Michigan and Foreign Trade
I was a bit surprised to find out that according to two University of Michigan economic professors, foreign trade has quite an impact on Michigan’s economy.
The Michigan Capitol Confidential is reporting that foreign imports and exports make up a larger percentage of Michigan’s gross domestic product (GDP) than any other state in the country.
Alan Deardorff, an economics professor at the University of Michigan was quoted in the article stating:
Both imports and exports are hugely important for the Michigan economy; exports because their production creates income and employs workers, and imports because they provide inputs to production that make that production more competitive…Imports plus exports added up to 38.9 percent of Michigan GDP, more than any other state.
Almost 39% of our economy in Michigan comes from foreign trade, which is quite a bit larger than I would have expected. Obliviously there are pros and cons to this trade number.
Another U of M finance and economics professor, Mark Perry, found that Michigan has become the most globalized state over time. Much of this globalization comes from the increasing globalization of our automobile industry. Professor Perry was quoted in the article saying:
As a state economy highly dependent on both exports and imports, Michigan is a state that would be at great risk from Trump’s protectionist trade policies including the recent tariffs on steel and aluminum
Obviously this is good news but also has some danger within it, as I stated above there are pros and cons to this economic reality. If the global market heads into another recession then that could affect Michigan’s economy greatly. We have all heard the saying that we should not have all our eggs in one basket.
Did you know that according to the Mackinac Center for Public Policy, fiscal analyst James Hohman:
- Michigan’s exports reached $59.8 billion in 2017, the highest recorded going back to 2000.
- Canada was the largest customer for Michigan’s goods and services at $24.8 billion.
- Mexico was the second-largest customer at $12.5 billion, and China was third at $3.7 billion.
- Michigan exported products to more than 200 countries last year.
- Records show that Michigan even sold products and services worth $3,290 to buyers on Christmas Island, an Australian territory in the Indian Ocean with about 1,400 residents.
Is this proof that the original NAFTA trilateral agreement was actually a positive for the state of Michigan as a whole? I realize that in any trade agreement with other countries there is going to be some winners and losers. We just hope that the winners outnumber the losers. That is no consolation prize for the losers in the agreement but it is a win for the entire state.