Two economic forecasts released in recent days warn of dire consequences for California should President Trump’s policies steer the country into a trade war.
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From the campaign trail to the Oval Office, President Trump has offered a consistently uncompromising message when it comes to trade: “We will only make great trade deals that put the American worker first.”
But two of California’s most prominent economic prognosticators are now warning that Trumpian trade policy might not be so great for the Golden State.
In dueling economic forecasts released over the last few days, both the UCLA Anderson Forecast and the Fermanian Business & Economic Institute warned of dire consequences for the state should President Trump’s policies steer the country into a trade war.
“The administration’s outspoken hostility to the North American Free Trade Agreement (NAFTA), especially with respect to Mexico, risks a major disruption in economic activity,” said David Shulman, a senior economist at UCLA.
Jerry Nickelsburg, another Anderson School forecaster, warned that “deportations of unskilled workers will impact food harvesting and food processing,” a concern shared by at least some farmers across the state.
The warning from UCLA echoes one offered a late last week by Lynn Reaser, who provides economic forecasts for the Fermanian Business & Economic Institute in San Diego and is also the chief economist on the state Treasurer’s Council of Economic Advisors: “A trade war runs the risk that everyone would see lower growth.”
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While Trump hasn’t declared all out war on our trading partners, he has assumed a more pugilistic stance than his predecessors. One of his first presidential moves was to pull the country out of the Trans-Pacific Partnership (TPP), a trade agreement that would have eased trade restrictions and standardized environmental, labor, and intellectual property standards between the United States and 11 other countries across the Pacific Rim.
During his campaign, the President also threatened to impose a 45 percent tariff on Chinese imports. More recently, the administration floated the idea of slapping a 20 percent tax on the goods that Americans buy from Mexico as one possible way to pay for his proposed border wall.
Trump argues that such tariffs will jumpstart domestic job growth by protecting industries that produce goods grown or manufactured more cheaply abroad. Defenders of Trump’s trade policies also envision using tariffs as a means of punishing countries like China, which the administration has accused of artificially depressing the value of its currency to make its goods cheaper on world markets. The director of Trump’s National Trade Council, UC Irvine economics professor Peter Navarro, is the co-author of Death by China, a book that lays the blame for much of the county’s economic woes on the “predatory” behavior of our largest trading partners.
Most economists, however, do not share this zero-sum view of trade. Placing taxes on imported goods make many of the things that consumers and businesses rely upon more expensive—and they risk provoking retaliatory tariffs. Roughly 46 perecent of all international goods purchased in California come from Mexico and China with a total value of $190 billion.