Governors concerned about tariffs

July 21, 2018 GMT

What do the Japanese care about Kentucky?

Plenty, these days.

As President Donald Trump has launched into a trade war, foreign dignitaries are looking beyond Washington for reassurance on their business ties in the United States or at least to apply a bit of political pressure in impressing how new tariffs could hit home for state leaders.

For example, Japanese automakers like Toyota, which has factories in Kentucky as well as other parts of the U.S., stand to take a hit if the Trump administration goes ahead with new tariffs on cars.

And so, while states have no control over tariffs or foreign policy generally, a meeting of governors that began Thursday in Santa Fe started with as much a focus on trade as anything else.

Foreign leaders warned tariffs would hurt industry while governors talked up a willingness to go their own way on trade even as the Trump administration takes a protectionist stance.

Representing border states, farming states, manufacturing states and more, many of the governors gathered here seemed caught in the middle of a trade war they would rather not be fighting. And the focus that was at times an outright push against recent or pending tariffs reflected the concern that favored trade projects or proud homegrown products will feel the pinch.

“If there are trade restriction measures, they will have a negative impact on the U.S. automotive industry,” Kentaro Sonoura, an adviser to Japanese Prime Minister Kenzo Abe, warned as Kentucky Gov. Matt Bevin watched on during one event.

The larger contingent of foreign officials and executives at this summer’s gathering of the National Governors Association reflects the current uncertainty around trade, said Gov. John Hickenlooper, D-Colo.

“They want to have relationships with governors so they can have a sense of what kind of environment they are stepping into,” he said.

Hickenlooper added: “I don’t know any governor who doesn’t believe in trade. I also don’t know any governor who believes our existing trade agreements were satisfactory. I don’t know anybody who thinks we should be throwing the baby out with the bathwater. There are ways to improve your trade agreements without getting so much uncertainty and unpredictability.”

The president campaigned on revamping the country’s trade policy and delivered, yanking the U.S. out of the Trans-Pacific Partnership with countries including Japan, slapping tariffs on all manner of Chinese products as well as imposing tariffs on steel and aluminum. Other countries have responded in kind with tariffs on American goods and casting uncertainty over the future of trade with the U.S.

In panels with governors, Chinese executives argued against protectionism while Japanese officials appealed for rejoining the Trans-Pacific Partnership, a controversial trade pact that the U.S. exited after Trump took office.

While governors do not have control over trade policy, under the Trump administration, states are forging their own paths on issues such as climate change.

And developing trade ties with foreign countries is another area where governors — Republicans and Democrats alike — are interested in working around Washington.

At the very least, they are one group with bipartisan concern about the Trump administration’s trade policy.

Utah Gov. Gary Herbert noted his state is aiming to expand imports and exports through Salt Lake City’s airport by developing what is known as an inland port.

But uncertainty over trade, he said, threatens to hamper economic development.

“Most of the problems we face with capital investment — with businesses expanding — is uncertainty,” Herbert said.

Gov. Doug Burgum, a Republican from the soybean stronghold of North Dakota, did not denounce the president’s approach to trade, though his state’s farmers stand to lose from tariffs China has slapped on their exports.

Instead, he offered that the end result — lower tariffs all around, perhaps — could be yet to come.

But far from taking a protectionist tone, he added: “China needs protein. We’ve got soybeans.”