China has cost the U.S. economy over $225 billion in counterfeit goods and pirated software, not to mention around $600 billion by thieving our intellectual property. In less nefarious but still harmful practices, China floods our economy with resources such as steel and aluminum, making it virtually impossible for U.S. companies to compete.
The U.S. now taxes half of all imports from China, who has responded with equal amounts of tariffs on U.S. goods including major commodities of Kentucky business like Bourbon, soybeans and metals.
China’s government has responded by causing a stalemate in the trade war that will escalate the 10 percent tariff up to 25 percent by 2019 if both sides can not reach an agreement. Trump likely recognizes tariffs are not the solution, but merely a move on his chess board, to balancing the trade deficit with China and curbing their unfair practices. He has sacrificed some pawns in hopes to get to the queen, and many Kentucky industries will suffer for it.
Bourbon companies from around the world met in Kentucky in July to sign a proclamation that encourages world leaders to collaborate in eliminating the tariffs harmful to their business—an $8.5 billion industry for the state of Kentucky. Impending consequences of the tariff range from less business for farmers, bottlers and logistics companies to less profit for producers and thus higher prices for you, the consumer.
Another industry vital to Kentucky’s economy, soybean production, is in serious danger as a result of China’s retaliatory tariff—driving down prices which may cost Kentucky’s 4,000 soybean farmers $200 million this year. Agriculture and majors at WKU should be closely following this story as it develops because the outcome will likely have effects on our local economy in the coming years if these tariffs remain.
One Kentucky industry, however, has seen massive boosts to its profits. Century Aluminum, is adding 300 jobs and $150 million in technology upgrades at its smelter in Hawesville, about 80 miles southwest of Louisville, ramping up production on previously inactive lines. The rising prices of steel and aluminum have given producers higher profit margins, but that means that manufacturing companies like Louisville’s Schuler Manufacturing are losing money—further complicating the effects of the tariffs.
Although the true impact of all the tariffs has yet to be understood, it is abundantly clear that the escalating trade war will have a negative impact on the U.S. and global economy as companies are forced to raise prices. Trump’s tariffs are certainly flawed, but there’s hope. If Kentuckians can bear the storm just a little longer, a new deal may well be forged with China that benefits Kentucky agriculture and manufacturing businesses as a whole.