NC Could Be Caught In Crossfire Of Trump, Xi Tariff Threats

RALEIGH – Whether or not you are in favor, or wary of protectionist policies stemming from an America First agenda, the tariff talk emanating out of Washington, D.C. and Beijing is bound to have ramifications for businesses in the United States. The trade talk has introduced volatility to capital markets in the U.S. and abroad, but what could escalation of tariffs by the Chinese mean for North Carolina businesses?

Commissioner of Agriculture Steve Troxler (R) discussed the possibilities at an event last week, mentioning that tobacco farmers may face the most market disruptions as the commodity is currently the largest agricultural export to China.

During a cabinet meeting Monday, President Trump addressed some of the concerns that the Chinese could target agricultural products with steep tariffs.

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“But the farmers will be better off than they ever were…But I say, it’s not nice when they hit the farmers specifically because they think that hits me,” said Trump.

While the farmers, as any entrepreneurs will adjust and find more profitable markets, it’s hard to understand just how they, and others, will be better off at the end of it all.

It’s not just agricultural exports that could be affected either if the trade skirmishes turn into a full blown trade war.

According to Director of International Trade at the Economic Development Partnership of North Carolina Mike Hubbard, North Carolina’s exports to China grew at a very healthy 7.9 percent last year across a wide range of sectors such as chemicals, wood pulp, and aircraft parts.

Aircraft engines and parts exports to China actually grew an astounding 350 percent from 2016 to 2017, representing nearly $90 million in revenues. Similarly, Automotive drive axles with differentials grew even more, at greater than 450 percent.

Wood pulp is one of the largest, weighing in at annual 2017 sales to China of nearly $260 million.

Even legacy industries like textiles, that have taken a hit from outsourcing to places like China, still represent niche growth businesses that export to China. Categories such as ‘Textile Fabric for Card Clothing & Other Tech. Uses’ enjoyed 350 percent growth in exports to China from 2016 to 2017.

Aircraft parts, chemicals, and agricultural products such as Soy beans are a few of the products China has hinted at targeting when threatening trade responses to trade actions taken my the United States. Those tariffs could possibly hit a wide range of products that are made right here in North Carolina’s manufacturing industries.

When it comes to economic policy, government intervention in markets always has a long list of unintended consequences. Those consequences are even more pronounced when it comes to trade tariffs. The Old North State is increasingly diversifying its market destinations to seek growth and new customers.

No matter how wonky trade discussions can sound, the effects are likely to be felt right here at home.

 

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