President Donald Trumps tit-for-tat trade struggle with China may seem distant, but its impact will likely be felt in Southern California.
Chinese tariffs already imposed on 128 U.S. exports, along with threatened duties on another 106 products, will affect 2.1 million American workers in 40 industries, according to a study by the Brookings Institution, a Washington, D.C. nonprofit research group.
Some 41,000 people in Los Angeles County work in the vulnerable industries, along with 10,700 in Orange County, 8,400 in Riverside County and 6,400 in San Bernardino County, Brookings county-by-county survey found.
Although Californias large and diverse economy tends to insulate it from a trade war, it nonetheless counts 287,000 jobs in businesses targeted by Chinese tariffs — more than any other state.
At the annual California-China Business Summit in Beverly Hills Thursday, California Governor Jerry Brown urged greater cooperation with China, noting that the economies of China and the United States are inextricably linked.
“Globalization is here. We are not going to get rid of it,” Brown said.
“And a trade war is stupid.”
Tension between the U.S. and China has escalated in recent weeks as the Trump administration imposed tariffs on tens of billions of dollars of Chinese imports, and China retaliated in kind.
Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, along with trade advisers Robert Lighthizer and Peter Navarro, traveled to Beijing Thursday for two days of talks to pressure China to cut its trade surplus with the U.S., protect American companies intellectual property and end discriminatory tactics against U.S. businesses.
In California, businesses most affected by Chinese import duties so far include Los Angeles plastics factories, Napa Valley wineries, and Central Valley vegetable, fruit, and berry farms, according to the Brookings study.
In agricultural counties such as Colusa and Napa, more than 14% of jobs are in industries targeted by the Chinese tariffs. The impact is more muted in cities and suburbs: In Los Angeles, Orange, Riverside and San Bernardino counties, no more than 1.3 percent of the four counties workforces are in affected businesses.
“Trade diplomacy can often seem an international and faraway activity,” wrote Mark Muro, director of Brookings Metropolitan Policy Program, in the organizations report.
“However, when it comes down to specific lists of tariffs on particular products that Americans produce, from ginseng to airplanes, the high-level posturing of Washington and Beijing suddenly gets more real.”
The largest U.S. sectors targeted by China so far are plastics (300,000 jobs), aircraft (230,000), pharmaceuticals (200,000) and fruit and nut tree farming (190,000 jobs). Other vulnerable businesses include wineries (60,000), breweries (58,000) and natural gas extraction (45,000).
After California, the next most affected states are Texas with 156,000 jobs in impacted industries and Washington State with 154,000, according to the study.
On Wednesday, the California Budget & Policy Center, a Sacramento-based think tank, published a paper warning, “The tariffs adopted and proposed by China, in retaliation for the tariffs imposed by the Trump Administration, could have a significant negative effect on California companies and workers, because China is a key destination for many California exports.
“More than $16.4 billion in exports to China originated in California in 2017 (though not all of those goods were produced in California), making China the states third-largest export destination overall, after Mexico and Canada,” wrote the policy centers senior analyst, Sara Kimberlin.
“Agriculture is an area specifically targeted by the retaliatory tariffs proposed by China. California farmers exported $2.0 billion in agricultural products in 2016 to China (including Hong Kong), which ranked third as a destination for the states agricultural exports.”
California technology firms may have been hurt by Chinas predatory intellectual property practices, which Trump seeks to curb. However, most tech executives oppose protectionism, arguing it is likely to harm US workers and consumers.
“Ultimately, as tariffs reduce demand or profit margins for specific products, their effects will be felt most strongly at the local level, among the companies that produce those goods and the workers they employ,” Kimberlin wrote.
Trumps protectionist initiatives began in January with tariffs on imported washing machines and solar panels, a key China export. In March, the administration announced levies on steel and aluminum, also partly targeted at China.
China retaliated by imposing tariffs on 128 U.S. products to take effect on April 1.
Trump then threatened new tariffs on 1,300 Chinese exports, worth $50 billion, especially machinery and high-tech components.
China responded by proposing tariffs on 106 U.S. exports, including soybeans, cars and chemicals worth $50 billion.
Finally, in early April, Trump announced the U.S. would consider more tariffs on another $100 billion in Chinese products. And last week, the administration indicated it may restrict imports of Chinese telecom equipment based on national security concerns.
Whether the aggressive tactics will lead to an all-out trade war remains uncertain. But business leaders are hoping the Beijing negotiations will lead to an agreement.
At the Milken Institute Global Conference in Beverly Hills Monday, Emmanuel “Manny” Roman, CEO of Newport Beach-based Pacific Investment Management Co., was among them. “I have a certain amount of sympathy for China, because the reality is they have to deal with an administration who deals with trade policy in a very different way than most of us have seen in the past eight years,” he said.
“So theyre also learning as they go. The most likely outcome is you come to some realistic compromise and you put the issue behind you.”