LOCAL NEWS

Trump trade war and other economic concerns for Washington

Nov 17, 2016, 7:10 AM | Updated: 8:47 am
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A record number of listeners tuned in for the live stream of the Ninth U.S. Circuit Court of Appeals Tuesday afternoon. (AP)
(AP)

There’s little information about what President-elect Donald Trump plans to do with America’s financial corner, but that hasn’t stopped people from worrying about the potential fallout of a trade war.

KIRO Radio’s Josh Kerns asked CBS News Senior Business Analyst Jill Schlesinger about the potential effects of Trump’s presidency on the Washington state economy — especially because Washington has a strong trade relationship with China.

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Could there be an effect on West Coast companies who do business with China?

“Yes, I do think so,” Schlesinger said. “But there’s no information yet. So we’re getting ourselves kind of worked up.”

Trump’s intentions have been vague and that hasn’t helped anxieties, leaving things up to speculation.

“If he just wants to make a bunch of threats and talk tough, but not actually do anything, then we are going to be OK,” Schlesinger told Seattle’s Morning News. “Because then he’s not doing anything and trade is still occurring.”

Schlesinger said there is a “generalized anxiety” among America’s financial sector. It all depends on Trump’s intentions.

“If there is some bigger picture, tariff, trade issues, then I think we are going to see some problems with companies you know and love,” she said. “That is not going to be good.”

Industry vs. Tech and a trade war

Schlesinger said there is a divide forming between the industrial sector and the tech industry in the wake of Trump’s election. She notes that during his campaign, Trump said that he intends to target companies who deal overseas. This is a concern for many technology companies — some of which saw their stocks drop last week.

“It wasn’t just about the fact that there could be a trade war, there’s also this idea that throughout the campaign Trump has said ‘big technology companies have been getting away with murder and I’m going to tax all that foreign money,’” Schlesinger said. “There’s even some anti-trust hints … that’s not good.”

On the other hand, Trump has also promoted infrastructure projects around the country, which has made many happy, yet still causes concerns for others — specifically Republicans. Infrastructure projects mean stimulus spending.

“The big fear among investors and economists is that President Trump will start a trade war which is a terrible thing for an economy and a terrible thing for markets,” Schlesinger said.

But Trump didn’t mention anything that would lead to such a result after the election. But he did say something else.

“He talked about infrastructure spending – stimulus,” Schlesinger said. “The thing that many congressional Republicans have been fighting against because it adds to the national debt.”

“If there is infrastructure spending, which companies will benefit?” she said. “Big industrial companies. The ones in the DOW Jones industrial average. That’s why last week the DOW had its best week in five years. Which companies didn’t do as well? Technology companies. No infrastructure dollars are going to Apple.”

But that infrastructure spending could be unique if Trump has to fight his own party on it. Schlesinger notes there could be conflict set up between the new president who wants to start stimulus spending, and his party members who don’t want to add to the national debt.

Inflation

And lingering to the side of everything is the fact that much of what Trump has said about the economy could lead to inflation.

“The 10-year treasury prices went down very dramatically (after his election), and yields went up,” Schlesinger said. “Yields went up because of infrastructure spending, plus tax cuts that favor rich people tend to be inflationary.”

“If Donald Trump is worried the fed is going too slow and leaving rates too low for too long — that’s going to change,” she said. “Right now the fed is totally on track to raise rates in December. I would suggest that next year sees a much faster pace of increases if these plans go through. These plans are inflationary in nature.”

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Trump trade war and other economic concerns for Washington