'Uncertainty' best describes trade wars' impact on Utah

By Brice Wallace

Facing possible huge impacts stemming from the current $300 billion in U.S. tariffs on imported goods and $660 billion in threatened tariffs, what are Utah companies to do?

The answers are elusive.

During a recent Thought Leader Symposium focused on trade wars, panelists struggled to find concrete, effective responses to that question. {mprestriction ids="1,3"}

“One of the biggest frustrations we have in agriculture right now is there is very little we can do to protect our own destiny,” Ron Gibson, a dairy farmer and president of the Utah Farm Bureau, said at the event, presented by the World Trade Center Utah and the Salt Lake Chamber. “We’re just kind of in the boat, riding the waves.”

The U.S. Chamber of Commerce has estimated that the current trade war threatens $181 million in Utah exports. But questions linger about the Trump administration’s existing and planned tariffs.

“If you distill the problem down to one single word, the word in my mind is ‘uncertainty,’” said Miles Hansen, president and CEO of World Trade Center Utah. That uncertainty extends to which tariffs have been imposed, the immediate and long-term consequences of those tariffs, which additional tariffs will be put in place and what Utah companies can do “to avoid becoming collateral damage,” he said.

“We have these tariffs threatened and imposed and the big question is, what do you do as a small business when you need to either pay the tariff or figure out how to get out of them?” asked Emily Lyons, a regulatory and litigation attorney at Michael Best & Friedrich LLP.

One possible option is to seek exclusions, she said. The Office of the United States Trade Representative and the U.S. Department of Commerce have undertaken an exclusion process regarding steel and aluminum tariffs and China’s unfair trade practices.

“This exclusion process is going to go on,” Lyons said. “I believe that so far under the steel and aluminum tariffs that no exclusions have been granted at this point in time, but I don’t think it’s fruitless to continue to file these exclusions. … It’s going to take time, but this exclusion process is the way that small businesses or any business can try to avoid these tariffs.”

While Utah has a trade surplus, President Trump is using trade issues — including tariffs — to deal with the nation’s trade deficit, she said. “I think right now in the short term, it’s going to be tariffs which are a chainsaw when really in trade policy you need a scalpel to be dealing with things. But the exclusion process is really the main way on how to make it through with your business right now until we’re able to see some movement in the foreign affairs area from our allies.”

In some cases, the impacts of tariffs on Utah companies is indirect. Gibson said that while no soybeans are grown in Utah, when soybean prices fall in the U.S. from tariff effects, farmers plant less soybeans and instead try other crops, which results in depressed prices on those crops.

“The challenge that we have here is the retaliatory tariffs that are placed back on agriculture will affect all of agriculture,” Gibson said. “Even though we only export a small percentage of the agricultural products from Utah, every farmer’s pricing structure is going to be based on those tariffs that are set.”

Preston Perkes, executive director of administration for Logan-based amusement ride maker S&S Worldwide, said S&S has “luckily dodged the direct bullet” of tariffs, in part because tariffs have not focused on amusement rides and also because the company has diversified suppliers both internationally and domestically.

However, those companies that supply track and structures for S&S rides are affected by any changes to material costs. The impact is that those suppliers pass on their price increases to S&S, which then has to charge amusement parks more for rides, and the parks then increase their admission prices for customers, he said.

One thing that was certain during the symposium was the stance taken by U.S. Sen. Orrin Hatch, who said he “makes no secret of my support for free markets and free trade” while challenging the president on the tariffs issue.

“Free and open trade is good for the national interest,” Hatch said. “This seems like common sense, but it requires constant reminding today. We must remake the case for why trade makes the economy great while finding ways to make trade even better than we have seen in the past. The alternative to free trade, including protectionist policies such as tariffs will, over time, cost American jobs, growth and stability.”

International trade by Utah companies supports nearly 350,000 jobs in the state, and that figure grew 2.5 times faster than total employment in Utah from 1992-2016, he said. And cheaper foreign imports keep consumer prices down, he added.

“More trade — not less — profoundly benefits Utahns and the American people. Meanwhile, protectionism not only corrodes our economy but our global and moral standing in the world,” Hatch said.

Tariffs threaten many industry sectors, including companies making or using steel and aluminum, agriculture and services, he said. Utah exported $11.6 billion in goods last year and $6.3 billion in services the year before that. Utah exports to markets with free trade agreements grew by 75 percent from 2007 to 2017, he said.

“Now, some observers might discount those statistics as nothing more than dry numbers, but these are real jobs being performed by real people, and more and more Utahns’ livelihoods are increasingly tied to trade,” Hatch said.

The implemented or threatened tariffs on more than $660 billion in U.S. imports hurts businesses and consumers, threatens to undermine the success of recent tax reform and closes off international markets upon which Utah businesses rely, he said. f Tariffs prompt higher costs for manufacturers, for example, which causes them to struggle to compete with international competitors.

Hatch said a 70-year track record proves the benefits of American-led, rules-based free trade. Last year, U.S. companies exported $2.9 trillion in goods and services, which supported 36 million jobs. What’s more, 95 percent of the world’s consumers and 80 percent of world’s GDP lie outside U.S. borders, he said.

With a low unemployment rate, high job creation and rising wages and GDP, “the economy is powering ahead, but despite having the world’s strongest economy, our nation cannot reach its potential without a well-functioning, open trading system,” he said. “The interdependence of the modern world is not a policy; it’s a reality.”

Hatch said he favors President Trump’s desire to hold U.S. trading partners accountable, including confronting challenges posed by China. But dealing with China’s unfair trading practices requires a “targeted” strategy, he said.

“While those efforts are underway, the administration should not impose further tariffs on our allies and partners, particularly on autos and auto parts,” he said.

To continue the discussion about the U.S.-China trade war, World Trade Center Utah, law firm Kirton McConkie and the Utah State Bar will host a luncheon seminar this week focusing on how businesses can mitigate the effects of the tariffs imposed on Chinese imports as well as China’s countermeasures. The event is Aug. 28, 11:30 a.m.-1 p.m., at Kirton McConkie offices in the Key Bank Tower, 36 S. State St., Salt Lake City. The cost is $10. Registration can be completed at Eventbrite.com.{/mprestriction}