Why Trump’s Tariffs Would Be Bad for Washington State

Donald Trump is proposing a 20 percent tax, a tariff, on all foreign goods. The idea is partly to force some of those goods to be made here. It is also likely that, for other goods, Americans will pay higher prices. The tariff on those goods, collected from foreign sellers, will enrich the government.

The U.S. government has been run into debt for a very long time. In Trump’s first term, the Treasury had to borrow more than $8 trillion to raise the money for him to spend. Part of it was because of Covid, but it was also because Republicans and Democrats in Congress both like to spend more than they tax. (Also Trump, a former hotel and casino developer, had always bathed in a tub of debt. Sometimes he paid it back and sometimes he stuck someone else with it.) Under Trump’s 20 percent tariff, he would be making the Chinese pay, and the Japanese, the Germans, the French, the British, the lot of them — for the privilege of selling goods to Americans.

Compare this with Trump’s promise in 2016 to build a wall along the southern border and make Mexico pay to build it. Now he promises a wall against foreign goods, and to make the Chinese and others pay to jump over it.

In Trump’s first term, his promise to build the wall and make Mexico pay for it didn’t work out too well. The Mexicans are a proud people, and there was no way they were going to pay for Donald Trump’s wall. Unsurprisingly, Congress didn’t want to pay either. To circumvent Congress, Trump declared an emergency and ordered the wall built by executive order. Was that constitutional? Arguably it wasn’t, but the courts said it was. Even so, Trump got less than a quarter of the wall built, and it was paid entirely by the United States.

Could Trump impose a 20 percent tariff on all foreign goods by declaring a national emergency? Once I assumed that would be impossible, thinking Congress would have to pass such a law. Poking around the Internet, I learn that I may have been wrong.

A recent piece in Politico says Congress passed a law half a century ago, the International Emergency Economic Powers Act, which was a 1970s update of a law originally passed during the Woodrow Wilson administration in World War I called the Trading With the Enemy Act. Under the law now on the books, presidents have declared 69 national emergencies, mainly to block transactions with places like Iran, Cuba, North Korea, Russia, etc. So far, no president has used the law to impose a tariff on the entire world, but Donald Trump is the sort of guy who might do it, and dare the courts to stop him.

That’s not the kind of protectionism American industry wants or needs. Many U.S. companies rely heavily on foreign components that would be subject to Trump’s 20 percent tariff. An example are the car manufacturers. All the cars assembled in America use imported parts. Of the 10 “most American” cars you can buy — the cars with the highest U.S. and Canadian content, by value — three are Teslas (Models Y, S and X), three are Hondas (Passport, Odyssey, and Ridgeline), one is the Toyota Camry, one is the Volkswagen ID 4, and one is the Jeep Gladiator. In that list from cars.com, only one company — Tesla — is American. And only one vehicle is assembled by union workers: the Jeep, made by Chrysler, a company owned by Stellantis N.V., of Hoofddorp, Netherlands.

In the 21^st century, many U.S. companies have linked up with foreign suppliers in this way. Boeing’s Commercial Airplanes division has relied on foreign supply chains for a long time. Historically, 70 percent of its sales have been exports — and the willingness to use imported parts has been part of Boeing’s sales pitch to government-owned airlines.

A blanket 20 percent tax on imports — raw materials, semi-finished items, finished parts, the lot — would be a shock to Boeing and many other companies. It would strain international relationships, and those other countries might retaliate by raising their tariffs. Tariffs would raise costs, making American products less competitive in foreign markets. Probably Trump would say, “So what? Do it!” — and it would feel good to his MAGA fans. Eventually, business might get used to it, and pass the increased costs on to consumers. Kamala Harris calls it Trump’s “national sales tax.” That’s not exactly true, but it’s close enough.

I’ve been writing as if a 20-percent across-the-board tariff were Trump’s finished proposal. Really it’s a simple, easy-to-understand campaign statement intended to get him elected. Historically, America’s tariff regimes were much more complicated. Different industries were treated differently, depending on how much they hurt, how loud they complained, and how much political influence they had. A tariff regime is inherently political, with the lobbying, horse-trading, corruption, and general messiness that implies.

Already Trump is singling out China for an even higher tariff wall. In the past several political cycles, the candidates for president have done their Two Minutes Hate on China, Republicans and Democrats all making Halloween faces before election time. And that brings the question of which states might feel the greatest pain from a Trump tariff.

For 34 U.S. states, the largest export market is Canada. For six states, it’s Mexico. Washington is one of only four states — the others are Oregon, Alaska, and Louisiana — whose top export market is China. China is also this state’s No. 2 provider of imports, after Canada. Ever since Deng Xiaoping came to Seattle in 1979, the Evergreen State has had a special relationship with China.

Washington is also a state that relies heavily on international trade. A quarter-century ago, it was the most trade-dependent state in the union, because of Boeing. By 2017, according to the American Enterprise Institute, other states had passed it by. By that year, the most trade-dependent state (defined as imports plus exports divided by GDP) was Michigan, on account of the auto industry. The second-most trade-dependent state was Louisiana, because of America’s rise as a petroleum exporter. As a foreign-trade state, Washington had fallen to eighth, after these two plus Kentucky, Tennessee, South Carolina, Texas and Indiana. (Trump states!)

Still, in 2017 Washington was the most trade-dependent state west of the Rockies. Boeing has had some problems since then, and port traffic has been up and down, so the ranking might have changed. But world trade has been part of this state’s business model for more than a century. In the 21^st century, much of the prosperity of Puget Sound country has been built on trade with China.

And what of labor, and the jobs that went to China? You’ve seen pictures of the Chinese factories, nice and clean, with uniformed women in obedient rows. I look at the images of red-hatted fans cheering Donald Trump and think: Do you really want those jobs back? Really? We have lots of jobs. Our state unemployment rate in 2023 was 4.1 percent, which is close to full employment. As an international-trade state, our average annual compensation in 2022 was $83,665, 19 percent higher than the national average and fifth-highest among the 50 states. (And roughly five times the average wage in China.)

In the state of Washington, 8 percent of our jobs — about a quarter-million — are in manufacturing.  According to Ziprecruter.com, the hourly pay for manufacturing in this state is now $25.47 an hour — an average that covers everything from $16 an hour for trainee jobs to more than $40.

Is the American economy doing okay? The party in power says it is, and the party out of power says it isn’t. Every four years, the “out” party screams that wages are falling, the middle class is being squeezed, the game is rigged, and America needs to be saved by changing who’s in power. The Democrats talked this way four years ago when Trump was president, and the Republicans are saying it now. Candidates talk as if the president “runs the country,” which under our Constitution no one does. Our media talk and talk about the candidates’ proposals for “change.”

A 20-percent tariff on all imports would be real change. As economic policy, big and disruptive change.