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In Our View: State has much at stake in tariffs against China

The Columbian
Published: May 7, 2019, 6:03am

Undoubtedly, there is plenty of good economic news. The jobs report issued last week by the Labor Department showed strong growth and an unemployment rate of 3.6 percent — the lowest in 50 years.

While we frequently issue reminders that presidents do not deserve all the credit — or the blame — for economic trends, President Donald Trump’s policies have been effective. There are some caveats — notably, a soaring national debt that continues to be ignored in Washington, D.C. — but the most important thing is to shepherd an economy that creates jobs, and the Trump administration has done that.

That being said, we continue to worry about the president’s affection for tariffs and the long-term impact they will have on the growing economy. On Sunday, Trump took to Twitter and threatened to hike tariffs on $200 billion worth of Chinese goods. This came as a Chinese delegation is planning to resume talks aimed at resolving a trade war that has shaken financial markets and cast a pall over the global economy. Trump said he would raise import taxes on Chinese products from 10 percent to 25 percent at the end of this week.

Trump claims that Chinese manufacturers are paying for tariffs. In truth, American consumers foot the bill through higher prices. As Jacob Kirkegaard of the Peterson Institute for International Economics explained to NBC News: “His assertion generally that the Chinese are paying these tariffs is just simply nonsense. It’s a complete misunderstanding of how tariffs work, because tariffs are paid by the importing company and those companies are overwhelmingly American. Ultimately, that means this is a tax paid by the American consumers.”

In March, a study led by the Federal Reserve Bank of New York estimated that tariffs are reducing U.S. income by about $1.4 billion a month.

In Washington state, any mention of tariffs leads to a bit of knuckle-cracking and teeth-gnashing. Washington is the nation’s most trade-dependent state, and unencumbered trade is essential to our economy. Imports and exports pass through our ports, our agriculture feeds people around the world, and an estimated 40 percent of Washington jobs are tied to international trade.

Only Texas and California exports more goods than Washington, and China is this state’s largest trading partner.

In February, the Washington Council on International Trade produced a policy paper examining the local impact of the United States’ trade war with China. “As tariffs continue, exporters lose market share and importers are forced to make suboptimal sourcing decisions,” the paper reads.

It also notes that each congressional district is affected by a trade war; in the 3rd District, for example, the impact is felt in the $360 million worth of logs the state annually exports to China.

Trump’s latest threat of tariff hikes is a negotiating ploy, an opening salvo leading up to trade talks. The strategy has worked thus far and, indeed, the United States must use what leverage it has against China’s theft of intellectual property and other violations of the principles of fair trade.

But Washington interests are understandably leery of the president’s impetuousness and the continuation of a trade war with our largest trading partner.

Washington’s economic ties with China reach communities throughout the state and are a linchpin for continued growth. With the economy booming here and throughout the country, the Trump administration should be cautious about tactics that will threaten that growth.

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