As the trade war continues with China, observers in Central Pennsylvania and the Lehigh Valley hope the latest stalemate might budge if and when President Donald Trump meets with Chinese leaders at the international G-20 conference in late June and agree that both countries can resolve their disputes sooner rather than later.
An agreement was supposed to have been reached this spring, but it was delayed after China tried to make last-minute changes that were rebuffed by U.S. negotiators. Trump has since signaled that he would meet with Chinese President Xi Jinping at the economic conference of 20 nations to see if the talks can stay on track for possible resolution this year.
“Tariffs drive up costs,” said Darlene J. Robbins, president of the Northeast PA Manufacturers and Employers Association, which is based in Pottsville. “We want to see the administration be successful for bringing China back to the table.”
Robbins, like others, said that an agreement shouldn’t be made without careful thought, as China has not been playing by the rules for decades.
“No tariff is good,” Robbins said. “But we certainly need a fair and level playing field.”
Pennsylvania observers – from farm interests to manufacturers – note that the strength of the U.S. economy has allowed growth to continue, despite the trade disputes. Several experts pointed out that the tariffs have helped some and hurt others, so opinions vary. But, they add, a resolution would be in everyone’s best interests.
In a May 15 article, Wall Street Journal reporter Greg Ip explained how the tariffs are rippling through the economy:
“As with any tax, the person paying the tariff doesn’t necessarily bear its burden,” Ip wrote. “If the tariff is simply passed along to the importer, American businesses or consumers bear the burden. If Chinese exporters cut prices to avoid losing sales, they bear the burden.
“If imports shift to another country, no one pays the tariff — but Chinese are burdened by lost jobs and Americans by a higher price,” he continued. “And if production shifts to the U.S., some of what Americans pay in higher prices goes to other Americans as wages and profits.”
Some shifting of production already is helping in western Pennsylvania, said David N. Taylor, president and CEO of the Pennsylvania Manufacturers’ Association, which is based in Harrisburg. He pointed to a May announcement, reported by the Pittsburgh Post-Gazette, that U.S. Steel will be investing about $1 billion in western Pennsylvania facilities.
Gordon Denlinger, Pennsylvania director of the National Federation of Independent Business, or NFIB, said such news is good for small businesses in the Pittsburgh area. Such a huge investment could create opportunities for new businesses to open and existing businesses to grow, as steel mills ramp up construction and then hire new workers.
“Certainly, small businesses will be benefiting,” he said.
Those positive improvements are important for everyone to recognize, said Taylor, who has been outspoken about how U.S. negotiators have a duty to make sure that any deal with China is fair. For decades, China has been cheating on trade, stealing intellectual property, limiting access to its own markets and conducting espionage – none of which should be accepted by a trade partner, Taylor said.
“Trade is for allies,” he said, adding that he fully supports free trade and open markets. “The principle of reciprocity stands above all others. Our national interest matters. Trade is necessary, but trade is for allies.”
Taylor credits Trump for making sure that any deal addresses the issues head on, though he said the implementation of Trump’s plans “has been messy.”
“He actually has defended our country and our economy against a hostile foreign power,” Taylor said. He isn’t confident that a deal will be reached soon, only because China hasn’t shown a willingness to change.
Mark O’Neill, media and strategic communications director for the Pennsylvania Farm Bureau, agrees that any agreement needs to be “fair and equitable.”
But for farmers, a deal needs to be reached as soon as possible, he said.
Pennsylvania farmers have been struggling for more than five years, predating the tariff crisis. But freer markets had helped, and farmers generally support open markets, he added. The tariffs are hurting farmers, but many farmers agree that there are important principles that need to be worked out with China.
The tensions with Mexico and Canada have had more of an impact on Pennsylvania, O’Neill also said. As long as the deal worked out to revise NAFTA is ratified by all three countries, the agreement will help the state’s farmers, particularly with opening dairy markets in Canada, he said.
“Our farmers are very supportive of the current deal and would like to get it signed,” he said. “The political parties need to come together and hopefully they can.”
The North American Free Trade Agreement, which deepened trade among the United States, Canada and Mexico, took effect on Jan. 1, 1994. The Trump Administration sought to renegotiate the deal, saying it was outdated and unfair to U.S. workers. The new deal, called USMCA, was reached late last year but Democrats and Republicans in Congress need to ratify it. In late May, Trump threatened to add new tariffs to goods coming from Mexico unless Mexican authorities do more to stem the flow of people emigrating illegally from Central America into the United States.
Unlike counterparts in other parts of the country, Pennsylvania farmers export very little soybeans, pork and dairy to China. But those who raise such crops still are affected because prices are worldwide, so any changes globally will affect local operations, O’Neill said.
For soybeans, in particular, China cut imports by 97 percent, which means there is an oversupply – and lower prices – “everywhere,” he added.
The administration’s plan to offer financial payments to aid farmers for the duration of the trade talks will help, he said.
“But farmers don’t want payments. They would rather earn the money on an open market,” O’Neill said.
One concern is that supply chains are changing and that could hurt businesses long-term, as well as China’s latest threat to increase the costs of raw materials, said Tom Palisin, executive director of The Manufacturers’ Association, based in York County.
“Once you lose a market, it is hard to get that back,” Palisin said.
So far, a lot of consumers might not have noticed higher costs because some businesses have been holding off on price increases or had been stockpiling supplies until the trade tensions eased, several observers noted.
“But the hope was that the tensions would be short-lived,” Palisin said. “As it drags on, that isn’t always going to be possible.”