Trade War Could Hit Washington Hard

Any trade war between the United States and China is worrisome, but if it escalated and tariffs are imposed, it will hit Washington particularly hard. Avoiding that possibility should be our primary goal.

Our state is our nation’s third largest exporter, with more than half of the containers leaving Puget Sound heading to China. The Port of Seattle estimated that China trade alone accounted for $18 billion last year and 40 percent of our state’s jobs are now tied to trade.

President Trump has proposed tariffs as a bargaining chip to get better deal for American exporters and to punish the Chinese theft of intellectual property. He also wants to cut into our $50 billion trade deficit with China.

The President frets that “Made in China 2025,” the aggressive initiative designed to dominate strategic sectors, such as industrial robots, components for electric vehicles and semiconductors, will put our country at a significant commercial and military disadvantage.

China retaliated with its own tariff plan consisting of a series of 25 and 15 percent charges.

If a 25 percent tariff was levied on Boeing commercial aircraft, it could hurt Washington and impact the company’s orders, deliveries and production. After supplying over a thousand 737s to China, Boeing recently listed 273 unfilled orders of 737s destined for China airlines.

So far, only the 737-800 and 737-900ER were among the $50 billion in Chinese tariffs announced in early April; however, if the trade disputes widens, more Boeing aircraft may be added, former Washington Governor and Ambassador to China Gary Locke worries.

“China’s retaliation is best understood as an economic and political demonstration,” the Wall Street Journal editorialized, “hitting a small number of products to signal where future blows could fall if the Trump Administration imposes punitive tariffs on $60 billion in Chinese good to punish the theft of intellectual property.” Tariffs on America’s biggest exports to China, such as soybeans and Boeing jets, are currently held in reserve.

But for Washington the immediate threat is the 15 percent tariff which may be placed on cherries, apples and wine. With the cherry crop ripening in early summer, the impact would be the most noticeable.

Keith Hu with the Northwest Cherry Growers Association told KOMO News: “Everybody is getting pretty nervous about it.” China is the top export market and last year, it bought 33,000 tons of premium cherries worth $140 million.

Besides cherries, China purchased $50 million of apples and $1.2 million in Washington wines in 2017.

In addition to airplanes and farm products, our state exported over $1 billion in vehicles and parts, wood products, medical and surgical equipment and other goods.

China has a couple of other leverage points we can’t ignore. The Beijing government can pare back on its purchase of U.S. debt. It is our largest foreign debt holder pegged at $1.7 trillion.

“China has many ways it can make life exceedingly uncomfortable for a large number of American businesses, both those that hoping for access to China’s fast-expanding market and those that use China as an important part of their supply chains,” said Eswar Prasad, a Cornell University professor of international trade, in the New York Times.

Hopefully, President Trump is correct in his assurances that a trade war between the United States and China is not imminent and the stock markets here and abroad will settle down.

Most importantly, a deal needs be worked out which will give us better protections for intellectual properties and a more even playing field for our products. The best approach would be to dial back the rhetoric and bring people to the bargaining table.

Don Brunell is a business analyst, writer and columnist. He recently retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at TheBrunells@msn.com.