‘A cloud descending’: Utah business leaders warn of economic toll from U.S. trade wars with Canada, China and beyond

(AP Photo/Marcio Jose Sanchez) A cargo ship being unloaded Aug. 22, 2018, at the Port of Long Beach in Long Beach, Calif., a conduit for Utah's seaborne exports to China. Business leaders in the Beehive State continue to warn of damaging effects to Utah's economy from a widening trade war.

Utahns support President Donald Trump in large numbers, but business leaders continue to warn of potentially dire effects from his protectionist policies on trade.

With tariffs threatened on products the Beehive State sends to China, Europe, Mexico and Canada, the incoming head of Utah’s trade-promoting World Trade Center said there is “a cloud descending on many Utah companies” — even as the state’s economy sees record-breaking growth and low unemployment.

In an opinion piece published Sunday in The Salt Lake Tribune, the center’s new president and CEO, Miles Hansen, said Utah’s farm, manufacturing and housing sectors face added costs and uncertainties as Trump moves ahead with tariffs and other countries retaliate.

His comments came as U.S. trade talks with Canada — ranked among Utah’s top four trading partners — drifted past a key deadline Friday and the two sides agreed to keep talking for at least 90 days.

Hansen, a Utah native and former official with the National Security Council at Trump’s White House, said tariffs already are “putting Utah companies at a disadvantage and shifting global supply chains as international customers begin purchasing from non-U.S. competitors.”

“With nearly one in five Utah jobs tied to international trade,” he wrote, “effective trade policy is essential to our economic growth and resilience.”

He joins a range of Utah business and elected leaders who say they’re unsettled over the global trade picture. A new trade deal with Mexico, announced Monday, has eased some worries over nearly $26 million in yearly Utah exports south of the border that were to be hit by retaliatory tariffs, including about $20 million in products flowing from the state’s agricultural and food sectors.

Those developments had shifted the focus to Canada, the third partner in the North American Free Trade Agreement, or NAFTA. Trade negotiators were said to be stuck but optimistic late Friday, reportedly bogged down in disputes over quotas in Canada’s dairy sector, its rules on movies, books and other media, and the process for resolving future trade disputes.

‘Handing the business over’

The Trump administration has cast its use of tariffs as a way to force trading partners into new negotiations on long-standing disputes and imbalances, an idea the president echoed Thursday at a rally in Indiana.

“We’re reclaiming our nation’s proud manufacturing heritage and putting tariffs on foreign producers who cheat our workers and cheat our companies,” he told an enthusiastic crowd in Evansville. “Not fair! Not fair!”

“It could happen,” the president said of a new deal with Canada. “And if it doesn’t happen, we’ll put tariffs on the cars coming in from Canada and that’ll be even better. … Either way, it’s going to work beautifully, OK? That, I promise.”

Sen. Orrin Hatch, R-Utah, said last month that he’d personally sought to dissuade Trump from imposing automobile tariffs.

Meanwhile, Bloomberg reported Friday that Trump intended to proceed as early as next week with tariffs on $200 billion of Chinese imports, a move likely to trigger similar tariffs from China on U.S. goods.

Retaliatory Chinese tariffs imposed in July and August have already affected nearly $150 million in Utah exports, with heavy impacts on products such as hay, aluminum waste and scrap, and X-ray technology.

In his op-ed, Hansen cited the plight of Varex Imaging Corp., a Salt Lake City-based supplier of medical X-ray tubes and related services that employs more than 1,000 people, many in what the company said were high-paying jobs.

With 80 percent of its business overseas, Varex is now being hurt on the import and export fronts. Hansen cited Varex CEO Sunny Sanyal, saying that between U.S. tariffs on products the firm and its suppliers import to construct its products and retaliatory tariffs on high-tech components it exports, tariffs are “handing the business over to competitors."

The company’s stock declined more than 20 percent this month as a result of lost sales, reportedly leading the company to consider moving operations out of the state, Hansen said. Such challenges, he said, “are commonplace across Utah.”

‘Improved NAFTA’

The stakes are also high in Utah’s trade relationship with Canada, with an estimated $3 billion-plus in goods and services going from Utah to Canada annually. Canadians bought nearly $90 million in Utah farm and food products in 2017, a market that LuAnn Adams, commissioner over Utah’s Department of Agriculture and Food, said was “critical.”

Leaders with the Utah Farm Bureau have said that after years of depressed commodity prices, farmers and ranchers in the state are in danger of going out of business if the latest disruptions in export markets are sustained.

“Farmers and ranchers in Utah are eagerly watching to see what the future holds for a new and improved NAFTA,” Adams said Friday in a statement.

On the housing front, lapsed rules on U.S.-Canadian lumber trade have boosted costs by nearly 60 percent since the start of last year, according to a top official with Ivory Homes, Utah’s largest homebuilder. In an interview, Michael Parker, vice president of public affairs and senior economist for Ivory Homes, said the rises in lumber, steel and aluminum costs had already hiked its average home prices by between $5,000 and $9,000.

Even before the specter of tariffs, Utah was struggling with a lack of affordable housing, with construction lagging behind the population-driven rise in potential buyers and renters at all income levels.

Derek Miller, president and CEO of the Salt Lake Chamber, said he remained hopeful that Canada would either join Mexico in a new trade deal or forge its own pact with the U.S. directly. Miller, too, has warned of long-lasting trade conflict’s damaging effects on the state.

“Strong trade agreements provide companies with the predictability and stability they need to compete in the global marketplace,” Miller said in a statement on the Mexico deal. “That is why our message on trade has been ‘make deals, not war!’”

‘Wrong approach’

Miller’s national counterparts at the U.S. Chamber of Commerce, a champion of traditional Republican causes, said tariffs “are inflicting harm on the American economy and will continue to do so unless the administration changes course.”

While lauding the policy goal of addressing U.S. trade imbalances, the business-oriented lobbying group is openly rallying opposition to Trump’s tariffs on steel, aluminum and Chinese imports, along with threatened tariffs on autos and auto parts.

The group is also trying to highlight negative effects on Utah and other U.S. manufacturers, farmers and technology companies, as well as average workers and families, dubbing tariffs “the wrong approach.”

Nationally, the U.S. Chamber noted, roughly half of all manufacturing jobs depend on exports and 1 in 3 acres of U.S. farmland is devoted to international sales. Trade actions by the Trump administration “threaten as many as 2.6 million American jobs," it said, “and will stymie our economic resurgence.”

And, in a state-by-state assessment of the impact of trade restrictions, the U.S. Chamber placed Utah among 13 states prone to “significant damage” from an emerging global trade war. The U.S. Chamber of Commerce projected that upward of $251 million in Utah exports were vulnerable to tariffs already announced, along with some 387,200 jobs in the state supported by global trade.

The prospect of damage in other states was far worse, particularly manufacturing, farming and some coastal states, the study found.