China's tariffs will hit farm states hard, spare service-heavy states

David Pan | USA TODAY

Show Caption Hide Caption What a trade war means for you President Trump‘s fresh tariffs on $34 billion in Chinese goods set the stage for price increases hitting American companies and consumers. So how does it affect the everyday American? We explain.

Correction: Percentages were incorrectly labeled in an earlier version of the states affected graphic.

Whether it's Iowa soybeans or Alaskan salmon, don't expect the tariffs China is imposing on the U.S. to fall equally. Some states are at more risk than others.

Farm and seafood-producing states are going to be hit hardest by China's new tariffs on U.S. goods. States where cars and SUVs are made and shipped to China are on the hook, as well.

The Chinese government imposed $34 billion in new duties on goods exported from the U.S. last week in retaliation for the Trump administration's round of tariffs aimed at driving better deals on trade. Economists have warned the trade war could risk jobs, industry profits and lead to higher prices for consumers.

"Agricultural states, I think, are being hit the hardest," said Rodney Ludema, a Georgetown University professor and former senior international economist in the White House Council of Economic Advisers under President Barack Obama. The tariffs spare states "that are heavily service-dependent, like New York."

In terms of value, some 38 percent of products on the tariff list are agricultural, including soybeans, sorghum, tobacco and meat, said Chad Bown, a senior fellow at the Peterson Institute for International Economics. That's bad news for farm-belt states, primarily in the Midwest.

Only about 1.1 percent of the nation’s workforce is employed in industries affected by the tariffs, but it’s 3.5 percent in Arkansas, 3.3 percent in Iowa and 3.1 percent in Nebraska, according to Joseph Parilla, a fellow at the Metropolitan Policy Program at the Brookings Institution.

A Brookings study looking at potential employment impact points to poultry and livestock processors, winemakers and vegetable growers, among others as vulnerable. About 1.7 million U.S. jobs are in industries that are subject to China’s tariffs, Parilla said.

States involved either in the production or transportation of soybeans and pork are heavily at risk in comparison to their overall gross domestic product. They included seven of the top 20 states most affected by the tariffs, according to Armstrong-Taylor's analysis.

And automaking states, particularly in the South, are also at risk.

Some 24 percent of products on the list – in terms of value – are cars, trucks and other vehicles. Michigan alone exported $1.7 billion worth of motor vehicles and vehicle parts to China in 2017, according to a DC-based consulting firm Trade Partnership Worldwide LLC.

Other states being affected include South Carolina, where BMW makes SUVs for both the U.S. and export, and Alabama, home to Mercedes-Benz, Toyota, Honda and Hyundai factories.

But some states may get off more lightly. Wyoming, Delaware, Pennsylvania and New Jersey are least affected in Armstrong-Taylor's study, which is based on figures from the U.S. Chamber of Commerce and Bureau of Economic Analysis.

California is the nation’s biggest grower of vegetables, fruit and nuts. But its economy is diversified enough that the pain won’t be felt as acutely in Los Angeles and San Francisco.

“Certain areas such as the central valley (of California) could see some decline in earnings but for the most part, directly, the state is just not that exposed,” Christopher Thornberg, a partner at the Los Angeles-based consulting firm Beacon Economics.

A wide range of seafood is on China's tariffs list. That could hurt fisheries workers in Alaska and lobster harvesters in Maine. Alaska, for example, exported nearly $1 billion worth of seafood to China.

“China is a major market for Alaska seafood and it is also a major reprocessing center,” said Alexa Tonkovich, executive director of Alaska Seafood Marketing Institute. “The seafood industry directly employs nearly 60,000 workers in Alaska each year and directly employs more workers than any other private sector industry.”

This round of tariffs spares some industries, like commercial aircraft. That’s good news for Washington state, home of Boeing.

It also, for the moment, skips tariffs on chemical and petroleum products. If the tariff exchange goes to a second round, that could hurt Texas and further damage Louisiana.

Those in affected industries are watching and waiting to see what happens. They "may go away in two weeks or equivalently it could get even worse. We just don’t know,” said Beacon Economics' Thornberg.

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