KRWG

Trump trade war with China is beginning to hit home

Sep 28, 2018

Credit Dr. Chris Erickson

Commentary: Trump’s trade policies are starting to affect me directly, so now are much more important than previously. I refer to the outbreak of an all-out trade war with China, a dispute that threatens to disrupt transpacific trade.

Here is the problem, my family exports logs to China. Our operations are located about 10 miles from the Port of Longview, which is one of the largest log shipping ports in the United States. And those logs go to China.

China has closed its natural forests to logging. This is good news for environmentalists as fragile forest ecosystems are now protected, and it is good news for U.S. log exports as Chinese demand for U.S. logs has increase dramatically. Log exports rose more than 25%, year-over-year so far year to date. The consequence is higher prices for logs out of Longview and good times in the Oregon logging industry.

So far, China has not singled out U.S. log exports for tariffs. This makes sense as logs are low value-added products, so importing logs to China provides raw material for high value-added Chinese sawmill production.

In the latest rounds of tit-for-tat, the Trump administration imposed tariffs on an additional $267 billion in Chinese products, bring the total to $529 billion, effectively taxing all Chinese exports to the United States. China’s response has been much less aggressive than the United States, only imposing tariffs on an additional $130 billion worth of U.S. goods.

Why the modest response? China is starting to run out of U.S. product categories on which to impose tariffs. We just don’t export that much to China.

Here is the rub. China is in something of a corner. Even though importing U.S. logs is a cheap source raw materials for China’s manufacturing, the same could be said for soya beans, yet soya beans were among China’s first targets. The need to hurt the United States outweighed the desire for a cheap source of beans. And that could happen to logging also.

This story I’m telling you about my families timber business illustrates a bigger point, which is that trade with China is profitable and disruption of that trade is going to hurt a lot of Americans, including potentially your truly.

On the other hand, China does not play well with others. It bullies firms desirous of entering its massive market to extort concessions from foreign companies, especially access to technology. This sort of behavior just isn’t fair.

In 1993, when China gained access to the WTO, the hope was that by integrating China into the global market, we could induce China to become more democratic. This just hasn’t happened and instead we have a China that acts like an unruly child.

Trump’s trade policies have been a disaster. Rather than focus on rallying our allies around us to create a unified front to block China, he has alienated our best allies by pulling out of the Transpacific Partnership and out of NAFTA, and by imposing tariffs willy-nilly on our NATO allies.

Had Trump begun his trade war with China by first working with our friends and allies, we would be a lot better off now.

Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. His families Oregon tree farm is home to wild mushroom hunters, salal gathers, and a fishing club, all of whom enjoy the beauty of the forest. The opinions expressed may not be shared by the regents and administration of NMSU. Chris can be reached at chrerick@nmsu.edu.