Weekly Updates
Weekly Updates
- The rise of trade taxes puts more economic focus on the performance of different regions. The consequences of trade wars are not evenly distributed, and this is likely to matter when it comes to policy.
- The exports of Canadian energy to the United States are one example of regional variation. The short-lived US tax on Canadian oil imports into the US and the equally short-lived surcharge on Canadian electricity exports into the US had uneven implications. Both measures would raise prices for consumers in the northern United States while leaving southern consumers less affected.
- Because trade conflict retaliation often has a political objective, industries with a regional focus are often vulnerable. The European Union is explicitly aiming tariffs at Republican areas of the US economy. That, along with a voluntary consumer boycott by Canadians, is bad news for US whiskey producers concentrated in Kentucky and Tennessee. Similarly, the threat of aggressive taxes on US consumers of champagne targets with precision the economy of France’s Champagne region.
- If the trade war continues to escalate, economists may have to spend more time focusing on regional variations in employment and inflation. A more divergent domestic economy makes central bank policy less effective as “one size” policy setting becomes less suitable for all.
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