OVERARCHING U.S. ECONOMIC RISKS: Implications for Tennessee and Memphis' Local Economy

By Gary Lendermon

Geopolitical shocks are pressuring the United States economy, primarily through threats to global supply chains and input costs, inflation, and volatility in the global energy market. Rising regional instability in the Ukraine-Russia conflict and the Middle East, coupled with US-China tensions, transfers risk and volatility to global supply chains and input costs, inflation, and energy costs.

Ukraine-Russia and Middle East instability are transforming inputs and market prices (OPEC+ oil production cuts), supply chain disruption, risk premiums, and slowing world economic growth. Global logistics, trade deterioration, and high infrastructure utilization also contribute to the slowing. Increased global risk and pressure also slow world economic growth, changing trade flows, slowing supply chains, and growing trade disputes.

Geopolitical risks are transforming key sectors in Memphis, such as manufacturing and agriculture, suppressing consumer spending and exacerbating high inflation. Geopolitical risks, war risk premiums, and market volatility lead to inflation and rising energy costs.

Supply chain shocks and pressures, complex trade, increased complexity. Rising protectionism and deglobalization, trade vulnerability, and making supply chains more resilient. Global input costs, inflation, risk premia, and market volatility (renewed inflation) restrain consumer expenditure and reduce regional economic growth.

Memphis and the Mid-South: The Specifics

1. Logistics. As a hub for FedEx, Memphis will suffer from global supply chain disruptions and tensions (US-China, Ukraine).
2. Energy costs. Memphis's economy and logistics will suffer from energy price volatility due to high fossil fuel prices. FedEx is heavily reliant on fossil fuels for aircraft operations. As a logistics hub, Memphis relies on affordable aviation jet fuel availability.
3. Manufacturing. The Mid-South will encounter plant slowdowns due to the automation bottleneck and the general downturn in world trade, which will spill back into tariff reductions. Specific plants, such as Nissan Canton and Volkswagen Chattanooga, face short-term issues (slower production schedules) and global supply chain disruptions.

Higher input costs will affect the Memphis regional agriculture industry (fertilizer availability, high prices). Further risks include supply chain bottlenecks, logistics market congestion (barges, rail, air), and infrastructure strain. Semiconductor shortages, energy prices, food and agricultural input prices (reduced fertilizer imports from Ukraine), and labor supply challenges compound the pressure.

TN is vulnerable as a US border state, a leading logistics hub (Memphis), and a manufacturing hub (automobiles). Manufacturing labor markets will continue facing the brunt of geopolitical risk and shocks, transforming labor markets.

Global logistics and trade shocks will risk Memphis, impacting commerce and employment. Consumer expenditure, the primary market for Memphis, will continue facing high inflation, thereby reducing spending and growth.

These geopolitical risks will continue negatively impacting the Memphis economy, especially in the logistics, manufacturing, and agricultural sectors. They will pressure consumer spending and exacerbate record-high inflation.

Disclaimer:

The views and opinions expressed in this article are those of the author and are based on publicly available information and research from third-party sources, including:

• S&P Global Market Insights (https://www.spglobal.com)
• World Bank (https://www.worldbank.org)
• Economics Observatory (https://www.economicsobservatory.com)
• Florida International University Department of Economics (https://economics.fiu.edu)
• Edelman Global Advisory (https://www.edelmanglobaladvisory.com)
• BNP Paribas Economic Research (https://economic-research.bnpparibas.com)
• Brookings Institution (https://www.brookings.edu)

This article does not constitute financial or investment advice and should not be relied upon as such. The author is not providing any form of investment advisory service. Readers should not interpret the information or opinions provided as a specific recommendation to make particular investments or take specific financial actions. The information contained herein is for educational and informational purposes only and reflects the author's personal research and perspective on U.S. economic risks and their potential impact on Tennessee and Memphis' local economy.

While efforts have been made to ensure the accuracy of the information presented, no guarantee or warranty, express or implied, is made as to the accuracy, completeness, or reliability of any of the content. Readers are encouraged to perform their own research or consult with a licensed financial advisor before making any financial decisions.

The author assumes no responsibility or liability for any errors or omissions in the content of this article. Additionally, all information is subject to change without notice.

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