President Donald Trump to this point has made good on his campaign promises of scrapping trade deals he feels are unfair to U.S. workers – despite warnings from some analysts over the potential repercussions from the collapse of decades-old trade arrangements.
Trump withdrew the U.S. from Trans-Pacific Partnership negotiations shortly after taking office – a move Democratic rival Hillary Clinton also promised on the campaign trail to consider.
But as Trump’s Election Day victory moves further into the rearview mirror and the president sets out tweaking trade agreements with China, South Korea and – most notably – Canada and Mexico through a revised North American Free Trade Agreement, a new study suggests the states that overwhelmingly voted for Trump have the most to lose should negotiations turn south.
The conservative think tank American Enterprise Institute on Sunday compiled trade data from the Census Bureau and state-level economic output statistics from the Bureau of Economic Analysis to determine exactly how important trade is to individual state economies.
The results showed the most globalized states in the U.S. – Michigan, Kentucky, Louisiana, Tennessee, South Carolina and Texas – all voted for Trump during the 2016 presidential election.
In fact, eight of the 10 states whose economies are most dependent on international trade sent electoral college votes to Trump last year.
5 Most Globalized States
- Michigan, where trade is 38.9 percent of gross state product
- Kentucky, where trade is 35.1 percent of gross state product
- Louisiana, where trade is 34.6 percent of gross state product
- Tennessee, where trade is 32.5 percent of gross state product
- South Carolina, where trade is 32.1 percent of gross state product
Still, it’s notable that Michigan was the only real curveball out of the top 10 states, as the other most heavily trade-dependent areas of the U.S. just happen to have a history of voting Republican. Kentucky, Louisiana and Tennessee haven’t voted for a Democratic presidential candidate since 1996. South Carolina and Texas haven’t swung left since 1976, while Georgia hasn’t since 1992.
And Indiana voted for former President Barack Obama in 2008 but hadn’t previously seen a Democratic candidate carry the state since 1964.
But Michigan saw red on Election Day for the first time since 1988 and represented a crucial swing state for Trump. The president’s anti-NAFTA, anti-TPP messaging in the state appeared to resonate enough for Trump to narrowly snatch Michigan from Clinton and the Democratic Party.
There was a less apparent pattern among the least globalized states. Two of the bottom five and five of the bottom 10 states in terms of trade reliance voted for Trump during the 2016 election.
5 Least Globalized States
- South Dakota, where trade is 4.7 percent of gross state product
- Hawaii, where trade is 5 percent of gross state product
- Wyoming, where trade is 5.2 percent of gross state product
- Colorado, where trade is 6.1 percent of gross state product
- New Mexico, where trade is 6.3 percent of gross state product
Common among the most globalized states in the country was a reliance on the auto manufacturing sector. In Michigan, for example, AEI noted that nine of the state’s top 10 exports and nine of its top 10 imports last year were all related to auto manufacturing.
“Michigan’s top import trade partner is Mexico and its top state export trade partner is Canada, reflecting the fact that Michigan automakers buy a lot of auto parts from Mexico and they then sell a lot of cars to Canada,” Mark Perry, a professor at the University of Michigan’s Flint campus and a scholar at AEI, wrote in a blog post Sunday. “Partly at least thanks to NAFTA, the North American auto industry relies increasingly on cross-border supply chains for parts, supplies, materials, and finished products.”
Kentucky and Tennessee were similarly reliant on the auto industry – which is already weathering a downturn this year after posting back-to-back record-setting sales performances in 2015 and 2016. Trade in and out of South Carolina and Washington was influenced heavily by Boeing and aerospace manufacturing, while Texas and Louisiana made a name for themselves on the international stage through their energy reserves.
But future trade prospects for all these states, and in particular the auto-heavy regions, have been thrown as Trump and Trade Representative Robert Lighthizer pursue aggressive tweaks to NAFTA.
“The main beneficiaries of those complex global networks of sourcing, production, and distribution are the consumers in the U.S. and elsewhere who get access to the best products at the lowest price and the greatest value,” Perry said. “Ironically, that’s the one group you’ll never hear Trump talk about when he discusses trade issues – the U.S. consumer and the U.S.-based firms like Ford and Boeing that depend on imports for their competitiveness.”
A source close to the Mexican trade party says discussions have hit a snag around Lighthizer’s rules of origin demands that would require a greater percentage of a particular product’s parts to be produced and manufactured in the U.S. as opposed to being imported from abroad. For vehicle manufacturing, in particular, this has been the subject of intense debate as auto manufacturers in Canada, Mexico and the U.S. argue to the administration that vehicles would immediately become more expensive as certain parts simply aren’t made in North America anymore.
That source indicated the rules of origin standards are a red line that Mexico will not cross, though it remains to be seen whether Trump and Lighthizer will back down or simply torpedo the decades-old agreement.
Should that happen, a pair of complicated bipartisan trade deals would need to be worked out, and integrated automotive supply chains would be disrupted in the states most dependent on their continuation. And should Trump decide to penalize companies like Ford and Boeing for investing in operations in Mexico and Canada in the aftermath, Perry suggests U.S. workers and consumers would suffer.