When economists from the Oregon Office of Economic Analysis presented the Economic and Revenue Forecast in June 2018, they identified trade tensions as one of a handful of national and international political/economic factors – along with a tightening labor supply and rising interest rates – that could slow Oregon’s economic growth. Developments since that presentation about a month ago have increased reason for concerns.
Efforts to change trade agreements and impose tariffs on some foreign goods sold in the United States already are creating confusion and increasing costs for some U.S. businesses. And, as economists Mark McMullen and Josh Lehner noted in their presentation to the House and Senate Revenue committees, Oregon is particularly vulnerable to trade disruptions.
“Given that Oregon is more trade-dependent than the typical state, China is our number one destination for exports, and Canada is our number two destination, any substantial revisions to trade relations would impact the regional economy to a larger degree than the typical state,” they wrote in the forecast.
To read the June Economic and Revenue Forecast, click here.
The stakes for Oregon’s economy are significant. According to the website globalEDGE, Oregon had almost $22.2 billion in total exports in 2016. Its trade balance of $4.34 billion ranked third among the 50 states. Oregon’s largest export market, by far, is China, which bought $5.82 billion of Oregon products. Canada is second, and both countries have been targets of Trump Administration trade policies.
The computer and semiconductor industry is particularly vulnerable because of the amount of business many of its leading companies – including Oregon’s largest exporter, Intel – do with China. Agriculture is another important Oregon industry vulnerable to a trade war.
Effects of global trade tensions go far beyond exporters who might lose access to foreign markets or see retaliatory tariffs placed on their products. Shelly Boshart Davis, Vice President of International Sales & Marketing for Oregon Business & Industry (OBI) member Boshart Trucking, said that tariffs affecting one industry or product can have far-reaching ripple effects.
“Any time one industry gets out of whack, the butterfly effect on other industries is concerning,” Boshart Davis said. One concern involves the ability to deliver products. The international shipping system is so fragile that a sudden cancellation of orders can lead to route changes that affect a wide range of exporters and importers. And trade-dependent companies in Oregon already face depleted shipping orders because of cutbacks in container service at the Port of Portland. National business organizations are working to help calm the tensions. The National Association of Manufacturers (NAM), National Retail Federation (NRF) and U.S. Chamber of Commerce all are advocating against tariffs and in favor of trade policies that promote economic growth and fair competition. Among other things, they supported legislation to require the president to submit to Congress any proposal to raise tariffs in the interest of national security under Section 232 of the Trade Expansion Act of 1962.
Regardless of what happens next, it appears certain that trade tensions will factor into business decisions and influence the stock market and consumer prices for some time.