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Tariffs and a potential trade war are bad news for California

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The new import tariffs on steel and aluminum, and the potential trade war that may result, could have a disproportionate impact on California.

California has a higher ratio of the kind of jobs that could be affected by these tariffs, according to Kadee Russ, a professor of economics at UC-Davis and a former adviser on international trade to the Obama Administration.  

In California, we have more than 100,000 jobs in industries that use steel intensively. I define “intensively” as an industry [that] has 5% or more of their total [input] requirements that comes from steel or products made from steel. So that outnumbers the number of jobs in the steel-producing industry by about 20 to 1.  

Russ also identified California ports as vulnerable to negative effects from the new tariffs. The Port of Los Angeles anticipates that the tariffs could affect up to 8,000 jobs in the area. 

One of the reasons people import steel [to California] is that otherwise, you often have to ship it over the Rocky Mountains, so there are real cost issues involved in having to source steel over land as opposed to by sea. 

The effects on individuals might not be easy to identify but could have a large cumulative effect.

Those costs are going to look very diffuse … it’s just a little bit here, a little bit there. If you buy a car, it might be a bigger punch. People are talking about a $175 increase in the cost of a car due to increased steel costs.

But, when you add all of this up, day to day, over a year, it may in fact be enough to counteract the increase you might have felt in your paycheck from the tax cuts. So, it’s small here and there, it’s hard to identify in any one particular product, but it's so diffuse it really does have the potential to add up for a lot of families.

Another concern is the growing possibility of a trade war featuring tariffs from other countries targeted at American industries and even specific companies.

“If there is a trade war, everybody loses,” Russ said.

California could experience unique effects of a trade war, too; the European Union has already identified Levi's, a clothing company headquartered in San Francisco.

"We would also see tariffs probably on citrus," Russ said, "according to the list that they put out."

Russ also identified agriculture and a variety of manufactured goods as potential targets, but also noted that it is too early to do much more than speculate. 

If these tariffs stay in place, if countries outside of the United States follow through on their threats to levy retaliatory tariffs, then … I think we could have a big problem on our hands. We could have a really big blow to rules-based commerce in the world as we know it. But I think that is the extreme case. 

"Everyone is still in wait and see mode," Russ said.