Minneapolis (WCCO) — The economic spillover effect of the intensifying conflict between Ukraine and Russia is increasing.
How could the Ukrainian crisis affect our wallets? And what about local businesses doing business in the area? Good question.
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It started with a petrol pump and continued to Wall Street, where prices rose and the stock market fell.
Both are part of the first wave of ripples due to rising tensions in Ukraine, and more waves could follow as Russian troops invade the eastern part of the country.
Timothy Kehoe is a professor of economics at the University of Minnesota.
“This only adds to the uncertainty,” Kehoe said.
He states that conflict can exacerbate inflation. That means filling up your car or paying more to shop at the grocery store.
Russia and Ukraine are large agricultural exporters to Europe and Asia. Any turmoil can push up global food prices, even in the United States. Russia is also a major producer of important metals connected to computer chips, which means that the prices of automobiles and electronic devices could rise further.
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Kehoe says a full-scale war will make it worse.
“If Europe gets caught up in millions of refugees and violence and trade turmoil, it will affect the world economy,” he said.
Minnesota does not have the strongest trade relationship with both countries. In terms of exports, Russia is 39th and Ukraine is 52nd. However, there are several Minnesota companies operating in Ukraine, such as Toro, 3M, Cargill and ADM.
Paul Vaaler is a professor of international business and law at the University of Minnesota.
“No one is really discussing, what do you do about the war with your property? What are your plants, property, equipment, and your people?” Varler said.
He states that ensuring the safety of staff is a priority, which may mean evacuating employees along the Russian border to other parts of Ukraine. He compared it to a US company on the East Coast preparing for a big hurricane.
“What we’re doing is breaking the hatch, shutting down essentially all businesses and keeping inventory. That’s what’s happening now,” Vaaler said.
All this happens when the US economy, and much of the world, is trying to rebuild in a pandemic.
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“This Ukrainian situation could throw a big wrench into it,” Kehoe said.