The second Trump Administration has not yet hit 100 days and tariffs have already emerged as a massive economic policy issue.
Tariffs are a tax on goods coming into the United States. If there’s one thing most analysts agree on, it’s this: they make prices go up.
Of all the countries that have been hit by tariffs so far, there has been no bigger target than China – and because trade and commerce are a two-way street, China has responded by taxing incoming American goods at 125%.
Last year, the United States sent more than $143 billion in goods over to China, meaning that these new tariffs will hit state economies across the U.S.
For a look at how this could impact the Texas economy, the Texas Standard was joined by Harriet Torry, an economic correspondent with the Wall Street Journal. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: In your reporting, you single out a handful of states that will be especially affected by China’s tariffs on the U.S., and Texas is one of them. What are we sending over to China?
Harriet Torry: Yeah, there are really about five states that account for roughly half of the goods that the U.S. sends to China, and Texas is No. 1. And of course, the top of that list is energy commodities – things like mineral fuel, and various chemicals and plastics that are byproducts of those types of productions. Cereals are another one.
So Texas is really on the frontline of tariffs on goods to China.
Do we know how this 125% tariff on American goods will affect state economies? Are we going to see job losses or companies shutting down?
I think it really depends on the state.
So if you look at a state like Texas, Texas sends the most in terms of dollar value to China – around $22.5 billion. That compares to, for instance, Louisiana, which sends $10 billion. But Texas is a much bigger state than Louisiana. And the hope is that Texas can sell those energy products – for instance, liquefied natural gas that it would have sent to China – it could hopefully sell to other countries around the world.
Of course, that works both ways, you know. China can also buy energy and produce relatively easily from other countries around the world.
So it’s a situation for both countries where they’re going to be struggling and trying to find new buyers for their products. But Texas is a very, very large economy, and it’s very diversified. So of course, there will be an impact on individual companies that have been sending their commodities to China.
But for a state as big as Texas, it’s probably not going to be as impactful as a smaller state like, for instance, Louisiana.
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In your reporting, you note that there’s a possibility that the Trump tariffs against China could have some positive effects on manufacturing in Texas. What would that look like and how likely is that?
That is definitely the hope.
So Texas, of course, is a very popular manufacturing hub, and it has seen reshoring efforts. When companies have been announcing, for instance, new silicon chip factories and so on, many of them have been placed in Texas because it has a business-friendly environment in terms of taxation and regulation and so on.
So the hope is that if the Trump tariffs have the desired effect of bringing more manufacturing back to the U.S., that Texas will be a winner in that sense. And then, although we’ll be losing out on trade as a big exporting state, if there is a shift in manufacturing, Texas could be a beneficiary of that.
Well, how much of the American economy depends on exports to China?
It’s pretty small. When you look at the U.S. economy as a whole, the U.S. economy is worth $29 trillion. And you know, the total amount of U.S. goods sent to China is about $143 billion. So it’s a very, very small fraction.
But having said that, there are jobs that depend on manufacturing. The trade situation is so complex, because you have things that are made in America, you have components that might be made abroad. So the tariff effects of that can lead to cost increases throughout the supply chain, can make things more expensive for exporters, but also for everybody and consumers and so on.
And so there could potentially be an impact on jobs and also just the impact on confidence, which, when you talk to economists, that’s what they often say – is that actually, in terms of the amount as a share of GDP, what the U.S. exports to China is a very, very small amount, but the worry is tariffs and trade wars can have a big impact on confidence, and it could perhaps, you know… A company was thinking about building a new factory or investing in jobs. I could be a little hesitant thinking, “I just don’t know how this is going to play out.”
Consumers may be worried about price rises, they might panic buy, or they might pull back from buying. It’s really unpredictable. And the impact on sentiment is really, you know, a potentially big unknown factor in this.
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Yeah, definitely can be powerful. We hear a lot about companies talking about uncertainty right now. Well, which other industries are going to be affected by China’s tariffs on U.S. goods?
So different states make different things.
So if you look at Washington, for instance, the biggest export that they sent to China is fruit and seeds and grain. But they also have, of course, a huge aerospace industry. And that is coming under scrutiny from Beijing. You know, we’ve seen some reporting about Boeing and exports to China and how that will all play out.
So industries could be impacted in very direct ways and other industries could see sort of a more indirect impact.
And it’s the same with North Carolina. They produce a lot of pharmaceutical products, but they also are a big agricultural state making tobacco. China is a big buyer of tobacco from North Carolina, and tobacco is a very-labor intensive crop. It’s expensive to make.
So for tobacco farmers in that region, they’re also worried that if the Chinese market is suddenly in question, what are they going to do? Will it make economic sense for them to continue to produce in the way that they have been before?
So there’s just a lot of uncertainty for businesses in different sectors of the economy who are looking at how this could play out and how this could impact their supply chains and their workers.
