Brice Wallace
Russia’s invasion of Ukraine likely will lead to higher commodity prices for Utahns, but Utah’s economic strength likely will insulate it from severe impacts.
That summarizes remarks made during a recent online briefing about the Ukraine-Russia conflict, presented by the Salt Lake Chamber and World Trade Center Utah.
If Russian troops go no farther than Ukraine, the impacts on the U.S. should be “impactful but modest,” while Utah’s impacts likely would be “measurable but minor,” according to Natalie Gochnour, an associate dean in the David Eccles School of Business at the University of Utah, director of the Kem C. Gardner Policy Institute at the UofU, and chief economist for the Salt Lake Chamber.
Still, Utahns probably will face continued higher prices for gasoline, nickel, copper and titanium.
“There are going to be some consequences and I don’t know how far these will spread,” said U.S. Sen. Mitt Romney, R-Utah. “There are some who think it will cause Europe, in particular, to fall into a recession, and it could conceivably pull us along with them. There will be impacts on China as well.
“Inflation is only going to get worse, given what is happening with Ukraine, given what’s happening with oil,” he said. “We’re going to feel it at the [gasoline] pump. We already are. It’s probably going to get worse.”
Prices for wheat and corn also likely will rise and shortage also may occur, he said.
“All in all,” Romney said, “it’s challenging time to be a businessperson and to be planning for what comes forward.”
Romney predicts a recession in Russia, while Gochnour said Russia’s economy “will get crushed.” However, Russia not a big buyer of U.S. goods, and that’s especially true for Utah. In 2019, Utah exports totaled $17 billion, but only $20.4 million of that total involved Russia and $8.9 million in goods were sent to Ukraine. That put Russia at No. 43 among Utah export nations and Ukraine No. 55.
“So, these linkages are small,” Gochnour said.
While the U.S. GDP will slow because of the conflict half a world away, the impacts on Utah’s economy probably will be small.
“Interestingly, in Utah, just like so many times — it was the truth of the pandemic, it’s the truth now — we enter into this world conflict in a very good position,” she said, adding that Utah has the nation’s fastest-growing economy and is among only four states with a growing economy the past two years.
Miles Hansen, president and CEO of World Trade Center Utah, said Utah businesses can affect the conflict by ceasing any business with Russia and by providing financial support to effected Ukrainians.
Hansen predicts the war will be “a long and drawn-out conflict” that will have a fundamental impact on Europe in many ways, including economically. “We can’t approach doing business with Europe as business per usual,” he said.
Hansen urged Utah companies to not “turn insular.” Those doing business in Europe should take a step back, reevaluate their business strategies there, and try to anticipate what they should do if the conflict spreads in eastern Europe and leads to another Cold War that could last for years or even decades.
“Companies need to be thinking through resiliency, how to mitigate the risk and make sure that they stay nimble with how they’re investing and identifying new markets,” he said.
Echoing Gochnour’s comments, Hansen said Utah will fare better than any place else in the nation and world. That means that amid the disruptions, Utah companies will face “significant opportunities” and can help the state keep its relative competitive edge, he said.
“So, our companies should not jump down into their foxholes and retrench, but instead figure out how to be agile, how to understand what’s happening, but then to see the opportunities admidst the disruption, to go out there and to go and find ways to compete and win despite the challenging environment we are in now and will likely continue to be in, in the months and years to come,” Hansen said.
Romney said it is difficult to predict how the conflict will progress and affect the world.
“I think we have a good sense what’s coming at least over this coming year. [It] is going to be challenging — hopefully not as challenging as what happened with COVID, but, gosh, if we have another variant that hits us like omicron did, why, just ‘Katy bar the doors,’” the senator said.
“But I think what happens at most successful enterprises is, you put your head down and you invest in the future, whether it’s good times or bad, and weather the storm as best as you possibly can.”