An escalating trade dispute between the U.S. and China could in a worst-case scenario disrupt up to $9 billion in commerce between Louisiana and the Asian nation, depending on products targeted as the two countries exchanged tariff threats this week.
Louisiana exported nearly $8 billion to China last year, Census Bureau figures show, representing 14 percent of the state’s total exports. The nation was Louisiana’s largest export market. It also was Louisiana's seventh-largest import market, at just over $1 billion.
Those figures give Louisiana a trade surplus with China of $6.6 billion, Louisiana Economic Development Secretary Don Pierson noted, largely because of the state’s energy and agribusiness sectors.
The state is in a precarious position as President Donald Trump vowed late Thursday to slap tariffs on another $100 billion worth of Chinese goods — on top of $53 billion he had already targeted. That's creating a tit-for-tat exchange of retaliatory tariff threats being made by China.
Among the products that China slapped new tariffs on are Louisiana’s second-largest export, soybeans. That affects Louisiana’s farmers and others around the country, with China potentially getting soybeans from countries like Brazil.
Congressman Ralph Abraham, a Republican representing north Louisiana, warned of a “devastating” effect on the nation’s growers.
What's more, Louisiana’s waterways and ports facilitate billions of dollars in commerce, much of which comes from products made elsewhere in the U.S. And recent steel and aluminum tariffs imposed by Trump have Louisiana officials worrying about a net economic loss as industry faces higher construction costs, especially for massive petrochemical plants. Steel also is used in drill pipe in oil and gas exploration and production.
“Because Louisiana is so connected with international trade and commerce, no matter what happens we’re going to feel some pain,” said Eddy Hayes, an international trade lawyer with Leake and Andersson in New Orleans.
Even Trump warned Friday that Americans might have to accept "a little pain" before they enjoy the fruits of his escalating trade fight with China.
Most economists agree with the president: The tariffs the United States and China are preparing to slap on each other's goods would take an economic toll.
For now, optimists are clinging to tentative signals from the Trump administration that it may be prepared to negotiate with Beijing and avert a trade war.
Beijing warned Friday that it will "counterattack with great strength" if the United States ups the ante.
On the other hand, Hayes said China’s intellectual property practices, which Trump has cited as reasons for his tariffs, also need to be addressed. Trump has harshly criticized China’s theft of intellectual property and U.S. companies' technology as a condition of doing business there.
The Port of New Orleans said it is still too early to tell what impact the moves will have on traffic and revenue. But data provided by the port show vinyl alcohol and PVC resins are the largest export to China, followed by zinc, ingots and slabs. Wood pulp, rubber and mixed scrap metal are also some of the larger exports. The port also sends petroleum and crude and fuel oil to the nation. China was the ninth-largest trading partner with the port in 2016.
Having already targeted soybeans, if China were to hit Louisiana even harder, it could tax mineral fuels and products made from them, which represent nearly 15 percent of the state’s exports to the country.
The state’s emerging liquefied natural gas export industry also faces uncertainty, and could take a hit if China limited imports. However, Hayes noted many of the facilities here are not yet in service.
The dueling tariffs could shave 0.3 percentage points off both U.S. and Chinese annual economic growth, according to estimates by Gregory Daco, head of U.S. economics for the research firm Oxford Economics.
"There are no winners in trade wars," said Nathan Sheets, chief economist at PGIM Fixed Income. "There are only losers."
In the United States, Mark Zandi, chief economist of Moody's Analytics, said the dispute could wipe out half the economic benefits of the tax cut Trump signed into law with great fanfare in December.
"There's lots of different channels through which this hurts the economy," Zandi said. "The most obvious is, it raises import prices. If American consumers have to spend more on Chinese imports, they have less to spend on everything else."
In the first $50 billion in planned tariffs, the Trump administration was careful to limit the impact on American consumers, sticking mostly to industrial products such as robots and engine parts.
But if the administration tries to triple the tariffs, they will be more likely to hit the low-price Chinese products that American households have come to rely on, namely electronics, toys and clothing.
The administration appears to be betting that China will back down because it has more to lose. It sent $375 billion in goods to the U.S. last year, while the United States sent only $130 billion worth of products to China.
But China has other ways to retaliate. It could cancel aircraft orders from Boeing. It could meddle with U.S. supply chains by disrupting shipments from Chinese factories to American companies. Or it could raise U.S. interest rates by selling Treasury bonds or buying fewer of them.
The Chinese appear confident they can withstand more pain than Americans can. In a democracy like the U.S., "if people start to hurt, they're going to complain," said Sheets, who was undersecretary for international affairs in the Obama administration Treasury Department.
They're complaining already.
Zippy Duvall, president of the American Farm Bureau Federation lobbying group, warned that the dispute has "placed farmers and ranchers in a precarious position."
Last year, the United States sold $12.4 billion in soybeans to China — nearly 60 percent of all U.S. soybean exports.