tariffs set by Trump administration will most likely have a greater impact on firms that rely on steel and aluminum imports. As shown in the graph Illinois is the least affected from the neighbor states, Missouri, Louisiana, Connecticut, and Maryland, are the most affected by the tariffs because they have a larger share of aluminum imports used to produce goods. Oil and gas drillers and petrochemical producers in those states are heavily affected on the imports of steel and aluminum to supply their business needs.
Tariffs on Solar Panels and Washing Machines
When Tariffs were applied to washing machines in 2018, it had a positive impact in some sectors of the economy, business saw an opportunity to increase prices on these products and they created more jobs to increase productivity. One of the reasons why jobs were created was because firms that were doing business in other countries came back to United States knowing that they could use tariffs as an excuse to increase prices.
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Even with the 30% on Solar panel imported parts the growth of the industry in Illinois is constant as seem in the picture below while other saw a decline on employment, Illinois saw a growth of jobs created in this industry. The Illinois Solar growth is tied to the Future Energy Jobs Act, which is a law that was passed in 2016 that required the state to increase its use of renewable energy. Last year 1,308 new jobs were created, and it saw an 37% increase in employment from previous year. This new project is leading to an increase of labor demand because the state before this had almost no solar panels. Another reason for the positive impact of solar panels in Illinois is that due to advancement in technology solar manufacturing has become less expensive to produced. The cost of solar panels has fallen between 2 and 6%.
Foreign Direct Investment (FDI) in the state of Illinois
The state of Illinois is home to more than 1,900 foreign companies. Illinois is the largest exporting state in the Midwest and the fifth largest exporting state in the U.S. The state’s international population includes more than forty distinct ethnic communities with populations over 35,000 and more than 80 foreign consulates help to facilitate employee relocation for global firms.
Illinois Central location in North America, together with its world class infrastructure and skilled, diverse workforce continues to attract internationational companies in different sectors to do business in the state. On octuber of last year Elgin- Harting a german company announcesd a 6 million expansion, which talks of the good relationship that the state has with foreing investors.
Country
Jobs
1
UK (England, Scotland, Wales, Northern Ireland)
63,564
2
Japan
47,232
3
Germany
36,702
4
Canada
36,143
5
France
20,018
Top Countries for FDI in Illinois
Source: U.S. Department of Commerce, International Trade Association
Foreign Direct Investement (FDI) in illinois is key in keeping the growth of their economy. FDI in Illinois generates more than $100 billions in revenues and employs more than 340,000 workers. 37% of all those employed by international investors are in the manufacturing sector. Among all international employers the United Kingdom employs the most. England, Scotland, Wales, Northern Ireland together generate more than 63,000 jobs, followed by Japan. In the past 5 years FDi has had an increase of 26% and because of their good relationship with the United Kindom exports and imports to an from Europe has increase.
Industries affected by taxes imposed to imports
Due to Trump administration’s tariffs on metal from China, Some business that import goods from China are moving to foreign countries were labor is cheaper and tariffs are less aggressive. Such is the case of Stack-On a manufacturer of storages safes which is set to move to Mexico to avoid tariffs. The company already has a plant in China and Mexico, and its only U.S factories were the two in the Chicago are. But due to the high prices of their supplies they can not afford to run the business with they costs.
Another Manufacturer that is closing a plant in Illinois is MV Industries, what they basically do is produce auto parts. Illinois meat producers is also stand to lose $100 million annually as result of tariffs.
Principal manufacturing businesses has seen significant price increase due to tariffs. Due to the price increase many customers and business have move production to other parts of the world such as canada and Europe. Other businesses affected were pork producers which exports nearly 6.5 million worth of pork products.
The Economics of Illinois
Median Household income in Illinois is $62, 992. This is in comparison to a median income of $60,960 in 2016,which represents a annual growth of 3.33%. The economy of Illinois Employs 6.01m people. The largest industries in Illinois are restaurants & Food Services.The highest paying industries are securities, commodities, funds, and other financial investments. As shown in the graph below males in Illinois earn 1.37 times more in salaries than what females earn, that shows the income innequality that exists in Illinois. The most common job groups, by number of people living in Illinois, are Miscellaneous managers (162,072 people), Driver/sales workers & truck drivers (154,612 people), and Elementary & middle school teachers (140,268 people). This chart illustrates the share breakdown of the primary jobs held by residents of Illinois.
Overall Effect of US-China Trade war
As the nation’s #1 producer of Soybeans, Illinois were the most affected when China, the largest buyer of this product impose 25% tariffs on US exports. Exports from Illinois fell by half last year, a loss of $1 billion, according to the U.S Census data. Prices increased and the demand decreased. The tariffs on Steel and aluminum has been a positive impact in overall because most of the consumers who used to buy overseas metal parts are not turning to American manufacturers to supply their needs. Profits rise from previous year as imports declined. Auto part suppliers were heavily affected because they rely on imports from China or other countries with cheaper labor. They employed nearly 900,000 people nationally and 40.000 in Illinois Based on my research I would not suggest congress to pass the trade agreement with China, one of the reason is that even though it might bring higher paying jobs to United States, it will have a negative impact in lower skill workers which are not qualified for those jobs. Also, tariffs increase prices which will decrease the consumer’s buying power. We are better off in an open market where we can choose what we want to buy at the price that we can afford giving each financial situation.
Bibliography
