If a trade war breaks out, how vulnerable is Washington?

Last week, President Trump slapped tariffs on imports of aluminum and steel. As the most trade-dependent state in the country, what's the potential impact of a trade war on Washington?

Kim Malcolm sat down with Debra Glassman, senior lecturer in business economics at the University of Washington to discuss.

On how steel and aluminum tariffs could affect Washington state

Any kind of trade protection intends to protect producers in a targeted industry. In this case, steel and aluminum — and the state of Washington does have some production in those areas.

The second effect, which is much bigger, is on industries that use steel and aluminum as inputs. Everything from construction, to manufacturing of Boeing aircraft, to food processing. Those effects are much bigger, and in terms of jobs, dwarf the numbers of jobs that are protected by tariffs.

How could those impacts play out if they apply to Washington industries like aerospace and construction?

I think we’ll all be affected one way or another. One thing that economists are unanimously in agreement on is that trade protection ultimately hurts consumers.

Whether we're consuming new homes, whether we're traveling in airplanes, whether we're buying canned beverages at the grocery store – we’ll see all of those things higher in price.

If this starts a so-called trade war, how would that play out in Washington state?

There are a couple of areas where we're vulnerable. Historically, retaliatory tariffs are slapped on food products. Washington state exports a lot of agricultural products. And it's not inconceivable that we could see tariffs on our exports of wheat or hops or a variety of other products like apples.

It's also possible that Washington will not specifically be targeted with retaliatory tariffs. Is that right?

That's correct. And this is actually a really interesting political story. Going back at least to the 1990s and probably earlier, the United States set a pattern of choosing trade retaliation that’s politically targeted.

The Europeans seem to have learned that lesson, because if you look at the products they've targeted for potential retaliation, they’ve mentioned things like Harley-Davidson motorcycles and Kentucky bourbon. I think it's no coincidence at all that the top two Republican leaders in Congress are from the states of Wisconsin and Kentucky. And I think the Europeans have chosen very carefully where they want to place their retaliation.

What's your sense of why President Trump is doing this?

I think he has a very strong view about trade being a win or a loss, and that you can measure whether you're winning in trade by your bilateral country-to-country trade surplus or deficit.

Economists would say that's too narrow a way to think about trade. We can have a trade deficit with Mexico, and have a trade surplus with Canada, and have things balance out over the group of countries. That's what trade agreements attempt to do.

And by focusing just on individual countries we hurt ourselves, and we don't realize the full benefits that we could realize through trade.