The Trump administration's trade war between the U.S. and China will have a $395 million negative impact on Nebraska's economy this year, according to a new model by an Iowa State University economist.
The tariffs on Chinese imports and the retaliation against U.S. agricultural exports ripples through all sectors of the state's economy, said Edward Balistreri, a former analyst for the U.S. International Trade Commission.
"On average, (the impact) would be about $600 per household per year," Balistreri told a fall forum of the Clayton Yeutter Institute of International Trade and Finance hosted by the University of Nebraska-Lincoln College of Law.
Balistreri's model, which focused on the Cornhusker State and seven other U.S. regions, evaluates the trade war by considering price increases on imported Chinese goods, price decreases on U.S. exports, and the resulting changes to the supply-demand relationships.
It also measures a loss of gross state product, or the output of Nebraska's economy. At the current level of tariffs, Balistreri said Nebraska has experienced an $817 million loss this year alone.
The effects could worsen if the trade war continues and new tariffs go into effect in December, he added.
At that point, the impact of the trade war on Nebraska's economy would reach $627 million, or roughly $940 per household.
"That's the average, so there would be significant distributional effects," Balistreri said in an interview earlier this week. "Ag sectors in Nebraska would be hit harder than some of the other sectors."
At the full escalation of tariffs, the loss to Nebraska's economic output could reach $1.3 billion, according to Balistreri's model.
A separate analysis, done by the Nebraska Farm Bureau earlier this year, estimated the tariffs leveled at American farmers in response to the Trump administration imposing taxes on Chinese goods would result in $943 million in losses to Nebraska's farmers this year.
Balistreri said the model does not account for the Market Facilitation Program, a USDA-administered aid program that paid $694 million to Nebraska farmers impacted by the trade war in its first year.
The Yeutter Institute forum — titled "What's on the Horizon for International Trade?" — also highlighted the supply chain impacts of the trade war and their consequences.
Reinke Manufacturing, which produces center pivots and other irrigation systems, had contracts in place with its suppliers when the tariffs on aluminum and steel imports went into place last year, said Chris Roth, the company's president.
"We had some contracts in place, but as time goes on, contracts expire," Roth said. "So you get new contracts, but the price has gone up in the meantime."
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By the time the tariffs on Canadian and Mexican steel imports were lifted, Reinke was caught unaware, Roth said. There was still plenty of equipment manufactured with higher-priced supplies in its inventory.
"It created some disruption, not just from a cost perspective, but also from a supply perspective," Roth said.
At the same time, Reinke was keeping an eye on the retaliatory tariffs on agricultural products, which along with low commodity prices, added uncertainty to its own sales year.
David Morfesi, a former U.S. trade representative who is now a visiting professor at UNL, said the model provided by Balistreri and the example presented by Roth illustrate the trade war's realities.
"Disruption, instability and cost," Morfesi said. "That's what a trade war gives you."
Balistreri and Morfesi offered grim prognostications for any potential end of the trade war between the U.S. and China.
"Trade disputes, at the end, are supposed to leave you in a place where you're partners again marching boldly on," Morfesi said. "It's not an 'I win, you lose.'"
The Iowa State economist said his model did not account for investments by China in Brazilian ag production, which could result in permanent losses for U.S. producers.
"Is China really going to be as dependent as it was on our ag products? I think the answer to that is clearly no," Balistreri said.
He also said any deal struck to remove the tariffs would likely just reset the U.S. and China's trade relationship back to its baseline.
If the goal of the tariffs, which are ultimately paid by the consumer, was to coerce China into changing its behaviors regarding trade, Morfesi said that's unlikely to happen.
Using a cruise ship as an analogy, Morfesi said if you spun the wheel to abruptly change direction, you would also overturn the buffet and make the passengers sick.
A gentle turn of the wheel allows for a change of direction without any disruption, even if it takes a little more time.
"That's trade, and that's the benefit thereof," he said.