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Impacts of trade war feared in Capital Region

Impacts of trade war feared in Capital Region

Protectionist policies create uncertainties, experts say
Impacts of trade war feared in Capital Region
U.S. Sen. Charles Schumer, D-N.Y., speaks to journalists July 5 at the Quad/Graphics printing plant in Saratoga Springs.
Photographer: John Cropley/Gazette Business Editor

CAPITAL REGION -- A trade war with China and thickening trade tensions with Canada and other U.S. allies mean uncertainties for local businesses, experts said Monday.

"I seriously worry about what is going to happen with our trade relations when we are basically insulting our friends and making it really difficult for companies that are involved in international trade," said Jerry Shaye, principal in Shaye Global LLC in Delmar, a global trade consultant.

He said President Donald Trump's trade policies are the most protectionist since the early 1930s, when most economic historians believe the protectionist Smoot-Hawley Act worsened the Great Depression by reducing U.S. imports and exports.

On Friday, a trade war between the U.S. and China officially began, as the Trump administration followed through with its threat to impose tariffs on $34 billion worth of Chinese products, and China responded with tariffs on pork, soybeans and automobiles. An escalation involving tariffs on more products is likely.

"There will be higher prices. It isn't China or Canada that pays for these tariffs. It's the American consumer," said Mary Ellen Ryckman, a career employee at the U.S. Office of Trade Representative who recently joined the Saratoga County Prosperity Partnership as a global trade adviser.

It isn't yet clear what the economic impacts on the Capital Region will be if the China trade war escalates. But there is already concern that steel and aluminum tariffs planned against many countries, and dairy and wood product tensions with Canada, will have negative consequences.

"The whole issue with these tariffs is a big concern," said Capital Region Chamber of Commerce President and CEO Mark Eagan. "From what I hear, the bigger issue of concern is not so much with China as with Canada, because they are a much bigger trading partner."

The Capital Region economy has become more dependent on exports over the past 15 years, according to an analysis by the Brookings Institute in Washington D.C. Total annual exports from the region rose from $2.9 billion in 2003 to $5.3 billion in 2017, and direct export-supported jobs have risen from 9,240 in 2003 to 16,500 last year. 

The sectors that have grown the most include research and development services, engine and power equipment, pharmaceuticals, financial management and semiconductors, according to the Brookings analysis. Semiconductor manufacturing -- GlobalFoundries, in other words -- didn't even exist in the region 15 years ago. Many of the computer chips made at the Malta plant go to China for assembly into smartphones and other electronic products.

The trade disputes are likely to be a major topic, as the semiconductor industry gathers this week at SEMICON West in San Francisco.

"I think overall, when you talk to business people -- semiconductor (manufacturers) or anyone else -- everyone is concerned, because of the law of unintended consequences," said Marty Vanags, president of the Saratoga County Prosperity Partnership, who is at SEMICON West to promote the county.

Vanags said he thinks there could be local impacts if the trade war escalates.

"Semiconductor chips go into products, and depending on whether those products are tariffed or not, it could effect prices," he said.

Some politicians support trade action against China, even if they disagree with Trump's approach.

“President Trump’s tariffs have started to take a toll on the American businesses he promised to protect," said U.S. Rep. Paul Tonko, D-Amsterdam. "While I believe it is important to hold other countries accountable for unfair trade practices, many of these tariffs are being applied unevenly and have not adequately taken into consideration their impacts on American businesses and consumers."

Tonko said Trump "should instead focus his efforts on negotiating trade deals that raise labor and environmental standards around the world, creating a level playing field for American manufacturers.”

U.S. Sen. Minority Leader Charles Schumer, D-New York, has criticized Trump for tariffs on Canadian paper, while supporting his China policy.

"I believe in going after China," Schumer said last week during a visit to a Saratoga Springs printing facility. "I think President Trump is doing the right thing on China. But China’s not Canada. You don’t treat the two countries the same.”

Ryckman, a 30-year employee of the Office of Trade Representative, worked for both Republican and Democratic administrations. She said other nations are also concerned about China's intellectual property policies -- and the U.S. should be working with them.

"We aren't the only ones with concerns about China's positions on intellectual property. Canada has concerns; the European Union has concerns," she said. "Wouldn't it make more sense to sit down together and then sit down with China together? That is not what this administration is doing."

Ryckman said the trade issue has the public's attention.

"When I spoke to the League of Women Voters (of Saratoga County), the room was packed," she said. "There's a lot of interest in this issue."

Shaye, who is a former director of international trade for Empire State Development, said China is an important trading partner of the U.S., and over time companies have found China an effective place to manufacture, and a trade war won't change that. "Relationships have been established," he said.

He would rather the disputes were settled, because of the fears about unintended consequences.

"I can understand the administration trying to make a point," he said. "But businesses can adapt to good news or adapt to bad news, but they can't live with uncertainty."

Reach Daily Gazette reporter Stephen Williams at 518-395-3086, swilliams@dailygazette.net or @gazettesteve on Twitter.

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