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Trump inked a deal with China. California is still sorting out the implications

Suhauna Hussain, Los Angeles Times on

Published in Business News

The list of Chinese goods Trump imposed tariffs on since launching a trade war two years ago seems like it runs forever: catfish, bird eggs, natural sponges, pearl onions, mushrooms, chestnuts, copper springs, tungsten wire, thermometer parts. These are just a few.

"It's mind-boggling to go down the list," said Jock O'Connell, international trade adviser at Beacon Economics. "It goes on for dozens and dozens of pages ... and covers a lot of goods you can't even imagine."

The trade deal inked Wednesday doesn't do much to clear up that complexity, or relieve the impact of tariffs on California businesses and consumers. Trump's deal with China was touted by his administration as a victory, but experts say that deal is only a first step toward eased tensions, bringing some immediate benefits but leaving some of the thorniest issues unresolved.

The vast majority of tariffs -- which escalated a trade war and delivered higher costs to consumers and uncertainty to the U.S. auto industry and agricultural and manufacturing sectors -- remain in place.

In a preliminary agreement last month, Trump canceled 15% tariffs on about $160 billion of Chinese imports scheduled to be rolled out Dec. 15. Levies on about $120 billion of goods from China were cut in half, to 7.5%. But the deal kept in place 25% tariffs on another $250 billion of imports as a bargaining chip for further negotiations.

"We're keeping the tariffs on because we'll use that for another one," Trump said at a Jan. 9 rally in Toledo, Ohio.

 

California's economy has weathered the trade war relatively well compared with other parts of the country slammed by declines in manufacturing and farming, said Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University. California's economy grew at a 2.6% rate through the first 10 months of 2019, according to the UCLA Anderson School, compared with 2.1% growth for the entire U.S. in the third quarter.

However, Reaser said the state would have seen higher levels of technology exports to China and more Chinese investment and spending on California education if not for the trade tension. Uncertainty and tariffs have also disrupted supply chains and plans for capital spending.

While China has not explicitly committed to removing some of the retaliatory tariffs that hurt California industries, the state could see gains from China's commitments to buy an additional $200 billion of American goods and services by 2021.

"What is likely to happen administratively is that waivers will be granted in cases where the Chinese decide to import U.S. products that remain subject to higher retaliatory tariffs," O'Connell said in an email.

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