Earlier this month, as part of the Golden Spike’s 150th anniversary celebration, Utah officials hosted a delegation of about 150 Chinese business and government leaders with the goal to foster relationships and expand trade between Utah and one of its largest trading partners.
That gathering, it so happened, came about two days after President Donald Trump slapped a 25% tariff on $200 billion in Chinese goods.
“So that definitely changed the context of the event,” said Miles Hansen, president and CEO of the World Trade Center Utah. “But it's still something that was very productive and I think that good things will come out of it.”
Even as Utah businesses are trying to build bridges, Trump is busy blowing them up. He has already warned that another round of tariffs may not be far off.
And, while most Utahns may not have felt the impact of earlier tariffs, that will change.
This new round will hit more consumer goods, meaning you and I are likely going to be paying more at the store, Hansen said.
“Think about the home goods section, all the small appliances. The clothing section. Go to the electronic section — laptops, cellphones, all those things that, even if it’s an American brand, have components from China,” he said. “All of those things, with the 25% tariff you’re going to see prices increase.”
Last week, the Federal Reserve Bank in New York issued a study that said the average U.S. household would end up paying $831 more per year for their purchases thanks to the tariffs. That’s real money for most Utah families.
The pain is also real for Utah businesses.
Take a company like Cotopaxi, which sells outdoor gear — coats, jackets, packs and so forth. While Cotopaxi only imports about 22 percent of its products from China, it will still end up costing the company $1.3 million in 2020, unless it raises prices for consumers or stops carrying certain items.
“Let’s call these tariffs what they are: The largest tax increase on the American people, as a percentage of [gross domestic product], since I was in middle school in 1993,” said Davis Smith, CEO and founder of Cotopaxi (who, yes, is that young).
Often overlooked but also affected, Smith notes, are the Chinese workers who make their products and, he said, “have become like family to us.” The workers have taken English classes, have planted a community garden and have been able to buy their first cars.
“Ultimately a trade war is good for no one,” he said. “It hurts American businesses, American consumers, and it hurts some of the most vulnerable people who are living and working in countries that need our help.”
Smith said some have suggested companies should start making goods in the United States, but overhauling a supply chain takes 18 months or longer.
And that’s if it can be done at all.
Brad Bonham is CEO of Walker Edison, a wholesale retailer of furniture, about two-thirds of which is made in China. And Walker Edison is among Utah’s fastest-growing companies. He said there isn’t enough manufacturing capacity in all of the other southeast Asian countries to make up for what China does now. And he has contacted every manufacturing partner in the United States and they simply don’t have the capacity to accommodate what he needs.
“When we have a government official saying, ‘You can just build it here,’ it literally can’t be done,” said Bonham — who, by the way, voted for and donated money to Trump.
To try to avoid across-the-board price increases, Bonham said he has pushed Chinese factories to cut prices. Still, some prices have gone up because of the tariffs and others could follow.
“This has the real potential to hurt our economy if the tariffs stay in place. The prices for consumers will be going up unfortunately,” he said. “China isn’t paying the tariffs on this. We are paying the tariffs on this.”
It’s obviously not just Utah companies coping with this trade war. Walmart executives, for example, warned earlier this month that the company will likely have to raise prices. It’s going to be felt across the economy.
Last summer, in the midst of the first round of tariffs and trade war talk, I spoke to Ron Gibson, a 6th generation dairy farmer and president of the Utah Farm Bureau, who warned then that the tariffs would drive Utah farmers out of business. And it has.
(Trent Nelson | The Salt Lake Tribune) Ron Gibson is a sixth generation dairy farmer and president of the Utah Farm Bureau. Gibson was photographed at his Ogden farm, Green Acres Dairy, Wednesday Aug. 1, 2018.
“We’re having a tremendous amount of dairies in Utah go out of business,” Gibson told me Tuesday. “It’s been extremely tough.”
Gibson doesn’t have precise numbers, but he estimates some 50 dairy farms have shut down, and there were only about 170 to begin with. It’s a message he was able to deliver personally to Agriculture Secretary Sonny Perdue when he was in town last week.
A government aid package helped soybean and pork producers, he said, but it didn’t do much for corn or fruit farmers in Utah and did very little for dairy farmers. Besides, he said, “None of us want to be tied to aid packages from the government.“
He is encouraged that Japan recently agreed to import more beef, but over the past 18 months, every time there’s been an encouraging step, he said, farmers have been “smacked down.”
Here’s the thing: Nobody I spoke with opposes getting tough with China. They recognize that China has engaged in unfair trade practices and violates international intellectual property laws.
Bonham said if he wants to buy a factory in China he has to partner with a Chinese company, but the United States lets China buy companies outright. China has “been a bad actor,” he said.
“I think putting China in check is long overdue,” Smith said.
The problem is HOW the president is going about it.
“He kind of throws a stick of dynamite in and steps back and sees what happens,” Gibson said.
Maybe it’ll work, but it hasn’t yet, and when Trump says China is paying billions because of these tariffs, he either doesn’t understand how they work or he is lying.
It’s businesses, farmers and families — including those in Utah — who are suffering from these tariffs. The prudent course would be to walk back from a trade war, not double-down with more tariffs and inflict more pain on people already hurt by this misguided policy.
