Business & Real Estate

Economists say Trump trade policies could hurt California business

The Port of Los Angeles, a hub of California’s international trade economy, could face changes if Donald Trump follows through on his campaign rhetoric. Experts say Donald Trump’s presidency could hurt billions of dollars in California exports.
The Port of Los Angeles, a hub of California’s international trade economy, could face changes if Donald Trump follows through on his campaign rhetoric. Experts say Donald Trump’s presidency could hurt billions of dollars in California exports. Associated Press file

California ships its almonds to China, its wine to Europe and its electronics components to Mexico. It leans heavily on immigrant labor to harvest its berries and code its software.

Few states have embraced globalization with as much fervor as California. Now it will have to deal with a president who has vowed to tighten the flow of immigration and rewrite trade agreements with some of California’s most important trading partners.

Although President-elect Donald Trump’s conciliatory victory speech early Wednesday calmed financial markets, economists said Trump’s plans for immigration and international trade could harm California’s economy. At the same time, they said Trump might choose a more moderate path once he confronts the realities of governing.

“It’s hard to say how much of it was bombast and how much of it was real policy thinking,” said Jock O’Connell, a Sacramento economist and international trade consultant. “He made a big deal of appealing to people who felt they were on the wrong side of globalization and trade deals.”

If Trump were to follow through on his anti-trade rhetoric, “it’s not good news for California,” O’Connell said.

Exports from California totaled $41.28 billion from July to September, the most recent data available, according to an analysis O’Connell conducted for Beacon Economics consulting. Mexico, the object of many of Trump’s criticisms, was the state’s single largest export destination, buying $6.51 billion of California’s goods. China, another frequent target of Trump’s campaign rhetoric, was the third-largest export destination, with shipments worth $3.6 billion.

California’s trade ties show up in ways that aren’t always obvious. While a fair amount of automobile manufacturing has moved to Mexico in recent years, O’Connell said California sells electronics and other auto components to those Mexican factories. Similarly, he said California companies sell components to a thriving drone-manufacturing industry in Tijuana.

California generates jobs from imports, too. All told, O’Connell said as many as 500,000 Californians work at ports and border crossings, processing the flow of goods.

California agriculture also has a lot at stake. In 2014, exports of almonds, wine and other commodities totaled $21 billion, accounting for 40 percent of the state’s agricultural output. More than two-thirds of the almond crop is shipped overseas, as is 28 percent of California’s dairy output.

Besides pledging to redo or even scrap NAFTA, the North American Free Trade Agreement, the president-elect also came out against the proposed Trans-Pacific Partnership, or TPP, which would reduce tariffs and other trade barriers between the United States and 11 Pacific Rim countries.

“If Trump does what he said he was going to do with his trade negotiations, then it’s going to have some repercussions for California agriculture,” said UC Davis agricultural economist Richard Howitt.

Some farm groups took a cautiously optimistic tack on Wednesday. “We’re hoping to educate him on TPP,” said Modesto almond farmer Paul Wenger, president of the California Farm Bureau Federation.

Wenger said he also hopes Trump softens his anti-immigration stance.

“Let’s figure out a way to bring these people out of the shadows,” he said. “We know we’re not going to export all these people.”

An estimated 50 percent of California’s farmworkers are undocumented, said UC Davis labor economist Philip Martin.

At the same time, the flow of immigrants has slowed substantially in the past decade, he said. Instead of regularly crossing the border back and forth, farmworkers are now “aging and settling,” Martin said. “They’re not migrating anymore.”

Silicon Valley was one of Trump’s biggest critics during the campaign, in part over his anti-immigration stance. The technology industry favors immigration reform to make it easier for foreign software designers and others to come into the United States. On Wednesday, San Francisco tech financier Shervin Pishevar announced on Twitter that he would help fund an effort to have California secede from the union.

One great unknown for the California economy is whether a Trump presidency would bring significant changes to water and environmental policies. Farmers and their Republican allies in Congress have long complained that water supplies have been constrained by protections for fish. Trump famously told a rally in Fresno during the primaries that too much water being devoted to “a certain kind of 3-inch fish,” a reference to the nearly extinct Delta smelt.

UC Davis economist Daniel Sumner said it’s far too early to say whether Trump can engineer wholesale shifts in environmental policy.

Financial markets recovered Wednesday after a bout of the jitters as Trump gained momentum Tuesday night. Most overseas markets recouped their early losses. In the United States, the Dow Jones average jumped 256.95 points, to close at 18,589.69. The S&P 500 and Nasdaq markets rose by 1 percent each.

Market analysts said they believe investors were more influenced by Trump’s plan to cut taxes than his anti-trade stance. Others said the unifying message of his victory speech was reassuring.

“Today was all about confidence. The rhetoric that he used to get elected was gone,” said Keith Springer of Springer Financial Advisors in Sacramento. “I don’t believe they trusted him to be presidential up until today.”

Dale Kasler: 916-321-1066, @dakasler