California Caught in the Middle of U.S – China Trade War

California, which is the 6th largest economy in the world with a GDP of USD 2.44 Trillion, ahead of France and the United Kingdom, finds itself caught in the crossfire between the U.S and China’s trade dispute. It is forecasted that the escalating trade war will significantly stunt the state’s economic growth rates as the Bank of the West reports that the trade war could lead to an outflow of workers and rising unemployment, as 50% of U.S – Chinese trade goes through ports located in the Los Angeles. Furthermore, the Brookings Institution in Washington estimates roughly 287,000 Californians are employed in industries targeted by China.

Likewise, Californian nut farmers are now being targeted by Chinese tariffs. This raises concern as China accounts for roughly 12% of U.S. almond and 40% of pistachios exports. This year, China has raised tariffs on American almonds and pistachios by 40%. China has also targeted farm products such as wine for additional tariffs ranging between 5% and 10%. As 90% of U.S exports of wine to China is from California, vineyard owners are concerned.      

Moreover, companies in the agriculture sector are experiencing downturns in shares prices as Tyson Foods, Inc (NYSE: TSN) is currently trading at a loss of 0.36%, continuing its 6-month trend of 18.13% in share losses. Sanderson Farms, Inc (NASDAQ: SAFM) has been experiencing similar share losses of 19.46% in the past 6-months, while Pilgrim’s Pride Corporation (NASDAQ: PPC) continues the trend with share losses of 27.14% in the past 6-months. It is important to note that these losses are not firm-specific as Tyson Foods, Sanderson Farms, and Pilgrim’s Pride all began 2018 with gains of 27.65%, 38.3%, and 53.60% over 2017.

In attempts to mitigate the effect of the tariffs on American farmers, the U.S. Department of Agriculture (USDA) plans for up to USD 5.9 Billion in bailouts. Saying that initial aid in will consist of about USD 4.7 Billion in payments, in addition, to purchasing up to USD 1.2 Billion in certain commodities which they feel have been “unfairly targeted by unjustified retaliation.”

3 Comments
  1. Jorge Martins 1 year ago
    Reply

    Both China and the US need more indigenous innovation. Could that be the key to ending their trade war?

  2. Kevin Hincks 1 year ago
    Reply

    this #tariff ripple is about to become a tsunami! Talking to large & small business owners this tariff, trade issue is going to wreck havoc on the U.S. economy if not resolved soon! | #Business #TradeWar #China #USA #Farmers #Manufacturing

  3. Edward Gerety 1 year ago
    Reply

    The Trump-China trade war has already torpedoed at least one mega merger. Will the deal blocking stop there?

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