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For better or worse, Trump’s trade policies poised to have big impact in Louisiana

February 2, 2017
By Sam Karlin
Originally Posted on Greater Baton Rouge Business Report

As the U.S. enters a new era for trade under President Donald Trump, experts say billions of dollars of Louisiana exports—as well as imports funneled through its sprawling ports and inland waterways—are threatened by a departure from long-standing trade agreements.

Many in the local business community are optimistic about Trump’s election and his subsequent moves to begin cutting federal regulations. Louisiana Association of Business and Industry President and CEO Stephen Waguespack expressed hope the executive order on regulations will “bring some sanity back to federal agencies and lead to a less onerous environment for Louisiana job creators.”

But many economists, including those in Louisiana, have cautioned since the early days of the campaign that drastic changes to trade agreements put American dollars at risk, and could pave the way for China to push the U.S. aside on the global stage.

“My view on that is not particularly different from every other economist,” says Tulane Economics Professor Douglas Nelson. “It’s spectacularly disastrous.”

If taken at his word, Nelson says, Trump’s position—that trade agreements and treaties have led to an exodus of American jobs and need to be entirely rewritten—is potentially dire for America’s economy and world standing.

In 2015, $1.47 billion in Mexican imports passed through Louisiana, according to Louisiana Economic Development, with the largest category of products being fuels. The Bayou State exported $5.82 billion in goods to Mexico that same year, including crude oil, soybeans and machinery, among other things.

Among the top 100 metro areas in the country, Baton Rouge’s economy relies more heavily on exports than any other, according a Brookings Institution analysis released this week. More than 24% of the Capital Region’s gross domestic product comes from exports, and New Orleans is ranked third for the same measure.

“I’m not really worried,” says Commissioner of Agriculture Mike Strain. “It’s great when you see on the first day the president has trade front and center.”

Louisiana’s agriculture industry is tremendously impacted by trade, Strain says, with more than half of the sector’s products being exported. Last year, the state exported $8.3 billion worth of agricultural products worldwide.

Nonetheless, Strain, a Republican, says he is encouraged by Trump’s presidency. He expects Trump to advance infrastructure projects that would help Louisiana’s trade economy. Strain is currently in Washington, D.C., meeting with dozens of other agriculture leaders, and he says trade is the number one topic.

Committee of 100 for Economic Development CEO Michael Olivier just returned from a weeklong trade mission in Mexico with more than 200 other businesses. He’s staunchly opposed to the cancellation of trade agreements that facilitate business between the U.S. and Mexico.

“There is some merit to the argument that trade policy has left some people behind,” he acknowledges. “We can always improve on our trade policies.”

The possibility of increased taxes on Mexican imports especially gives Olivier pause. Given Louisiana’s proximity to the country and its port capacity, “there’s no way we can’t be hurt” by a tax on imports, he says.

Nelson, of Tulane, says attacks on trade are misguided. Automation—not trade policy or globalization—is the biggest reason manufacturing jobs have left the country in recent decades, he says.

“When the car was invented, that left wagon-wheel makers behind,” Nelson says. “Big tariffs on China or Mexico are not going to cause industrial jobs to come back to the U.S.”