Wichita Is the Most Exposed City To China Tariffs
If you ask most people in Wichita, they’ll agree that the aviation industry is the first to dip in a recession and the last to grow in a recovery. The aviation industry plays a major role in Wichita’s gross domestic product (GDP). If the aviation and advanced manufacturing industries decline, so does Wichita’s economy as a whole. Research from The Brookings Institute confirms the city’s dependency on these industries and the lag in recovery after recessions.
Wichita is slower to recover than other cities, shown in the aftermath of the 2001 and 2008-9 recessions. For example, while most cities have fully recovered from the most recent recession, Wichita hasn’t. Compared to other comparable cities in the Midwest, Wichita averages $10,000 less annual wage, $50,000 less average home value and $130,000 less average net worth. So, if the total impact is added together – more decline with slower recovery – the real impact and challenge facing Wichita is seen. The Chung Report and The Brookings Institute dive into this, showing that Wichita is lagging significantly behind the rest of US economy and other comparable cities in the Midwest.
Wichita is Export Dependent
Not only is the Wichita economy more affected by recessions, but it is also extremely dependent on exports. Brookings calculates the trade dependency of a city based on the percentage of exports per the metro GDP. The most recent numbers in their Export Monitor put Wichita at #3 in the nation for export dependency with 20 percent of the Wichita economy being dependent on exporting.
How do Tariffs Impact Wichita’s Economy?
So how will the rising tariff war affect Wichita’s economy? According to Brookings’, Wichita is the most impacted city in the nation by the tariff war with China. The first reason is, as was discussed above, Wichita is so dependent on exports. The second reason is the concentration of certain industries in Wichita. Brookings found that the tariffs currently in place hurt the agriculture, aerospace and automotive manufacturing industries most.
It is not simply a theory from a global economics class that says that tariffs will damage companies. The hurt from tariffs can already be seen. Already, tariffs of up to 25% have been levied by either side on thousands of items. Americans are already seeing the cost of materials and wait time of materials rise substantially, rising to double and triple what they were before the tariffs. According to the Brookings Report:
“Metropolitan areas that specialize in agriculture, aerospace and automotive manufacturing are most exposed to the Chinese tariffs. The metro areas with the largest share of tariff-affected export jobs are Wichita, Kan. (8.6 percent of export-supported employment, 2,900 jobs), Bakersfield, Calif. (7.7 percent, 1,800 jobs), Jackson, Miss. (7.2 percent, 1,000 jobs), and Stockton, Calif. (6.6 percent, 1,000 jobs). Seattle has, by far, the highest total number of jobs at risk, with just over 16,000.”
At Kansas Global, we are committed to help companies all over Wichita export their products and expand their business internationally. By doing this, we help keep our city’s economy stable and growing. From aviation and advanced manufacturing, to craft beer, we’ve been involved with dozens of companies. Companies who work with us find that the services and strategy we offer create tangible value averaging around 20 times the cost of services. This kind of efficiency is rare and is greatly needed to build and maintain Wichita’s economy.
The bottom line is that the status quo is not good news for Wichita. Wichita companies and the metropolitan economy will suffer greatly if action isn’t taken. If companies just patiently take it on the chin, the repercussions on jobs, income levels and the health of Wichita’s economy could be drastic. But how can companies respond when the Federal government is putting up the tariffs?
- First, companies should talk. Speak to news outlets, like Kake News, to increase the awareness. Talk to your representatives from Congress. Let them know specifically how your company is hurting from these tariffs. While the effects may not be seen immediately, knowing your stories will empower your representatives to tell them in Washington. Don’t be silent.
- Second, companies should create long and short term plans for dealing with the problems caused by the tariffs. As costs go up and wait times increase, it is important for companies to make short term plans to keep supply chains functioning, costs as low as possible and margins high enough to make a profit.
Finding alternative suppliers, asking for product exclusions, checking out legal ways to reclassify products so that they don’t fall under the tariffs, ordering materials as a group with other players in the industry in order to get additional bulk discounts and bargaining power; these are all options companies have to adjust. Companies should look at the options and make a plan, both short and long term for how they will continue operating under these tariffs.
At Kansas Global, we have over 30 years of helping businesses to understand and respond to global trade events. If you want expert analysis and guidance in creating your plans, contact us today.