Chinese President Xi Jinping image via flickr user Michel Temer

published on April 13, 2018 - 2:25 PM
Written by David Castellon

The escalating trade conflict between the U.S. and China poses a major threat to jobs across California, particularly in the Central Valley, where just over 5 percent of jobs could be threatened.

That’s according to a new report released this week by the Brookings Institution, a non-partisan Washington think tank, looking at the economic threat posed by China’s tariffs on imports of 234 products made and grown in the U.S., among them nine of the top-ten agricultural commodities California farmers ship to China and Hong Kong including wine, walnuts, pistachios, table grapes, oranges, strawberries and raisins.

China is the state’s third largest export market for agricultural goods after Canada and the 28-country European Union, with sales totaling $2 billion in 2016, the latest figure available.

“California is heavily affected by the potential tariffs, with Napa Valley wines; Central Valley vegetables, fruit, and berry growers; and Los Angeles plastics,” states the report that looks only at the number of jobs in 40 U.S. industries that could be affected by China’s tariffs, breaking them down by state and counties, illustrating how this global conflict is having effects on local levels.

Global issue hits close to home

“Trade diplomacy can often seem an international and faraway activity. However, when it comes down to specific lists of proposed tariffs on particular products that Americans produce, from ginseng to airplanes, the high-level posturing of Washington and Beijing suddenly gets more real,” the Brookings researchers wrote.

To determine the local effects, Brookings analyzed the exposure of U.S. industries and businesses vulnerable to potential disruption from the two rounds of threatened Chinese tariffs on U.S. goods,” the first of which took effect April 2 in retaliation to President Donald Trump’s March announcement that he would impose tariffs on steel and aluminum on some U.S. trade partners, China among then, followed by additional tariffs on about 1,300 Chinese goods imported here.

Trump said he took action in order to pressure other countries to renegotiate trade deals balanced out of this country’s favor as well as to stop what he described as unfair trade practices, with China being particularly singled out on that issue.

The president has threatened further tariffs on Chinese goods.

“We then checked their national and county-by-county employment as a way of gauging industry and local vulnerability to potential trade gyrations. In this fashion, we’ve sketched a granular, bottom-up look at industries’ and locations’ exposure to Chinese saber-rattling,” the Brookings report continues.

In all, about 2.1 million U.S. jobs exist in the affected industries, most in the plastics, aircraft and pharmaceutical manufacturing fields.

Fourth on the list, with more than 192,000 jobs that could be affected, is fruit and tree nut farming, which is predominately done in California’s Central Valley.

Wineries and canning of fruits and vegetables are eighth and ninth on the list.

Among states, California has the most jobs potentially vulnerable to job losses from an extended tariff conflict, 287,418 based on 2016 state employment figures, which amounts to 1.7 percent of jobs in the state.

Texas comes in at a distant second with 156,092 jobs in the affected industries.

As for the jobs that could be affected in counties across the U.S, Los Angeles County has the highest number, with 40,996.

California a big target

Among the California counties, Ventura comes in second with 20,747 jobs, followed by Fresno County with 18,428, San Diego County with 18,352 and Kern County with 15,685.

Among the South Valley counties, Tulare has 6,607 jobs in the affected industries, followed by Kings with 3,600 jobs and Madera County with 2,612.

Combined, the nearly 47,000 jobs in the five Central Valley counties constitute more than 5 percent of total jobs, according to data provided by the Brookings Institution.

As for how many jobs the Chinese tariffs could actually cost industries here and across the U.S., that’s anybody’s guess. The Brookings Institute researchers didn’t offer that figure.

It’s too early to know how U.S. businesses that export to China may react to the tariffs, and the one-upmanship both Trump and Chinese officials have displayed so far — each escalating the tariff threats — isn’t helping to allow anyone to easily the estimate the effects. In addition, it’s not known if the escalation will continue into an all-out trade war and how long the tariffs may last.

China did its homework

Based in the specific goods Chinese officials chose to target in their tariffs, “Overall, the list suggests that Chinese trade bureaucrats have as good, or perhaps even better, of a feel for the diverse and culturally significant key elements that comprise the U.S. production base than their U.S. counterparts. High-tech and low-tech, industrial and agricultural, commodity and specialty production are all represented and put into play.”

That’s important, said Robert Maxim a senior research analyst with the Brookings Institute, noting that most tariff conflicts end because one side finds alternate sources for goods or because of backlash against governments — which can come from the public, industries or both — over the loss of goods and supply disruptions.

He noted that China’s choice of goods to tariff particularly hits rural America hard, a core constituency that normally gives Trump some of his strongest support.

“Map the potentially affected jobs, meanwhile, and it’s very clear that the Chinese have done their homework about the geography of both the U.S. production system and its divided politics,” the Brookings report states.

The researchers went on to say that “the Chinese tariff lists seem designed to ensure that both parties — and virtually all parts of the country — are maximally disturbed by the ongoing saber-rattling. On the one hand, the 2.1 million potentially tariff-affected jobs are almost evenly distributed in counties that President Trump and Hillary Clinton won in the 2016 election,” though the list seems to be optimally designed to especially agitate President Trump’s red-state base.

“That means that both red-state and blue-state members of Congress will be activated by the faceoff.”

Blowback likely

They also theorized that any coming trade wars will not be remote from America’s local communities, “which will likely not remain silent about their views of any potential dislocation.”

Trump may be looking to placate industries and individuals facing job losses, as he reportedly directed White House staff this week to look into the possibility of the U.S. rejoining the Trans-Pacific Partnership, which the president derided in his campaign and pulled the U.S. out of days after taking office last year.

That agreement with counties that include Japan, Vietnam and Singapore could give the White House more leverage against China and beef up foreign trade for U.S. ag commodities and other goods, some of the president’s critics have said.

China’ tariff impact by the numbers

Here are the number jobs in California industries that could be affect by China’s tariffs on U.S. goods, along with the numbers in the five South Valley counties – based on 2016 job numbers – and the percentage of jobs they represent in each region.

Employment in affected industries     

                                    2016        Ratio

Fresno County        18,428     5.1%

Tulare County         6,607       4.2%

Madera County       2,612       5.6%

Kings County           3,600       8.0%

Kern County            15,685     5.2%

Total                          46,931     5.1%

California                 287,418  1.7%

Source: Brookings Institution

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