The Orange County Register reports that California is home to nine out the 10 metropolitan areas throughout the U.S. with the highest unemployment rates, making the state second only to Nevada for unemployment. It should be noted right away that none of those cities and towns are in the Bay Area, and that most of them are centered in the Central Valley and other rural areas.
Nevertheless, as unemployment continues to plague vast swathes of the state, the Bay Area could suffer.
The problem is that there is increasing talk of slapping tariffs on Chinese imports in response to that country’s continued manipulation of its currency. Currency manipulation by China is making it increasingly more difficult for the U.S. to compete in manufacturing. Last September, the House of Representatives passed a bill that would encourage the President to place tariffs on all Chinese goods, from steel to plastic Walmart tchatchkes.
The vote passed 348-79, unusual in this age of partisan bickering. However, the bill failed to address the issue of China’s inevitable retaliation. An ensuing trade war might affect the American economy.
China not only holds a significant portion of U.S. debt. It is also the nation’s third largest trading partner purchaser of American exports, after neighbors Mexico and Canada. In the first decade of the 21st century, trade with China increased a whopping 468 percent. Can the U.S. afford to risk that?
More precisely, can California afford to risk that? While all states would be affected by a trade war, a report by the U.S.-China Business Council says no state would be as negatively impacted by a trade war as California.
In the last decade, California’s exports to China have increased by 252 percent, hardly a piddling amount, even when compared to the U.S. total. In contrast, California’s exports to all other nations increased by just 13 percent.
Furthermore, the total value of exports to China is $12.47 billion, of which $3.8 billion is comprised of computers and electronics, most of it coming from Silicon Valley and the Bay Area.
The consequences are potentially grim. According to the Business Insider, California, more than any other state, would be “crushed” by a trade war with China. The article even notes how specific companies, such as Apple, would be crushed, particularly since 12.66% of its revenues are derived from the Asia-Pacific region, and China is by far the biggest kid on that block.
Furthermore, at a May meeting of the U.S.-China Strategic and Economic Dialogue forum, China stated that it would like to expand its high-tech exports from the U.S., and suggested that this could help balance the trade deficit. The U.S. was reluctant, with Vice President Joe Biden and Secretary of State Hillary Clinton saying that such trade would depend on improved human rights conditions in China.
This places California in a dilemma. While increased trade with China would mean increased revenues, it is also tacit acceptance of unbalanced Chinese trade practices, currency manipulation, and human rights abuses. On the other hand, taking the high road could have a devastating impact on California’s economy. With soaring unemployment, is that even feasible?