Donald Trump is flirting with a global trade war and it could hit North Carolina hard.
Trump has long believed in the ability of tariffs, or import taxes, to stimulate economic growth. However, economists anticipate that tariffs and the retaliatory tariffs that inevitably follow will raise prices, slow growth, and increase unemployment.
The rule of thumb is that for every 1% increase in tariff rates, inflation increases by .1%. Given that Trump has threatened tariffs as high as 60%, we could potentially see the inflation rate spike– and inflation has already begun increasing since Trump took office. Economists from the Tax Foundation estimate that Trump’s tariffs could increase costs by $800 for the typical American household.
Trump has primarily targeted Mexico, China, and Canada – North Carolina’s three largest trading partners. Trump has threatened 25% tariffs on Mexico and Canada and has enacted a 10% tax on all imports from China.
Together, China, Mexico, and Canada represent 45% of all of North Carolina’s international trade– a $72 billion economy. The proposed tariffs would not only make North Carolina goods less competitive in these markets, but they would also increase costs for NC consumers who rely on imports from these countries.
China has already enacted retaliatory tariffs on the United States. Canada has released lists of products that would be subject to retaliatory tariffs, including NC products like pork, chicken, tobacco, and soybeans.
North Carolina’s farming communities stand to lose the most, as 26% of agricultural production was exported internationally in 2022. Agricultural markets are especially vulnerable to trade disruptions due to the perishability of many products. When foreign markets close due to tariffs, farmers often cannot quickly find alternative buyers.
Trump’s economic policies have cost North Carolinians before. In 2017, his decision to terminate the Trans-Pacific Partnership resulted in an estimated $1.8 billion in lost revenue for North Carolina farmers.
Each dollar of export activity generates additional benefits throughout an entire economy. With a trade war looming, Trump is not only jeopardizing the businesses of NC farmers who rely on international trade partnerships– he could be threatening the stability of the NC economy as a whole.
