Trump’s Trade War With China Is Hurting The Same States He Won In 2016

Trade tariffs mark an escalation in the trade war between the US and China
The latest raft of trade tariffs mark an escalation in the trade war between the US and China
The latest raft of trade tariffs mark an escalation in the trade war between the US and China

By Ken Silverstein

Donald Trump’s trade war with China is hurting the same states he won in 2016. And that includes Pennsylvania and West Virginia, which sit atop the natural gas-rich Marcellus Shale basin. Will the tariffs erode his political support not just in those states but elsewhere across America’s heartland?

The immediate test will be November’s midterm election. China has thus far responded to Trump’s trade tactics by matching him tit-for-tat when it comes to taxing goods crossing its borders, creating economic pain at home. In fact, China is targeting the regions of the United States that Trump carried.

Take Pennsylvania, where 1.6 million of its people have jobs dependent on foreign trade: That includes those in natural gas production as well as steel and agriculture. The natural gas, for example, could get exported to China, which will now get it from Qatar, United Arab Emirates or Russia. Pennsylvania is already feeling pain from the solar tariffs imposed earlier in the year. Overall, the U.S. Chamber of Commerce says that tariffs could cost the state $1.7 billion.

West Virginia will also get whacked. It is in the midst of trying to attract an $84 billion investment over 20 years from Chinese Energy Holdings to help it build out its natural gas and petrochemical business. The state is also home to a new Proctor & Gamble plant in its eastern panhandle, which gets the raw materials that it uses in its manufacturing process from China.

“They are the collateral damage. And the potential harm to America’s industrial and agricultural heartland is about to get much worse,” writes Lucy Wolfe in a story called, “Real Ugly, Real Quick: 3 Pennsylvania Industries Feeling the Sting of Tariffs” for the U.S. Chamber of Commerce.

The Charleston Gazette-Mail reported that West Virginia’s two U.S. senators and three representatives to the U.S. House all expressed support for Trump’s tariffs. While Trump may have won that state by a huge margin, the tariffs will cause economic hardship there. For starters, it will hit P&G’s $500 million plant that now employs 330 people — a facility that has every intention of expanding.

“P&G believes strongly in free trade as it helps us best serve consumers …” P&G spokeswoman Jennifer Corso said in news reports. “Tariffs create a barrier to that.”

The congressman representing the district where these tariffs are resonating has issued only one formal statement, saying “I support President Trump’s policies which put American interests first” — a political remark coming from Rep. Alex Mooney, R-WV, with no facts to back it up. The congressman is hiding behind the president to conceal his move from Maryland a few years ago and to cover for the fact that he has little contact with his constituents. When asked multiple times to debate his opponent on this issue, Talley Sergent, he refuses to even respond.

Altogether, the U.S. exported $1.3 trillion in manufactured goods, some of which could be placed at risk as a result of the tariffs. Gross domestic product would fall by $11 billion while financial markets would be depressed, says the U.S. Chamber of Commerce. Morgan Stanley adds that economic growth could decline by 0.2% because of the $250 billion in the tariffs that Trump has put in place, so far.

Perhaps the biggest economic gut punch could come because China will find new energy suppliers. Let’s start with coal: This column has documented the rapid decline of coal use by electric generators in this country and thus the best hope for coal producers is to sell into India and China. For what it’s worth, the Australians have a much more direct route into China. West Virginia’s congressional representatives should thus be demanding an end to the trade war.

As for natural gas production, suppliers want to export their product in the form of liquefied natural gas or liquefied petroleum gas (LPG). The United States, according to the U.S. Energy Information Administration, sold $3.3 billion in LNG in 2017 and next year, the U.S. could surpass that. Already, Cheniere Energy exports LNG to 11 different countries and China had been expected to be the biggest customer at 400 billion cubic meters. 

Big Mistake

But IHS Markit says that China, which purchased 3.6 million tons of LPG in 2017 has reduced that to 1 million tons this year, in a Reuters report. It will make up the difference by importing the fuel from Qatar, the UAE and Saudi Arabia. LPG consist mainly of propane, propylene, butane and butylene.

“I think the tariffs are a big mistake. I think the policy is very, very counter productive,” U.S. Senator Pat Toomey, R-Pa., told CBS Philly. He goes on to say that the argument that tariffs help domestic steel production is a faulty premise: in the case of Pennsylvania, it manufactures 75% to 80% of the steel that it consumes domestically and it buys none of its steel from China.

Any rebirth of American steel is because of the domestic shale boom. The good fortune is compounded because developers are able to make use of both “dry” natural gas and the “wet gas” that is separated from it. Those so-called natural gas liquids are comprised of such chemicals as butane, ethane and propane — all of which can serve as the foundation for finished goods that are consumed domestically and exported around the globe.

The United States is part of a global matrix and it cannot afford to be isolated — whether by presidential design or by an international boycott. American commerce is dependent upon it. And so are people’s livelihoods, or 26 million jobs in all, says the U.S. Chamber. China gets it too, which is why it is fighting back and hitting goods produced by states that Trump carried in 2016. And if Americans vote their pocketbooks, they will think twice about supporting Trump in 2020. The 2018 midterms will be the first test.