Another day, another…tariff? That seems to be the reality for the U.S. and its trade partners as trade wars continue to escalate, leaving American industries to watch closely and determine how to best weather the storm.
In March, the Trump Administration announced it would be placing 25 and 10 percent tariffs on steel and aluminum imports, respectively. Several countries have pushed back with their own tariffs, such as Mexico announcing it would place tariffs on U.S. apples, China’s deciding to do the same on 106 U.S. products and now the European Union following suit with its own 25 percent tariffs.
Along with each of Trump’s proposed tariffs, China has indicated it will mirror moves made by the Trump Administration. What began as levies on $50 billion of Chinese and U.S. goods has now escalated to the threat of the U.S. placing tariffs on $200 billion of Chinese goods.
Washington’s trade stakeholders are advising the Trump Administration to be more transparent with its plans in the trade war, better consider the stake of a trade-dependent state like Washington and also to reach agreements as soon as possible to keep markets open for Washington products.
“Washington state has had a long-standing, really important trade relationship with China,” Lori Otto Punke, President of the Washington Council on International Trade (WCIT) told Lens. “We would like to see strategic frameworks put in place for what the Trump Administration’s objectives are. We haven’t seen clear negotiations.”
Approximately 25 percent of the state’s exports go to China, she added, and last year’s surplus with China was $3.7 billion.
The bilateral relationship had a positive effect on several industries across the state including aerospace, forest and paper products, seafood and agriculture.
She added that even though soybeans are not produced in Washington, they play a key role in the success of the state’s relationship with China. The product is sent through our export system via ports and rail, so any changes in the U.S.-China relationship related to soy has effects on Washington too.
Several agricultural products including apples and cherries have been targeted by the tariffs, and the move could have a “huge impact on our local economy,” she added.
“The challenge for the agriculture industry is that you are growing apples or whatever the commodity is and it’s not easy to redeploy that.”
The Administration’s biggest mistake was withdrawing from the Trans-Pacific Partnership, she added, which would have really helped the U.S. write the rules of trade in Asia.
“Now we are seeing the negative impacts within Washington industries: orders are getting delayed or canceled, and it’s harmful for our economy. We are trying to keep a close eye on this with a big, medium and small company perspective in those key industries that are central to Washington state.”
Punke warns of the long-term effects brought on by a trade war.
“You see a real drag on the economy well beyond the specific product that has received a tariff. Thinking about it in a broader ecosystem is very important.”
A tariff on grain or wheat might lead to fewer hours for that industry and eventually less jobs, added Punke. Another example is how tariffs on steel and aluminum push equipment costs up.
WCIT is “aggressively engaging” with the Washington state delegation and providing them with stories from its members on what negative effects they might experience from the trade war’s escalation.
“It’s not easy to say the trade war is over and all this business will come back. There’s been concern in the market…and uncertainty for what this means in the near term as well as down the road to see what the repercussions will be in the coming months and the coming years.”
One industry particularly affected by the Chinese tariffs is dairy, where products such as powdered whole milk and skimmed milk, infant formula and lactose are being targeted. If Washington’s dairy sector loses the Chinese market due to costs, it will have to open new markets, according to Dan Wood, Executive Director of the Washington State Dairy Federation (WSDF).
“China is an important market,” he told Lens. “I want to say about 40 percent of Washington’s milk is exported to Asia. China is a big landing place for a lot of that, and we want to be able to have those markets open.”
Washington dairy is a $1.1 billion industry, according to Scott Dilley, Communications Director at WSDF.
“Currently our dairy producers are facing prolonged low prices for their milk, and discussions of additional tariffs adds another variable into an already complex production and marketing situation. We will be keeping a keen eye on these trade discussions as they unfold.”
Wood said: “Dairy is constantly focused on markets, whether it’s Washington state or U.S. dairy, and we are a big exporter out of the Port of Seattle, so our proximity to foreign markets is good in the Northwest but that’s a very important market.
“We are hopeful that the rhetoric settles down and they can get down to some agreements between the U.S. and China and other trading partners.”
He added that representatives from the dairy sector are often part of delegations to go to other countries and showcase Washington products.
“There’s input to the administration encouraging them to do the best they can to reach fair agreements and keep the market open not only for China but everywhere.”