The Trump Administration’s Trade War With China Is Likely to Affect Businesses in All California Congressional Districts

The ongoing US trade war with China, initiated by the Trump Administration, shows little sign of ending soon. After months of escalating tit-for-tat tariffs, the US has now imposed tariffs on $263.1 billion of goods imported from China, and China has responded with retaliatory tariffs on $112.4 billion in goods exported from the US to China. President Trump has recently threatened to impose tariffs on all remaining Chinese imports — representing an estimated $257 billion in goods — by early December, if upcoming trade discussions are not successful. This action would likely trigger further tariffs from China on US goods and/or other retaliatory measures targeting US companies. Tariffs imposed in response to the Trump Administration’s actions are likely to affect businesses in every part of California, because China is a major export market for goods produced in every California congressional district (see maps and link to table below).

The US has legitimate concerns about unfair trade practices in China, including deliberately weak protection of intellectual property rights and restrictions on foreign investment and market access which disadvantage US companies. The US also imports far more goods from China than it exports to China, creating a bilateral trade deficit that is cited by President Trump as a key reason for trade actions against China, though economists disagree about the significance of this trade deficit. Many economists argue that trade deficits are not problematic, and that US consumers and businesses, and the overall US and global economies, benefit from global supply chains that allow countries to specialize in producing certain goods and global consumer markets that allow producers to sell their goods widely and consumers to access goods produced globally. Some economists, however, argue that the trade deficit with China is a problem because of evidence that the increased flow into the US of lower-cost manufactured goods imported from China has triggered a drop in the number and wages of US manufacturing jobs, limiting the job opportunities available to less-educated US workers and pushing a significant number of former manufacturing workers into lower-paying jobs or out of the labor force entirely. But economists on all sides of the debate about the core concerns about trade with China — from those who emphasize the need to protect jobs and wages for US workers or address the needs of workers and communities harmed by trade, to those who believe unfettered free trade promotes the best economic outcomes, to those who support open markets coupled with targeted protections — all oppose the untargeted, broad-based tariffs that the Trump Administration has imposed on China. They argue that these types of tariffs are an inappropriate and ineffective approach to addressing concerns about China’s unfair trade practices or the negative effects of trade with China, because they appear unlikely to lead to desired reforms in China or significantly more jobs in the US, while they cause US businesses and consumers to face higher prices as a result of both tariffs imposed by the US on Chinese goods and retaliatory tariffs imposed by China on US-produced goods.

As discussed in a prior Budget Center blog post, California companies and workers are likely to feel the effects of retaliatory tariffs imposed by China because China is a key export market for California businesses. This is true for businesses in all parts of California that export goods. In fact, as of 2016 China was one of the top five export destinations for goods produced in every one of California’s 53 congressional districts, with annual exports to China valued at more than $100 million in more than 90% of districts, according to figures produced by The Trade Partnership for the US-China Business Council, based on data from the US Census Bureau and US Department of Agriculture (see maps).

Download a table of the value of goods exported to China and rank of China as an export destination by congressional district.

This means that the Trump Administration’s tit-for-tat tariff war with China, with no end in sight, can be expected to disrupt operations and revenues of businesses throughout California that produce agricultural, industrial, and manufactured goods for export — with cascading effects on jobs, business profits, and state and local tax revenues. California workers and businesses need a different federal approach to trade policy with China — one that addresses legitimate concerns about unfair competition and the negative effects of trade on workers and communities, without punishing US workers, companies, and consumers through direct and retaliatory tariffs that do not lead to meaningful trade reform.

— Sara Kimberlin