Chamber Business News

Third salvo in trade war to hit Arizona businesses and consumers

President Donald Trump shot off a third salvo in the trade war against China for “ripping off” American intellectual property and technology.

Trump announced a third round of tariffs will start immediately with a 10 percent levy on $200 billion of Chinese products. A list issued by the Trade Office shows thousands of products affected. Trump plans to add another 25 percent Jan. 1 if China does not make concessions.

“China’s acts, policies and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory and burden or restrict U.S. commerce,” the United State Trade Office said in a statement last week announcing the new tariffs.

Beijing shot back that it plans to retaliate with tariffs on $60 billion of U.S. goods.

That stands to hurt businesses, jobs, and consumers in Arizona and the nation, economists warn. It also will disrupt the global supply chain further, threatening the economy.

If Trump follows through with an additional 25 percent, everyone will start to feel the pain, said Russell Tronstad, an agricultural-resource economics professor at the University of Arizona.

“Consumers will probably start to feel it more than they did before because those earlier cuts were deeper and more narrowly specific, impacting more on the producer,” Tronstad said.

A new study from the National Retail Federation shows consumers would pay from $2.1 billion to $4.6 billion more for furniture and from $578 million to $1.2 billion more for travel goods under the new tariffs.

Some products like steel that were targeted by earlier tariffs have seen sharp price hikes.

In Arizona, the farmers and businesses that benefit from a valued $3.54 billion in goods and services in export and import trade with China are eyeing the escalation nervously.

“The trade war’s greatest impact on cotton prices has been the volatility it created in the futures market,” said Paul Bush, president of Cotton Marketing Services Calcot in Glendale. “That was certainly evident when cotton futures dropped almost 3 cents in response to the administration’s latest announcement, after trading in a subsequent narrow trading range for almost two months.”

The drop in futures prices could hurt cotton, Bush said. But he and other industry officials said they will find ways to sell to other countries not affected by tariffs.   

“One standout is Vietnam, who already sources 50 percent of their cotton from the U.S. and is eager to increase that amount this year,” Bush said. “They can buy raw cotton tariff-free from us, spin into yarn, then export the yarn tariff-free into China.”

Meanwhile, economists are questioning the wisdom coming from the White House. China has failed to respond to Trump’s demands so far.

“For farmers that are exporters, this is really going to start to hurt,” said Troy Schmitz, associate professor in the Morrison School of Agribusiness in the W. P. Carey School of Business at Arizona State University. “For other industries, (tariffs) protect them against competition but overall, when you take the gains and losses together, most economists agree that you’re better off having trade as an effect on total economy as opposed to imposing trade barriers.”

Arizona farmers understand that measures need to be taken against China, but tariffs are not the answer, said Julie Murphree, outreach director for the Arizona Farm Bureau.

“It’s tough in the ag market in general,” she said. “The trade war only makes us feel a bit more beaten up… Market volatility is often the common factor amongst the agriculture commodities affected by the tariffs. In an already depressed farm economy you hate to see additional price uncertainty.”

Victoria Harker

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