From beer to semiconductors, war will hit US state economies

A protracted conflict between Russia and Ukraine would widely affect the US economy, with all 50 states affected by the fallout, according to an analysis by Moody’s Analytics.

While the United States has limited trade ties with Russia and Ukraine, companies from beer breweries in Missouri to semiconductor factories in California would see an impact, as prolonged fighting and even more sanctions Severe ones are restricting supply and driving up global prices for oil and other critical materials.

“The odds are much better that even we actually experience a recession in this scenario,” said chief economist Mark Zandi.

Some states would fare better than others, according to analysis of the effects of a military conflict that drags on into next year.

Energy producers such as North Dakota and Alaska stand out in this regard, with a long dispute pushing oil prices to $150 a barrel as Russia cuts Europe’s energy supply. On the other hand, Alabama and Mississippi — the two states most dependent on cars and driving — would suffer disproportionately from an energy shock.

The analysis, by Moody’s Analytics Senior Regional Economist Adam Kamins, shows that a protracted war would harm US states and localities in a variety of ways, some of which are not immediately apparent.

– Michigan automakers are said to be hit by continued shortages of computer chips, as semiconductor plants face cuts in Ukrainian supplies of the neon they need for lasers. Higher prices for palladium, used in catalytic converters and a major Russian export, would also affect automakers.

– Prices for high-end condominiums in New York and South Florida could fall as Russian oligarchs are shut out of those markets.

— Farmers would see mixed effects. Some would benefit from higher prices for wheat and maize as supplies from Ukraine – Europe’s breadbasket – are tight. They would, however, have to pay for fertilizer, a key export from the region.

— Livestock producers would end up spending more on animal feed. Higher barley prices would affect beer makers in and around St. Louis.

– States most exposed to financial markets, such as New York and Connecticut, would be under pressure as prolonged hostilities after a Russian occupation of Ukraine heighten uncertainty and drive stock prices further down.

— Washington and South Carolina, the two states which export most proportionally to Russia and the Ukraine, would be harmed. Affected shipments would likely include transportation equipment from Washington and auto parts from South Carolina.

A computer model from Moody’s Analytics suggests that the United States as a whole would be able to avoid a recession, even if military hostilities are prolonged. But Zandi has doubts.

“The models are very good in typical times,” he said. In very stressed and very unusual environments, “the world becomes what I would call non-linear and things go off the rails”.

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