Texas Businesses Brace As China Tariff Rhetoric Ratchets Up

Jul 16, 2018
Originally published on July 13, 2018 3:02 am

When it comes to tariffs, the Texas economy has a lot at stake.

“Texas clearly is the No. 1 exporting state in America, so we really have ostensibly the most to lose,” said Jeff Moseley, president and CEO of the Texas Association of Business.

Moseley said he's worried about the potential effects of tit-for-tat tariffs from China.

This week, the Trump administration threatened a new round of 10 percent tariffs on $200 billion in goods – ranging from fish to forks, crowbars to tires.

China quickly promised reciprocal actions, which would likely target products that come from Texas.

There's the obvious stuff, like propane.

“China is getting 97 percent of their propane from Texas,” Moseley said. “Crude oil, 83 percent of U.S. exports to China in crude oil come from Texas.”

Then there’s the stuff that would not likely come to mind, like grain sorghum. “China depends heavily on grain sorghum to feed its livestock,” he said.

The grass is worth $291 million annually to Texas farmers, he said, and makes up nearly 60 percent of U.S. sorghum exports to China. 

Texas is the biggest exporter in the United States. If it were its own country, it would rank ahead of Canada and behind Brazil in gross domestic product. 

Tariffs won’t just affect the exporters. Texas businesses have benefited from Chinese imports for decades, Moseley said, "because of the low cost of manufacturing China affords and the fact that a lot of U.S. companies have mastered logistics and can get those products to us at a very efficient price.”

An increase in tariffs could put what Moseley calls a "chill" on the state’s economy – just as things are seeming to get rolling again.

West Texas crude oil prices have rebounded. Texas Comptroller Glenn Hegar just revised his office’s tax revenue estimate upward because of better-than-expected spending in the state. And the Port of Corpus Christi announced a record high for freight tonnage in the first half of this year. Its CEO said in a statement that the port is buoyed by oil exports and liquefied natural gas – two products that could see lower demand if tariffs were to be levied in China.

Conservatives in Congress have decried the tariff trade policy. Gov. Greg Abbott has written a letter to the president outlining the negative impact it would have on Texas.

Moseley is convinced the state’s businesses will be heard in Washington.

“Our commitment is to have an open dialogue with our 4,000 members and get that information back to the administration, so they can have a sense and understanding of what their negotiating means on the economy of our members and on the state of Texas,” he said.

The administration says its trade policy is the best tool to force China to protect intellectual property rights and reduce the trade gap between the two countries.

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