With the first quarter of 2019 under our belts, two things are becoming clear. First, despite some weakening, our regional business climate remains generally strong. Most of the challenges to economic development getting the most press, such as new construction costs and tightening labor pools, correlate for the most part to an economy firing on most, if not all, cylinders.

 

That said, trade issues appear to be impacting the economy negatively. At a macro level, the tariffs imposed last year by the U.S. have added $69 billion in additional costs for U.S. consumers, according to a recent study conducted by economists funded through a grant from the National Science Foundation. In a related story, U.S. consumer confidence, as measured by the New York-based Conference Board, declined over 5% in March.  

 

On a regional level, the threat of new import tariffs on passenger vehicles and the related uncertainty represents a real threat to our economic gains. Unlike steel tariffs, which had the support of domestic producers, a proposed 25% import tariff on vehicles and parts from the EU has united the not-ordinarily-unified auto industry in opposition. Business communities in states with significant automotive clusters would do well to look more closely at why.

 

Following last year's imposition of U.S. tariffs on steel, aluminum and some Chinese auto parts, some automotive supply and distribution channels were rerouted with astonishing speed. Implicit in the calculations in imposing the U.S. tariffs appears to be an assumption that those same channels return to their prior routing when some accord is reached, which is far from certain. It is worth noting here that South Carolina automakers purchased $9 billion from U.S. suppliers in 2017, so what happens to the supply chain if and when tariffs are reduced or removed is extremely relevant to the health of our local economy. In addition, the prospects of further U.S. tariffs and likely retaliation from affected trading partners impact global automakers' decision-making regarding U.S. production of new models. Once made, a decision to produce a model elsewhere is likely irretrievable: production of that model will almost certainly continue at the chosen global location for the life of the program.

 

In a recent meeting I sat in on with U.S. State Department officials, one remarked that South Carolina's economy was "a canary in the coal mine" for the economic impact of international trade issues. If you are reading this, you likely live and work close to the front line on issues of international trade. Make no mistake, there are real inequities in our relationships with many of our trading partners, and reasonable minds can differ on how to best address them. Form your own opinion, and let your elected representatives know your thoughts. As you do so, remember what happens to the canary when there is a problem in the mine.