Texas is fated to be caught in the cross­fire of Trump’s trade war

Houston Chronicle Sunday - - CITY | STATE - ERICA GRIEDER

Ac­cord­ing to Pres­i­dent Don­ald Trump, “trade wars are good, and easy to win.”

Ac­cord­ing to econ­o­mists and his­to­ri­ans, that is not the case. Amer­i­cans are prob­a­bly about to learn the hard way who is right.

On Fri­day, just af­ter mid­night, the Trump ad­min­is­tra­tion slapped tar­iffs on $34 bil­lion worth of Chi­nese goods. Be­fore the sun rose over the United States, China had re­sponded in kind, with tar­iffs on Amer­i­can soy­beans, corn and pork, among other goods. Trump had al­ready im­posed tar­iffs on roughly $50 bil­lion worth of goods from our ma­jor trad­ing part­ners. In May, for ex­am­ple, he im­posed tar­iffs on steel and alu­minum im­ports from Canada, Mex­ico and the Euro­pean Union.

Still, this week’s tar­iffs on China struck many ob­servers as a sign that Trump hasn’t been bluff­ing. The tar­iffs are cer­tainly ev­i­dence that no one has been able to dis­suade him from launch­ing a trade war — de­spite the fact that his saber-rat­tling on the sub­ject and his open­ing salvos have al­ready caused Amer­i­can in­dus­try some dif­fi­cul­ties.

Last month, the Fed­eral Re­serve warned that some in­dus­try contacts across the coun­try were start­ing to scale back or post­pone their plans “as a re­sult of un­cer­tainty over trade pol­icy.”

One such contact had re­sponded to the Fed­eral Re­serve Bank of Dal­las’ quar­terly en­ergy sur­vey.

“Com­ments and ac­tions by the ad­min­is­tra­tion on tar­iffs and oil sup­ply have in­creased our un­cer­tainty about the next six months, so we are lim­it­ing in­vest­ment at the mo­ment,” ex­plained the contact, who works for an ex­plo­ration and pro­duc­tion firm.

And Gov. Greg Ab­bott moved to in­ter­vene in a letter sent to Trump on June 28.

“I am con­cerned that the new

tar­iffs on steel and alu­minum im­ports and other goods may threaten fu­ture eco­nomic growth both in our state and across the coun­try,” Ab­bott wrote.

Tex­ans, in par­tic­u­lar, should be alarmed by the tar­iffs that Trump none­the­less pro­ceeded to im­pose. No state has as much to lose.

Ab­bott’s letter to Trump ex­plains the prob­lem well. Texas is the coun­try’s lead­ing ex­port state; in 2017, ac­cord­ing to cen­sus data, we ex­ported roughly $265 bil­lion worth of goods — 17 per­cent of the na­tion’s to­tal. And Texas im­ports a lot of goods, to boot.

Many of the goods the state ex­ports, for that mat­ter, are pro­duced us­ing goods we im­port. The Toy­ota trucks pro­duced in San An­to­nio, for ex­am­ple, in­clude parts made in Mex­ico. The oil and nat­u­ral gas ex­tracted from the Per­mian Basin would be stuck there if not for pipe­lines made from alu­minum and steel.

Close to home

In the event of a trade war, then, Texas is ef­fec­tively doomed to be caught up in the cross­fire. Last year, as Ab­bott noted, Texas farm­ers ex­ported about $1 bil­lion of agri­cul­tural prod­ucts to China. This week’s re­tal­ia­tory ac­tion from Bei­jing will hit close to home.

Mean­while, Texas im­ported twice as much steel and alu­minum as any other state, so Trump’s own tar­iffs will raise the costs of do­ing busi­ness in the oil field. As Ab­bott rightly ob­serves, that has im­pli­ca­tions for Amer­ica’s over­all en­ergy port­fo­lio.

“If the new tar­iffs con­tinue to drive up the cost of oil and gas pro­duc­tion, Amer­ica’s quest for global en­ergy dom­i­nance could be sig­nif­i­cantly hin­dered,” the gov­er­nor wrote.

Un­for­tu­nately, there’s no ev­i­dence Trump shares Ab­bott’s con­cerns. He might ac­tu­ally be pleased by the no­tion that his trade poli­cies could put a damper on the shale boom, which has been hard on his fa­vored fos­sil fuel: coal.

Also un­for­tu­nate is that Ab­bott has pre-emp­tively sac­ri­ficed what­ever lever­age he might have had, as gov­er­nor of Texas, by mak­ing it clear that his sup­port for Trump is ef­fec­tively un­con­di­tional.

In May 2016, Ab­bott ex­horted del­e­gates at the state Repub­li­can con­ven­tion to unite be­hind the party’s pres­i­den­tial nom­i­nee — even though, at that point, Trump had yet to of­fi­cially se­cure the nom­i­na­tion. Since then, while cam­paign­ing for his own re-elec­tion, Ab­bott has urged vot­ers to “Keep Texas Red,” as if any other course would mean cer­tain doom.

As a re­sult, Ab­bott isn’t in a po­si­tion to de­mand that the pres­i­dent sus­pend his trade war — or even to ar­gue that the pres­i­dent should.

Ill-fated fight

Trump has never made any se­cret of his pro­tec­tion­ist views.

“We don’t have vic­to­ries any­more. We used to have vic­to­ries, but we don’t have them,” Trump said in his cam­paign an­nounce­ment speech in June 2015.

“When was the last time any­body saw us beat­ing, let’s say, China in a trade deal? They kill us,” he con­tin­ued.

The lead­ers of Texas heard that kind of rhetoric, just like the rest of us did, and none­the­less gave Trump their full sup­port. They can hope that the United States, as a whole, will come out ahead in this trade war, or at least not too badly bruised.

But for Texas, at least, trade wars are bad. And Trump’s trade war is one that we can’t win.

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