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Tariffs and Washington’s economic outlook

Tariffs and Washington’s economic outlook

An ongoing concern among Washington state officials is the potential impact of a trade war between the U.S. and China. However, the latest economic forecast concludes that the overall effect is still unknown. Also, whether the tariffs could prove beneficial or harmful depends on which industry, and even then, it could be hard to correlate with any changes to the state economy.

At the state Economic and Revenue Forecast Council (ERFC)’s Sept. 6 meeting, Executive Director and Chief Economist Steve Lerch told members that while “We definitely are concerned about the impact of these tariffs on Washington exports,” he added that “it’s certainly possible that we’ll see some positive employment impacts in some sectors. But we could even see some negative impacts. We’re going to have to kind of wait and see.”

The September forecast continues to show Washington’s economic growth outpacing the rest of the nation. Yet as the most trade-dependent state in the U.S., its stakes within trade disputes are much higher. Earlier this year the U.S. imposed a 25 percent tariff on billions of Chinese goods including steel and aluminum. In response, China slapped similar tariffs on U.S. exports that include Washington’s agricultural industry. As a result, the Northwest Horticultural Council reports that Washington cherry growers have lost between $60 million and $86 million.

Although farmers are cautiously optimistic about a new preliminary trade agreement between the U.S. and Mexico, China dominates in terms of Washington exports. According to the U.S. Census Bureau, Washington exported $18 billion in goods to the country last year. China alone was the destination for a quarter of the state’s exports. The new tariffs also threaten the state’s wheat industry. According to the Washington Association of Wheat Growers, 12.5 million bushels have been shipped to China in the 2017-18 reporting year so far.

At the Sept. 6 meeting, ERFC member Rep. Ed Orcutt (R-20) inquired what the overall impact would be to wheat exports.

Lerch replied that wheat producers could shift sales to other markets, but “that will probably mean that even if they’re successful…they’re going to have to cut prices. That means wheat farmers and the people involved in that (industry) wind up with less money.”

However, he added that “may also mean more wheat available domestically, which would drive down prices for farmers but be good for people that buy bread or flour. Some potential impacts there could be positive, but in that case the negatives would be bigger for Washington and more positive for the U.S. as a whole.”

Incidentally, Lerch said a reverse situation could occur with tariffs on Washington’s steel industry, calling it a “clear positive” for employers such as Nucor that has a plant in Seattle. “It’s positive for them, but it still has the potential be a negative for some U.S. firms,” including aluminum. Aerospace companies that rely on imported aluminum may not be able to switch to cheaper domestic products.”

One of the reasons for the uncertainty is that, like it appears with Mexico, the U.S. and China could ultimately eliminate the tariffs placed as part of a revised trade agreement.

“Right now, we don’t really have enough data to know what’s going to happen,” Lerch concluded.

ERFC’s next meeting is on Sept. 26.


TJ Martinell is a native Washingtonian and award-winning journalist. Born and raised in Bellevue, he’s been involved in the news industry since working at his high school newspaper.

His investigative reporting for various community newspapers in the Puget Sound region has been recognized by the Washington Newspaper Publishers Association and the Society for Professional Journalists.

A graduate of Eastern Washington University, he has a B.A. in journalism and was the news editor of EWU’s student university newspaper.

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