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Georgia was among the many states that suffered declines in Chinese exports in 2019, with the worst yet to come as the impacts of COVID-19 have yet to be factored into the data.
According to an April report from the U.S. China Business Council, a metric that was once a bright spot in the bilateral relationship — sales by American companies to China supporting more than a million jobs — has now dimmed amid the Trump administration’s trade war.
And it could deteriorate further as the politicization of the coronavirus pandemic, which originated in China, threatens the so-called “Phase One” trade deal that many had hoped would return the relationship to more amicable footing.
After marking strong growth for two decades, Georgia’s China exports fell by 21.5 percent to $2.3 billion in 2019 from $3 billion in 2018, as China slipped to the No. 4 among Georgia export markets. That figure had come out earlier in the state’s own export report released pre-pandemic, which showed record totals despite the decline.
What the report made clear is that Georgia is not alone in hitting a decade low: At the national level, goods exports were down 11.4 percent to $104.8 billion annually, and the number of states exporting more than a billion dollars in goods to China fell from 30 to 27. More than 60 percent of U.S. states saw their exports to China decline in 2019.
“These were very bad years for American exporters to China,” said USCBC President Craig Allen, who gave a press conference virtually April 16 and spoke about the environment since Mr. Trump started bending policy to his trade-war will in March 2018.
Mr. Allen was optimistic then that China would be able to meet its purchase obligations under the Phase One deal that went into effect in the thick of China’s outbreak in mid-February.
Chinese commitments to buy some $32 billion in farm goods over the next two years have been touted by President Trump, who had vowed relief for producers bearing the brunt of China’s tariff retaliation. Chicken producers in Georgia are among those that have benefited as China dropped restrictions on U.S. poultry. Overall, China committed over the next two years to buy $200 billion in U.S. goods over 2017 levels in defined product categories from manufacturing to energy.
This week, however, Mr. Trump contradicted negotiators from both sides expressing their commitment to the terms, saying he was “torn” about whether to keep it, leading some analysts to believe he was setting up a scenario that would justify pulling out.
Others have said, however, that China’s purchase agreements were unrealistic in the first place and have now moved into the realm of fantastical, given the way the pandemic has slammed demand and injected uncertainty into global markets. Energy prices, for instances, have plummeted, meaning China would have to significantly ramp up its purchases of American oil or natural gas to meet $18.5 billion in planned spending on that category this year.
For their part, Mr. Allen and the USCBC have advocated for a pause to more acrimonious aspects of the trade war. He said the administration should go beyond its temporary suspension of tariffs on medical products during the pandemic and instead remove up-to-25 percent tariffs that remain on $370 billion in Chinese imports. Steel and aluminum tariffs of 25 and 10 percent, respectively, also remain in place.
Mr. Trump sees those as leverage for enforcement on Phase One upcoming negotiations on Phase Two. Contrary to claims that China is filling U.S. coffers, duties are paid by the importers, who either eat the costs or pass them on to American customers.
“Without tariff relief, many U.S. companies, especially small ones that are responsible for the majority of private-sector jobs in this country, will be significantly damaged,” Mr. Allen said.
Other than a general allowance for pandemic-impacted importers to delay paying tariffs for 90 days, the Trump administration so far hasn’t seemed interested in this form of relief, even as many cash-strapped manufacturers have pleaded for assistance or exemptions, Mr. Allen said.
“We continue to believe that it makes economic sense and we know that 10s of thousands of American farmers and small and medium -sized manufacturers are looking for relief at this time,” Mr. Allen said during the April news conference. “At least a temporary moratorium would be a good idea.”
Meanwhile, another potential bright spot in the relationship — services exports — has seen some recent promising signs, like the opening of financial services to foreign companies in China.
Unfortunately, Georgia’s services exports saw growth slow to 4.3 percent in 2018, the latest year for which figures are available. And its most successful sectors: air travel, logistics and education, are the ones most at risk of pandemic fallout. Another factor: Engaged in another kind of trade war over 21st-century supremacy, the U.S. continues to restrict sales from American suppliers to Chinese telecom giant Huawei and other firms.
According to the Rhodium Group, venture capital investments between the countries have plummeted, and Chinese direct investment into the U.S. dropped to $5 billion in 2019, its lowest level since 2009. Georgia is No. 9 among services exporters to China in the U.S. Between goods and services, exports to China from the state supported 25,900 jobs in 2018, according to estimates.
Read the full USCBC 2020 State Export Report here or select using a map here.
See the Georgia figures here.