The Impact of the 2018-2019 Trade War on U.S. Local Labor Markets

Abstract

We study the impact of the 2018-2019 trade war on U.S. local labor markets, distinguishing between regional exposure to foreign tariffs on U.S. exports, U.S. import tariffs, and U.S. tariffs on intermediate inputs. We find foreign retaliatory tariffs on U.S. exports have led to an increase in local unemployment rates, and this effect is magnified for regions specialized in non-manufacturing tradable goods (e.g. agriculture). U.S. import tariffs, on the other hand, have had an impact on local labor market conditions primarily through input-output linkages, leading to a decline in the employment share in the manufacturing sector and a decline in regional earnings.