While larger companies like Intel could mitigate the harm, smaller companies, especially farms, could face irreversible damage.
Maria Ellis, executive director of the Pacific Northwest International Trade Association, was matter-of-fact when discussing the latest round of federal tariffs aimed at punishing the Chinese market. Still, when it came to discussing how the most recent tariffs – 10% duty on additional $300 billion-worth of Chinese goods – could impact Oregon businesses, especially smaller businesses unable to mitigate the damage, tidbits of wariness slipped through.
Ellis is under no illusions about China’s market manipulation. “China is a very uncompetitive environment. They have state-sponsored enterprises that are dumping products intothe market at a low, low price,” says Ellis. However, she believes the tariff slugfest puts lopsided pain on Oregon businesses.
On the one hand, the tariffs make it easier for U.S.producers to compete with the artificially low cost of Chinese exports; On the other hand, when one country puts up tariffs, the other country retaliates with tariffs of their own.
Not only does Oregon’s location along the Pacific Rim make it an ideal exporter to Asian markets, these tariffs strike four of Oregon’s biggest sectors: agriculture, tech, appareland manufacturing.
Furthermore, according to the Portland Business Alliance, one in five jobs in Oregon are connected to trade. China is Oregon’s largest export partner, accounting for more than 20% of all export profits ($4.7 billion annually).
Oregon farmers got walloped during the first round of tariffs, which included a 15% hike on hazelnuts, Oregon’s most lucrative agricultural export to China. Ninety-nine percent of the hazelnuts grown in the U.S come from Oregon, supporting more than 800 family farms and $90 million in annual revenue. Hazelnut growers export over half of their crop every year, with more than 90%t of that to China.
35% of Oregon’s imports from China are intermediate goods, meaning they are materials used by tech and manufacturing sectors. Larger manufacturers, such as Nike or Intel, though significantly impacted are able to absorb the costs of these tariffs in the short term. However, the impacts longer term will be felt by consumers. Smaller to medium-sized tech companies could face a large burden over the short and long term.
“Let’s say you’re a supplier to Intel, and you’re trying to purchase wires from China. It’s just jacking up your costs in the long run,” says Ellis. To avoid the tariffs, larger manufacturers are likely to shift production elsewhere, effectively mitigating U.S. tariffs by producing outside the U.S.. But there is no guarantee these companies will transition back to purchasing materials from Oregon once the tariffs are lifted.
China is likely to fill its agricultural needs elsewhere. These new trade agreements would require treaties and negotiations, and would not disappear if the trade burden with the U.S. were lessened.
“[China] is one of the largest consumers in the world, they will get their products somewhere. Once that market access is gone, a lot of [companies] won’t be able to get them back,” says Ellis.
Tim Boyle, president and chief executive officer of Columbia Sportswear Company, claims the new tariffs will be a “disaster” for U.S. manufacturers across all levels. “If tariffs are imposed, Columbia Sportswear Company – along with many other manufacturers in our industry – will be forced to raise prices on our products. This is a massive tax on employers and consumers, not on China.”
If that doesn’t sound precarious enough, some of the measures taken to help rural farmers could do more harm than good. This year, the U.S. Senate passed the Family Farmer Relief Act of 2019 (H.R. 2336), which increased the debt limit for agricultural producers seeking to file for relief under Chapter 12 bankruptcy, a code specifically used for family farmers to help offset the effects of the trade war.
The legislation raises the debt limit for Chapter 12 bankruptcy filings from approximately $4.3 million to $10 million. But lawyer and agribusiness expert from K&L Gates Marisa Bocci says the trade war could turn some farm operations into credit risks for landlords.
“In response to the trade pressure, this legislation is trying to offset some of the pressure by giving farmers with more debt a more lenient form of bankruptcy,” says Bocci. “As a result, you’re going to have more farmers filing for Chapter 12 bankruptcy, which is more of a wild west.”
With more than double the debt ceiling to work with, landlords and other creditors will have to navigate new and uncharted waters, which could carry unforeseen risks. “It’s not a solution to a trade war,” according to Bocci.
If these tariffs aren’t helping Oregon businesses, and they aren’t helping Chinese businesses, who are they helping? One potential victor in this trade war is Turkey, the number one hazelnut supplier in the world, whose farmers now have a lot more access, and a lot less competition, to the largest market in the world.
“The EU is eating our lunch on the agricultural front now,” says Ellis.
Still, despite the pain inflicted by the trade war, Ellis believes the impact of these tariffs could help demonstrate the importance of trade across the political spectrum.
“Historically on the Left, there has been some division between labor and trade,” she says. “Two of the nine members of [Nancy Pelosi’s Trade Working Group] are from Oregon, because they understand the importance of trade to our state.
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Henry A. Fields Tuesday, 20 August 2019 12:25 Comment Link
The key word is she BELIEVES. I want to see actual figures. Thank you.