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As trade war escalates, Colo. faces broadening impact on export economy

Author: Marianne Goodland - August 1, 2018 - Updated: August 6, 2018

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Cattle grazing near Boulder. Colorado exports of fresh and frozen beef were valued at a combined $853.7 million in 2017. (iStock/Getty Images)

It isn’t only Colorado agriculture that’s getting nervous about what the Trump administration’s tariffs could cost them.

Insiders at many industries in Colorado — even distillers — say they could be hurt by an escalation of the trade war between the United States and foreign trading partners like China, Canada and Mexico — the state’s top three export destinations.

Colorado exports were valued at $8.06 billion last year, up 6.4 percent from the previous year, the Metro Denver Economic Development Corp. says. Canada and Mexico account for a combined $2.7 billion of that total, followed by China ($585.6 million), Japan ($445.1 million) and Malaysia ($417.4 million).

Colorado’s most valuable exports are fresh and frozen beef (a combined $853.7 million in 2017), computers and electronic products ($714.7 million), medical instruments ($375.3 million) and frozen pork ($246.6 million).

After the first round of tariffs imposed by the Trump administration on $34 billion worth of Chinese exports, the Chinese government immediately retaliated with tariffs of its own on $34 billion worth of U.S. goods, much of it agricultural. U.S. Trade Representative Robert Lighthizer  said in a statement at the time that the Chinese retaliation came “without any international legal basis or justification.”

The impact of the Chinese tariffs, as well as tariffs imposed by other trading partners like the European Union, was almost immediate.

Don Brown farmers in crisis
Colorado Agriculture Commissioner Don Brown (File-Courtesy of the Colorado Farm Bureau.)

According to Colorado Commissioner of Agriculture Don Brown, corn prices in Colorado dropped 20 percent between the first of June and mid-July, due to the trade war. Wheat prices also have sharply declined since China put those products on its list for retaliatory tariffs, he told a group of producers earlier this month.

Colorado corn exports were valued at $86.1 million in 2015, while the state’s wheat exports were valued at $200.3 million that year, the U.S. Department of Agriculture reported.

Attempting to stave off the political damage, on July 24, President Trump announced $12 billion in emergency aid for farmers — primarily soybean, dairy and pork producers — hurt by the trade war. But it’s a bailout that in Colorado isn’t playing particularly well.

“We appreciate the offer of the bailout,” Joyce Kelly, executive director of the Colorado Pork Producers Council, told Colorado Politics. “It definitely is something we can put to good use.”

But pork producers want trade deals, not bailouts, she added.

China is Colorado’s No. 3 consumer of pork, and the current tariff erases 60 percent of the value of the product shipped to China, Kelly explained. “We understand there are trade issues with China that can’t be glossed over.”

Colorado is the 15th largest pork-producing state, she said, and Yuma County is the 23rd largest county in the nation in pork production. “Anytime you see a national impact on the export value of pork, Colorado gets hit.”

Kelly said her industry wants the government to engage in bilateral trade, pointing to a new trade agreement with Thailand that should open up that market to Colorado pork. Additionally, Argentina has opened up its markets to pork for the first time in 20 years, Kelly said.

A farm along the South Platte River in northeastern Colorado near Fort Morgan uses an industrial sprinkler to water their corn crop. Colorado corn exports were valued at $86.1 million in 2015. (iStock/Getty Images)

Colorado corn growers are like-minded on the subject of bailouts, said Kim Reddin of the Colorado Corn Growers Association. She told KUSA-9News recently that growers really want a long-term fix, not an aid package or assistance. “What they’d really prefer is market driven demand where they can go to the marketplace and sell their crop.”

According to the U.S. Chamber of Commerce, however, that $12 billion bailout for agriculture would be the tip of the iceberg if the administration wants to hold harmless any and all U.S. industries hurt by retaliatory tariffs imposed by other nations.

The chamber estimated Monday that the cost of bailouts for all industries could easily top $39 billion, based on current tariffs. Colorado is in the category, according to the chamber, of facing “very significant damage” from the trade war, with estimated annual losses at $276.8 million for the state.

It estimates that 733,900 Colorado jobs are supported by trade.

“Tariffs imposed by the United States are nothing more than a tax increase on American consumers and businesses,” a chamber report says.

The U.S. Chamber worked up this chart of Colorado industries that could be hardest hit by the current tariffs, based on the projected annual value of lost export sales:

Total Exports to Canada Threatened by New Tariffs: $50,653,642
1. Bread, Pastry, Cakes, Etc & Puddings: $13,536,293
2. Aluminum Casks, Cans Etc: $9,046,224
3. Retail Surface-active Soap, Etc: $5,501,031

Total Exports to China Threatened by New Tariffs: $30,310,164
1. Aluminum Waste And Scrap: $29,111,373
2. Animal (not Fish) Guts, Bladders, Stomachs & Parts: $272,139
3. Passenger Vehicle, Over 3000 cc: $201,750

Total Exports to EU Threatened by New Tariffs: $8,246,390
1. Articles Of Iron Or Steel: $4,822,794
2. Motorcycles, Cycl,excd 800 cc: $1,123,744
3. Whiskies: $624,743

Total Exports to Mexico Threatened by New Tariffs: $187,658,359
1. Meat, Swine, Hams, Shoulders, Bone In, Fresh Or Chilled: $105,838,309
2. Cheese Of All Kinds, Grated Or Powdered: $35,927,033
3. Meat, Swine, Hams, Shoulders Etc, Bone In, Frozen: $15,833,694

And the chart, which was published earlier this month, does not take into account retaliation from China that could take place from the latest round of tariffs announced by the Trump administration on July 10. The administration said it would put a 10 percent tariff on another batch of Chinese goods valued at around $200 billion.

No date has yet been set for when those tariffs would go into effect, and they come on top of the 25 percent tariff placed on $34 billion of Chinese products that went into effect on July 6.

If those latest round of tariffs on Chinese goods is imposed by the Trump administration, that would cover 50 percent of all goods exported to the United States from China, according to Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit, a London based data company with its U.S. headquarters in Douglas County.

And then there’s NAFTA, the North American Free Trade Agreement that Trump has frequently criticized and wants to renegotiate. The Council on Foreign Relations warned Monday that Mexico’s new president, Andrés Manuel López Obrador, is unlikely to be the trading partner Trump might want and is likely to want to stick to NAFTA as is.

The deadline for Congress to approve a new NAFTA agreement expired in May, meaning there will be no agreement before the midterm elections. And at least one former Trump aide is sounding the alarm that this could cost Trump and his congressional allies votes come November.

Steve Gould poses for a photo at Golden Moon Distillery in Golden. (Sounders Studios/Golden Moon Distillery via AP)

Another Colorado business sector worried about trade wars is distilling. Steve Gould of Golden Moon Distillery in Golden told the Associated Press earlier this month that he expected revenue from exports of his gin, whiskey and other spirits to the European Union to top $250,000 this year. Now, he projects EU sales of just $25,000.

“We’ve lost years of work and hundreds of thousands of dollars in building relationships with offshore markets,” Gould told the AP.

The president’s determination to continue waging the trade war has prompted congressional lawmakers to introduce bills to rein him in, but none are expected to gain much ground.

Republican Sen. Bob Corker of Tennessee, who has chosen not to run for re-election in November, is among those concerned about the impact of the trade war on the American economy. He introduced a bill last month that would require congressional approval for any trade adjustments proposed by the president that could impact national security.

But that bill, which gained eight Republican, seven Democrat and one independent co-sponsor, is unlikely to gain much traction, based on opposition from Senate Majority Leader Mitch McConnell of Kentucky.

Neither of Colorado’s senators, Democrat Michael Bennet and Republican Cory Gardner, are listed as co-sponsors. Bennet, however, is a member of the Senate Finance Committee to which the bill has been assigned. A similar bill has been introduced in the House but has drawn opposition from Speaker of the House Paul Ryan.

Jim Dornan, a Republican strategist and former Trump campaign aide, said earlier this month that “a bill that will rein in Trump’s ridiculous tariff fixation so that farmers and manufacturers don’t leave the party in droves in November would be a plus.”

IHS Markit’s Biswas noted the same impact, stating that the Chinese are targeting U.S. agriculture in hopes that the Trump administration will face political backlash from the U.S. farm lobbies ahead of the mid-term elections.

Marianne Goodland

Marianne Goodland

Marianne Goodland is the chief legislative reporter for Colorado Politics. She's covered the Colorado General Assembly for 20 years, starting off in 1998 with the Silver & Gold Record, the editorially-independent newspaper at CU that was shuttered in 2009. She also writes for six rural newspapers in northeastern Colorado. Marianne specializes in rural issues, agriculture, water and, during election season, campaign finance. In her free time (ha!) she lives in Lakewood with her husband, Jeff; a cantankerous Shih-Tzu named Sophie; and Gunther the cat. She is also an award-winning professional harpist.