As the most trade-dependent state in the nation with one third of its jobs tied to foreign commerce, Washington has been hit particularly hard by trade disputes with countries such as China. Not only have Washington exports dropped by $621 million, or 19 percent, but also the state estimates tariff increases on foreign imports cost Washingtonians a total of $2.4 billion a year – or $1,000 per household annually.
While the U.S. and hits China with new retaliatory tariffs and considers a new trade agreement with Mexico and Canada, state officials at a Nov. 21 work session of the Senate Financial Institutions, Economic Development & Trade Committee stressed the need for relationships with and between business and local governments.
“We need to be engaged, maybe even more engaged than ever before, at participating in trade shows and doing those one-on-one meetings to understand where the opportunities would be for Washington State,” state Department of Commerce Director Lisa Brown said. “That’s kind of the bottom line.”
“I’ve heard from some companies that they like the extra protection,” Governor Jay Inslee’s Trade Advisor Robert Hamilton said. “But I’m hearing more from more companies that they’re concerned about the impact on their supply chain…the fact that this is going to increase the cost they pass on to consumers.”
He added that “specific companies…are somewhat on hold waiting to see what happens with respect to those tariffs, and this is across the state – this is not just a Puget Sound phenomenon.”
That urgency is most felt with China, Washington’s top trading partner and a country responsible for two-thirds of the export losses due to retaliatory tariffs. Already, Chinese investments have fallen by 88 percent from 2016 to 2018. Meanwhile, Washington agricultural exports have dropped by $260 million, or 24 percent.
To address this, Brown said the U.S. Department of Agriculture is shifting to other markets, though she added “it’s the uncertainty that is really affecting both Washington businesses that want to export as well as international businesses that are thinking about either expanding or doing direct investment into the Washington market.”
In some ways, the trade situation with China is only expected to get worse in the near future. By Dec. 15, nearly all Chinese imports will be subject to a U.S. tariff , while China will have a retaliatory tariff on 69 percent of all U.S. imports. The average tariff on U.S. goods will have increased from 8 percent to 26 percent.
While the short-term outcome with China is uncertain, Brown said “in the long term with it becoming the largest economy in the world, there are a lot of reasons for us to stay engaged at the business-to-business and province-to-state level. It’s clearly in our interest to maintain people-to-people and business-to-business relationships during this time.”
However, a prolonged trade dispute may encourage stronger relations with countries such as India. According to a new report by the Washington Council on International Trade (WCIT), the nation is expected to outpace China’s growth over the next five years.
“With China trade issues and the proposed new trade agreement with Canada and Mexico getting most of the headlines, it has been easy to lose sight of India’s importance to Washington’s economy,” WCIT President Lori Otto Punke said in a statement. “From aircraft to apples, India is one of the most vibrant growth markets for Washington state exporters.”
However, she added “that opportunity could be undermined if tariffs from both countries get in the way.”