The intensifying trade war between the U.S. and China could have significant ramifications for two of Louisiana’s top economic sectors—industry and agriculture.
Following President Trump’s latest round of tariffs, scheduled to take effect Sept. 1, the ongoing trade dispute threatens to further delay major industrial projects planned for Louisiana’s Capital Region, which is already experiencing a lull industrial construction. The state was named the No. 1 loser of construction jobs in the nation over the past year.
Local economist Loren Scott points to lucrative projects like the $1.25 billion Wanhua chemical plant proposed in St. James Parish, saying Wanhua is a Chinese company that could hold off on the project due to trade tensions.
Not only that, tariffs drive up construction costs for steel-intensive projects, like the Wanhua plant and others in the works, potentially causing further delays.
“This is particularly important for the Baton Rouge area because we’re in between projects right now,” Scott says. “We just finished up some big ones, but we have big projects coming up, like Shintech and Methanex, which, again, are very steel intensive. It’s a little unnerving because we really need them.”
Construction employment in Louisiana has fallen while the state’s been in between industrial projects, a trend which cannot go on much longer without repercussions.
“We don’t want to be delayed into 2021,” Scott says. “We want to get these projects started. Performance Contractors, Cajun Industries—we have to get all those people back to work again.”
Meanwhile, in the agricultural industry, anytime there’s a threat of new tariffs, demand for agricultural products will likely be impacted, as well as prices, says Michael Deliberto, LSU AgCenter professor of agricultural economics. Crops expected to be most affected are soybeans, corn and cotton.
For Louisiana, soybeans have suffered most from the U.S.-China trade war, as the Asian country is Louisiana’s largest export market for soybeans. China had recently committed to buying large shipments of U.S. soybeans, but they haven’t been shipped yet. With the new proposed tariffs, the question now is, will they take it?
“Any reduction in shipments, if sales go stagnant, more commodity is left sitting on the market,” Deliberto says. “It’s certainly not helping farm prices.”
Trump announced Thursday the U.S. would impose 10% tariffs on the remaining $300 billion in Chinese imports, accusing the country of not keeping its promise to resume buying farm products. China has halted U.S. agricultural imports in retaliation, according to CNBC. If the U.S. continues to raise tariffs on Chinese imports, experts say a recession will be underway soon.
“Tariffs are notorious creators of downturns,” Scott says. “But these tariffs do not go into effect until Sept. 1. Let’s hope it’s just a good negotiating game and gets China to table.”