California Reacts to the Drum Beats of Trade War

President Trump stunned economists, investors, and even members of his own party last week when he announced impending tariffs of 10 and 25 percent on imported aluminum and steel. An executive order is expected by next week.

Free trade advocates are holding out hope that Republicans in congress can dissuade the president from following through. If not, some experts warn the move could upend the U.S. economy, raising the prices of goods and sparking a trade war with allies and foes alike.

The impact on California could be particularly significant.

California steel manufacturers are concerned that tariffs proposed Thursday by President Trump will drive up the price of their products, threatening their ability to compete with foreign and eastern U.S. steel makers and forcing them to cut local jobs...

In California, industry leaders and analysts argue that the tariffs would provide no benefits to steel manufacturers on the West Coast — companies that import steel in the form of slabs and coils, rather than making it from iron ore. They use that to create finished products for a vast array of businesses across the United States. Those companies also worry that the tariffs would drive up the price of domestic steel.

The Golden State imported a combined $4 billion in iron, steel, and aluminum products last year. The largest steel mill in the Western United States, California Steel Industries in Fontana, is almost entirely dependent on unfinished products from Mexico, Brazil, and Japan.

But it isn’t just the steel and aluminum industries that could suffer. Any industry that exports products to countries pressed to retaliate could get hit. That includes agriculture.

"We could be in a really nasty trade spat, and we've seen that agriculture is usually a big target," warned Josh Rolph of the California Farm Bureau Federation. "We are greatly concerned."

On Sunday, White House trade advisor Peter Navarro -- a University of California, Irvine professor and former candidate for San Diego mayor -- dismissed those concerens and cited U.S. trade imbalances.

"We're not going to take it anymore," he told Face the Nation

Trump’s protectionist leanings have been evident for years. It was the freewheeling nature of the announcement and its broad scope, however, that appears to have caught allies and markets off guard. As justification for its unilateral actions, the administration is citing Section 232 of the 1962 Trade Act, a Cold War-era provision reserved for imports that are deemed a national security threat to the United States. 

Trump has also done little to quell the anxiety. On Friday, he tweeted that sometimes “trade wars are good” and, in this case, it would be an “easy” win for the United States.

Economists beg to differ.

UPDATE: On Monday morning, the president issued another tweet suggesting his recent announcement on tariffs could be a tactic in NAFTA negotiations.