What are the implications for California in the Trump trade agreement?

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The list of Chinese products that Trump imposed tariffs since he launched a trade war two years ago seems to work forever: catfish, poultry eggs, natural sponges, pearl onions, mushrooms, chestnuts, copper springs, tungsten wire, pieces Thermometer These are just a few.

“It’s amazing to go to the list,” said Jock O’Connell, international trade advisor at Beacon Economics. “It continues for dozens and dozens of pages … and covers many products that you can’t even imagine.”

The trade agreement signed on Wednesday does not do much to clarify that complexity or alleviate the impact of tariffs on California businesses and consumers. Trump’s deal with China was promoted by his administration as a victory, but experts say the deal is only a first step to ease tensions, bringing some immediate benefits, but leaving some of the most thorny problems unsolved.

The vast majority of tariffs, which intensified a trade war and generated higher costs for consumers and uncertainty for the US auto industry. UU. And the agricultural and manufacturing sectors are still valid.

In a preliminary agreement last month, Trump canceled 15% tariffs on approximately $ 160 billion of Chinese imports scheduled for December 15. The levies on approximately $ 120 billion of China’s assets were halved, to 7.5%. But the agreement maintained tariffs of 25% on another $ 250 billion of imports as currency for future negotiations.

“We keep the tariffs because we will use them for another” Trump said at a rally on January 9 in Toledo, Ohio.

California’s economy has withstood the trade war relatively well compared to other parts of the country plagued by declines in manufacturing and agriculture, said Lynn Reaser, chief economist at the Fermanian Institute of Business and Economics at Point Loma Nazarene University. California’s economy grew at a rate of 2.6% during the first 10 months of 2019, according to the UCLA Anderson School, compared to 2.1% growth for the entire United States 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 education in California if it weren’t for the commercial strain. Uncertainty and rates have also disrupted supply chains and capital expenditure plans.

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

“What will probably happen administratively is that exemptions will be granted in cases where the Chinese decide to import US products that are still subject to higher retaliatory tariffs,” O’Connell said in an email.

“It’s not much progress. The United States is still imposing high tariffs on an even large volume of goods that we would import from China,” O’Connell said. “We’ll have to wait and see”.

This is how some key industries in California can be affected.

Wine

During the summer, China imposed a 93% tax on US wine, a 48% increase before the escalation of tensions, according to the Wine Institute, a commercial group for some 1,000 California wineries and related businesses.

As a result, sales of wines from California to China decreased slightly more than 20% in volume last year through November compared to the previous year, said Honore Comfort, vice president of International Marketing at the Wine Institute.

The rates remain valid. However, the trade agreement prevents tariffs from rising, which is positive for the industry, Comfort said.

The wine is included in the list of Chinese purchase commitments. Comfort said the Wine Institute was evaluating the details of the trade agreement and could not draw any conclusions.

“We will continue to support California wine in China. … We hope to be able to resume our commercial position with them, ”he said.

Almond Orchards

A worker sprays insecticide in an almond orchard near Ripon in the San Joaquin Valley.

(Mike Nelson / EPA)

farming

While Trump accrued tariffs, China retaliated by canceling soy purchases, one of the largest US exports to that country. It also hit wheat and corn with tariffs. The Trump administration gave farmers a ransom of $ 28 billion.

Beijing imposed a 50% tariff on US almonds, one of the largest crops in California; That stays in place. The state supplies 82% of the world’s almonds, and exports to China fell by about a third, according to the California Almond Board.

In the agreement, China is committed to agricultural purchases that will primarily benefit states that specialize in soybeans and pork, Reaser said. However, California should see some gains in citrus and nut exports, he said.

“We are happy to see an agreement and China’s commitment to buy more agricultural products,” Julie Adams, vice president of global technical and regulatory affairs for the Almond Board of California, said in a statement. “But for almonds and other specialized crops, the question is whether China will reduce the reprisal rates that have been imposed since April 2018, as a means to encourage our Chinese customers to buy more almonds.”

Apple in China

Apple’s chief executive, Tim Cook, visits the iPhone production line at the new Foxconn plant in Zhengzhou Technology Park in China in 2012.

(France-Presse Agency)

Technology

American companies have long accused their Chinese rivals of stealing valuable technology. Under the trade agreement, Beijing says it will ban such practices and increase the protection of intellectual property. Experts say this could benefit technology companies in Silicon Valley and southern California, as long as China maintains its share of the agreement.

China also promised to stop demanding the transfer of technology as a precondition for companies to have access to their markets. But it remains to be seen how strictly China will enforce these provisions, Reaser said.

China has shown that it can acquire technology and, with government support, build competitive rivals for US companies. The technological wall between the two countries solidified further in the course of the commercial war. From China Huawei was forced to find alternative supply chains after the Trump administration cut critical components of the likes of Intel and Qualcomm.

For more than a year, while the commercial war was going on, Apple avoided damage. The 15% round of tariffs that Trump threatened to impose in December would have included mobile phones; Apple’s iPhone is almost completely made in China. These rates have been suspended indefinitely.

Reaser said US companies will likely continue to seek alternative supply chains to China as the administration’s national security and uncertainty persists.

“The technology wall has a big impact in California,” he said. “Paranoia and fear represent an important restriction.”

Consumer goods

In September, Tariffs of 15% were applied to $ 120 billion in Chinese imports which included consumer products such as smart watches, televisions, shoes, diapers, sporting goods, meat and dairy products. That round hit US homes directly, as many American companies said they would be forced to pass high prices to customers. According to the agreement reached in December, the tax imposed on these imports is reduced from 15% to 7.5%.

Long Beach Harbor

Containers are loaded in the port of Long Beach.

(Los Angeles Times)

Ports

The ports of Los Angeles and Long Beach, which handle roughly half of U.S. maritime trade with China, will likely see an increase in business deal deals, O’Connell said.

However, the Executive Director of the Port of Los Angeles, Gene Seroka, does not believe that the agreement does much to improve things. Seroka said the port has not yet seen a notable increase in exports, and that he does not believe there will be significant gains in the coming months. He said it could take months or years for trade volumes to recede, and he is not sure that they can ever return to pre-war levels.

“It has been 14 consecutive months of decline in export business,” Seroka said. “The damage that has been done in the last 18 to 20 months has been so painful.”

Seroka said that many American companies have moved their supply of supplies to the nations of Southeast Asia, which adds complexity to the routes established above and reduces business for the port.

If an American company decides to move its manufacture to Vietnam from China, for example, it might be easier to ship the products to the east coast through the Suez Canal, and then inland to destinations such as Chicago, Memphis and Dallas. “Basically we have given a sales advantage to all other trading nations,” Seroka said. “Officially we are left behind.”

The port needs more specificity on which products will benefit from the increase in purchases under the agreement, he said, and what tariffs are maintained to determine supply chains and transit routes.

“Details are very scarce,” said Seroka. “We would like to see some details.”

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