White House

Trump trade war casualties could include 5 million U.S. jobs

Gary Locke, the former U.S. ambassador to China, says that President-elect Donald Trump’s threats to impose tariffs on Chinese goods could ignite a trade war, hurting all U.S. exports, particularly in Washington state.
Gary Locke, the former U.S. ambassador to China, says that President-elect Donald Trump’s threats to impose tariffs on Chinese goods could ignite a trade war, hurting all U.S. exports, particularly in Washington state. AP

As a presidential candidate, Donald Trump said that China had committed “the greatest theft in the history of the world” by taking advantage of the United States in global trade.

“We can’t continue to allow China to rape our country,” Trump said at a rally in May.

With Trump now headed to the White House in just three weeks, many trade backers fear the president-elect will follow through on his threats to add a 45 percent tax on all Chinese goods entering the U.S. and a 35 percent tariff on Mexican imports.

The anxiety over a possible trade war is particularly acute in Washington state, where China ranks as the No. 1 trading partner, accounting for nearly a quarter of all the state’s exports.

For many, the biggest worry is that China would respond by not doing business with Boeing, Washington state’s largest private employer, with more than 75,000 workers.

“The Chinese will simply retaliate and make Washington goods much more expensive,” said former Washington state Democratic Gov. Gary Locke, who served as the U.S. ambassador to China from 2011 to 2014. “It will cost us jobs. Those Chinese airlines don’t have to buy from Boeing. And they don’t have to buy Washington wheat. . . . It’s bad news for Washington state.”

How bad could it get?

Under the most dire scenario, a trade war would kill nearly 5 million U.S. jobs, with Washington state hit the hardest of any state, losing 5 percent of its private sector jobs, or a total of 127,685, according to the Peterson Institute for International Economics, a pro-trade group.

While Washington state would be the worst affected, the study concluded that a broad swath of states would lose at least 4 percent of their workers, including California, Texas, Pennsylvania, Illinois, Kentucky and North Carolina.

The study assumed that China and Mexico would respond to Trump by slapping equally large tariffs on U.S. goods, which would drive up costs for all consumers and result in far less cross-border trade.

Trump argues that his plan would result in more U.S. jobs staying put. And his advisers have argued that new tariffs may never be needed if China and Mexico change their positions in response to worries over a loss of access to American markets.

Trump made trade a signature issue of his campaign, appealing to blue-collar voters by arguing that the U.S. had become a pushover, allowing too many companies to lay off employees and move their operations to foreign countries.

Last month, Trump took credit for saving a thousand U.S. jobs when heating and cooling giant Carrier decided not to move some of its production work to Mexico. Trump said all American companies are now on notice that they’ll face tariffs if they try to relocate with hopes of selling products in U.S. markets.

Trump also wants to renegotiate the North American Free Trade Agreement (NAFTA), signed in 1993 by President Bill Clinton, and to scrap the 12-nation Trans-Pacific Partnership long sought by President Barack Obama.

Bob Haberman, co-owner of No. 9 Hay Trading Co. in Ellensburg, Washington, is among those sympathetic to Trump’s get-tough approach, even though his business could get caught in the crossfire.

“No one wants a trade war, don’t get me wrong,” he said. “But we’ve been on the other end of a trade war with China.”

While Washington state is well known for exporting its prized cherries and apples to foreign destinations, the state’s farmers have found a niche market in recent years by selling increased amounts of hay – mainly alfalfa – to Chinese dairies.

Haberman said he shipped roughly 30 containers of hay – each carrying 25 metric tons – to China in 2015. He figured that nearly 20 percent of his hay now goes to China, but he said that Chinese authorities have hurt American farmers by restricting sales, with no consequences from the U.S. government.

He’s still irked that China began rejecting deliveries in 2014 when Chinese authorities complained that too much of the hay came from genetically-modified crops.

“It is a big market and they feel they can do whatever they want,” Haberman said. “And we’ve pretty much let them dictate what they want to do.”

Locke, who lives in Seattle after resigning as Obama’s ambassador to China two years ago, said that U.S. companies need to rely on foreign markets, with 95 percent of all consumers living outside the country. He said Trump’s tariff plans reflect “a gross simplification” of the world economy and that China’s growing middle class has become increasingly important for U.S. businesses.

“The fact is that millions of American jobs depend on selling made-in-USA goods and services to China,” said Locke, who was born into a Chinese immigrant family and in 1997 became the first Chinese American to lead a U.S. state. “The Chinese people very much love American products because it stands for quality and purity, as well as status.”

When China President Xi Jinping visited the U.S. last year, he made Washington state his first stop, visiting a Boeing plant in Everett to show China’s close ties to the aerospace giant.

But in an editorial last month, the state-backed Global Times warned that China will give its business to Europe’s Airbus Group, a top Boeing competitor, if Trump imposes tariffs on Chinese goods. The newspaper called it part of a “tit-for-tat approach” that would hurt many American industries.

“The new president will be condemned for his recklessness, ignorance and incompetence and bear all the consequences,” the editorial said.

Trump has a long history of animosity toward China. After a Chinese court refused to acknowledge Trump’s brand name in 2011, Trump wrote a letter to Locke, complaining that the entire system was “faithless, corrupt and tainted.” He told Locke that China’s behavior “should be a clear warning to the rest of the world to refrain from any trade practice or business relationship with them.”

The president-elect angered Chinese leaders again earlier this month when he broke with diplomatic protocol by talking to the president of Taiwan, becoming the first U.S. president or president-elect to do so since the U.S. formally ended relations with Taiwan in 1979.

And last week, Trump chose Peter Navarro, an economist and professor at the University of California, Irvine, and a longtime critic of U.S.-China trade, to lead a new trade council in the White House.

On Capitol Hill, many members of the Washington state congressional delegation are ready for a battle with Trump over his trade plans.

In a state where 40 percent of the jobs are dependent on trade, it makes no rational sense,” said Washington state Democratic Rep. Rick Larsen. “Trade is a two-way street. If the president-elect believes that we are the country of the 1950s, where we can merely punish countries on trade without them taking reciprocal action, he’s wrong.”

Democratic Rep. Adam Smith, who will be the new dean of the state’s House delegation in 2017, said “there’s every reason to be concerned about a trade war and a massive increase in tariffs” and what would happen as a result.

“Mr. Trump, when he was a candidate, basically said, ‘I’ll just stare them down and they’ll agree to give me everything.’ And I doubt that,” Smith said.

Trade supporters hope that Trump will follow the lead of his predecessor and back trade pacts after he’s sworn in. Like Trump, Obama criticized U.S. trade policies when he ran for president in 2008 and proposed rewriting NAFTA as well, but he reversed course and quickly became a pro-trade president.

Washington state Republican Rep. Dave Reichert, who plans to lead the House Ways and Means Trade Subcommittee again in 2017, said he expects trade to still have plenty of support in the new Congress, even predicting that the Trans-Pacific deal can be revived in the next year or two with Trump in office.

“It’s about education, it’s about about getting the facts out there – he has a shared common goal of job creation,” Reichert said. “The opportunity here is to open a dialogue with the administration and have a chance to share the positives, the benefits of what trade brings to the United States of America, rather than focus on some of the dramatic statements or ideas or thoughts he’s had.”

Reichert, who met with Vice President-elect Mike Pence last week to discuss trade and tax issues, said he’d like the new Congress to link trade with lower corporate tax rates, taking away the incentive of U.S. companies to move their operations overseas.

“This is an opportunity,” Reichert said.

But Larsen joked that Reichert’s trade subcommittee should get a new name in the 115th Congress that will convene on Tuesday: The Subcommittee on Anti-Trade and Job Loss.

“Dave’s a good guy, but he’s going to have his work cut out for him with this administration on trade,” Larsen said.

Rob Hotakainen: 202-383-6154, @HotakainenRob