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Trump's tariffs face wide-ranging electoral test in Washington state

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Trump's tariffs face wide-ranging electoral test in Washington state

In the contest for control of Congress, Washington's 8th District ranks as a crucial battleground. Home to Costco Wholesale Corp., a Boeing Co. production plant and other businesses that thrive in proximity to Pacific seaports and land trading routes, the district also extends into the central, more agrarian part of the state. The combination of retailing, manufacturing, farming and international commerce provides a wide-angle view of how President Donald Trump's hardball trade tactics are playing out on the ground.

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Republican Rep. Dave Reichert's decision not to run for re-election in the 8th District gives Democrats an opportunity to take back a seat that Reichert first won in 2004. Polls show that the race is a dead heat between Republican Dino Rossi and Democrat Kim Schrier.

The campaigns for Rossi and Schrier did not respond to requests for comment, but on her campaign website, Schrier has criticized Trump's actions. "Our district is particularly hurt by President Trump's unpredictable, governing-by-tweeting trade policies," the site reads.

Trade policy is one of the top issues that will help decide the outcome and the dynamics here are likely being replicated in other districts where the costs and benefits of tariffs are reshaping local economies. The candidates who win these races will go to Washington, D.C., and could try to check Trump's aggressive trade actions, or provide legislative backing for him to go even further.

Fruits and fuselages

Cherries, potatoes and apples, along with aircraft and parts, all top exports from Washington, have been targeted for tariffs by China, Mexico and Canada in retaliation for the Trump administration's trade policies, which consist of tariffs on $250 billion of Chinese imports and separate U.S. tariffs of 25% on global steel imports and 10% on aluminum imports.

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Roughly 40% of Washington jobs are trade-related, said Lori Otto Punke, president of the Washington Council on International Trade, a policy organization. She said that many Washington companies have reported canceled, delayed or lost orders, as well as longer inspection times at ports, which caused supply chain disruptions and losses in both imports and exports.

"We have a lot of diversity of companies here," Otto Punke said in an interview. "We have everything from retail to tech to ag to aerospace, so trade is really a critical part of the community here."

And the issues are percolating in local races.

"We've seen it become more of a campaign issue than in past elections," Otto Punke said. "I do think it's become a broader part of the dialogue than seen in years past."

Nonetheless, while trade has become part of the discussion, the practical effects of Trump's policies may not be immediately evident to most voters.

Brian Kelly, an associate professor of economics at Seattle University who previously worked for the U.S. Department of Commerce, cited apple and potato crops as products that cannot adjust as readily to changing economic conditions brought on by trade disputes.

"It takes about three to four years for apple growers to change their growing patterns to reflect that, and to some extent that's true for potatoes as well," he said. "In the agriculture sector, despite potential falling apple and potato prices, and in the Midwest of course soybeans, I don't think you've seen too much of a hit on production or employment yet because it's a lag."

A similar phenomenon affects Boeing, but it’s mainly felt by the company's shareholders, Kelly said.

"Boeing has such a big backlog that the impact has been not on employment or production so far, but it has been on the stock price a bit," he said. "Boeing stock price is doing pretty well, but each time another round in the trade war appears, analysts are concerned that three years from now this will start biting."

Boeing did not return a request for comment, but Dennis Muilenburg, Boeing's chairman, president and CEO, said at a Sept. 12 investors conference in California that Boeing has not seen a "material impact" from China's tariffs.

Muilenburg did note, however that roughly one-third of Boeing's 737s are being delivered to China, and he expressed confidence that the demand from China will help ramp up production at the Renton, Wash., facility.

"Nothing here is going to create a sudden change in profile or deliveries or orders volume," Muilenburg said. "So, it's more of a long-term issue that we need to work."

Similarly, while a separate set of U.S. steel tariffs imposed by the Trump administration has raised costs for builders, the strength of the economy is insulating consumers from higher prices, according to Thomas Robinson, a 50-year veteran of the steel industry based in Washington.

"It has impacted the cost that people are paying for steel currently for existing buildings and then future buildings. Those increases are fairly significant," Robinson said. "The down-market steel product consumption, those prices are up significantly as well. Those prices are having to be passed on to consumers … manufacturers of industrial goods, agricultural products … there will be significant increases in those selling prices to those products as we go forward."

Measuring the effects

The top trade policy adviser for Washington's Democratic governor, Jay Inslee, downplayed the notion that Washington is being hurt by the Trump administration's protectionist policies.

According to the adviser, Robert Hamilton, Washington's exports to China amount to just over $13.54 billion after removing the “pass-through” exports, or products produced in non-port states and sent through Washington's ports, such as cars and soybeans produced in the Midwest.

Hamilton said that while he did not want to overstate Washington's exposure in the trade spats, he acknowledged that produce is particularly vulnerable.

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In July, China imposed a 25% tariff on cherries, apples and pears in retaliation for the Trump administration's Section 301 investigation that resulted in tariffs on select Chinese goods, bringing the total duty rate for those American agriculture products to 50%.

Several agricultural products have also been subject to retaliatory tariffs from Canada and Mexico over those nations’ inclusion in the Trump administration's tariffs on steel and aluminum imports.

The Washington Apple Commission said this move led to canceled orders, lowered apple prices and a lowered projection of apple shipments by roughly one million boxes of apples.

“Certainly with cherries going up to now 50% tariffs, importers could get cold feet,” Hamilton said. “They could say 'We don't want to import cherries because there's too much risk the Chinese consumer may not pay the price.' And apples can be sourced from all different countries so there might be a direct tariff impact there.”

While the implications for produce growers cannot be ignored, the district’s electoral history and voters’ perceptions of free trade may ultimately trump those concerns.

"The benefits of free trade are diffused across 300 million consumers. The benefits of protection tend to be very narrowly focused and politically far more powerful," Seattle University's Kelly said. "Those who benefit from protection tend to be more focused and have a lot of voice than those who are damaged by it."

Though many industries have said that the Trump administration's tough stance on China will only disrupt longstanding supply chains and raise production and consumer prices, several industries, including steel and textile producers who have railed against inexpensive competition from Chinese producers, have come out in support of the protectionist policies.

Nationally, the United States-Mexico-Canada Agreement is expected to provide moderate benefits to the American dairy industry through slightly expanded access to Canada's restrictive dairy market as well as to American auto and auto parts producers by upping the North American content requirement for car production to qualify for duty-free access. Textile and steel groups have also voiced support for the deal.

But he added that those in the district who are concerned about trade may be more apt to stick with familiar representation when it comes to their new member of Congress.

"The apple packers and shippers are pretty sophisticated people, so they'd be pretty worried about it," Kelly said. "Then again, I don't think any of them has ever met a Democrat."