Latest / Trumponomics / Alaska: Front Line in the Global Trade War

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Alaska: Front Line in the Global Trade War · Trumponomics

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  Speaker 1: When Donald Trump ran for president in sixteen, a lot
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  Speaker 1: of attention focused on how falling trade barriers had caused
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  Speaker 1: pain throughout the rust bell and other centers of manufacturing
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  Speaker 1: in the United States. Now, with Trump's trade war spreading
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  Speaker 1: more widely each month, the fallout is hitting many industries
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  Speaker 1: in the US and around the world. On this week's episode,
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  Speaker 1: we look at how Trump's tariffs on Chinese imports, along
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  Speaker 1: with China's retaliation, are threatening America's great northern frontier of Alaska,
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  Speaker 1: a state that happened to vote big for Trump and
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  Speaker 1: Republicans in Welcome to Benchmark. I'm Scott Landman, an economics
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  Speaker 1: editor with Bloomberg News in Washington. Joining me in our
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  Speaker 1: d C studio is Reid Picker, who's interning the summer
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  Speaker 1: as a reporter with our US Economy team. She recently
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  Speaker 1: wrote about how Alaska's seafood industry is getting caught up
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  Speaker 1: in the trade war. Read thanks for joining us on
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  Speaker 1: the podcast. Glad to be here so read why did
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  Speaker 1: you look into this topic? I started looking into this
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  Speaker 1: topic originally because we had just received the list from
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  Speaker 1: China of the retaliatory tariffs on the thirty four billion
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  Speaker 1: dollars worth of Chinese goods that the US was putting
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  Speaker 1: on their products. So when I was looking at this list,
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  Speaker 1: the first thing that I noticed, well, when I was
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  Speaker 1: reading the Google translated version, the first thing I noticed
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  Speaker 1: was the amount of seafood on this list. And then
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  Speaker 1: the next day, when I was on Twitter, I saw
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  Speaker 1: a tweet from Alaska Senator Lisa Murkowski on how the
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  Speaker 1: tariffs could impact the Alaska seafood industry, and the story
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  Speaker 1: was born. And when you were reporting it and looking
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  Speaker 1: into this, what struck you or surprised you the most?
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  Speaker 1: I think what surprised me the most was the sheer
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  Speaker 1: size of the relationship between the Alaska seafood industry and China.
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  Speaker 1: So close to a billion dollars worth of Alaskan seafood
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  Speaker 1: goes to China each year, making up almost a third
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  Speaker 1: of all of the seafood exports from Alaska. And that
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  Speaker 1: was amazing, and it was a scale that I had
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  Speaker 1: not anticipated. All Right, well, we're gonna find out more
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  Speaker 1: about those details from two guests who are based in
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  Speaker 1: Alaska and are highly knowledgeable about the state seafood industry
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  Speaker 1: and its importance to the economy there. On the phone
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  Speaker 1: with us from the state capital of Juno is Alexa Tonkovic.
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  Speaker 1: She's the executive director of the Alaska Seafood Marketing Institute.
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  Speaker 1: It's a partnership between the industry and the state. And
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  Speaker 1: also on the line we have Ralph Townsend, an economics
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  Speaker 1: professor at the University of Alaska, Anchorage and director of
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  Speaker 1: the school's Institute of Social and Economic Research. Alexa and Ralph,
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  Speaker 1: thanks for joining us on Benchmark. Thank you happy to
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  Speaker 1: be here, very pleased to be here to talk about
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  Speaker 1: this important topic. So first, Alexa, we just heard a
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  Speaker 1: little bit about background on the seafood industry in Alaska
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  Speaker 1: from read here. Can you tell us some more about
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  Speaker 1: the size of Alaska's seafood industry, how much it employs,
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  Speaker 1: how important it is to the state? Absolutely, um, the
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  Speaker 1: Alaska seafood industry is really a vital pillar of the
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  Speaker 1: state's economy. In for example, sixteen, we've produced five point
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  Speaker 1: six billion pounds, an x vessel value of one point
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  Speaker 1: seven billion, and a first wholesale value of four point
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  Speaker 1: two billion. It directly employs more workers than any other
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  Speaker 1: private sector industry in Alaska. Sixty thousand people directly employed
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  Speaker 1: by the industry. Not counting multiplier effects, it's the third
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  Speaker 1: largest basic sector job creator after oil and gas. In
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  Speaker 1: the visitor industry and looking at national impacts, nationally a
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  Speaker 1: hundred thousand full time equivalent jobs, five point to billion
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  Speaker 1: and annual labor income and twelve point eight billion economic output.
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  Speaker 1: So it's not only important for the state of Alaska,
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  Speaker 1: but I would argue important for the country overall and alexa.
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  Speaker 1: What are the main kinds of fish and seafood that
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  Speaker 1: come from Alaska's waters. Well, certainly we're well known worldwide
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  Speaker 1: for things like Alaska salmon, of which there are five
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  Speaker 1: different species. Were also known for crab king crab certainly
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  Speaker 1: gets a lot of publicity. Alaska also produces a ton
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  Speaker 1: of whitefish. The largest fish by volume is Alaska pollock,
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  Speaker 1: which you have probably had in a fish sandwich or
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  Speaker 1: in fish sticks or fish tacos. We produce flatfish, We
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  Speaker 1: have hall of it, we have black cod, sable fish,
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  Speaker 1: multiple species of crab cod. It's really there's a lot
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  Speaker 1: of variety. There's also a lot of more specialty products
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  Speaker 1: like row scallops, s cucumber, gooey duck. The list kind
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  Speaker 1: of goes on and on and Ralph, I know that
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  Speaker 1: you've studied fisheries and seafood for a long long time.
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  Speaker 1: Can you put into context Alaska seafood industry with other
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  Speaker 1: parts of the or the United States or or the
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  Speaker 1: rest of the world. Well, in terms of the United States,
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  Speaker 1: Alaska is far and away the most seafood dependent economy
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  Speaker 1: in the nation. Uh no state would come close to
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  Speaker 1: the significance. And Alexa just outlined the size of the
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  Speaker 1: fishing economy in Alaska, and it's it's simply in many
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  Speaker 1: of the states, fishing is visible, it's something that people
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  Speaker 1: know is there. But in Alaska it is a base
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  Speaker 1: industry in the economy. So can you tell us about
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  Speaker 1: how it's processed in other countries like China and then
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  Speaker 1: sent back to the US or to other countries. Yeah, Well,
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  Speaker 1: China is our largest trading partner and it's also a
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  Speaker 1: major reprocessing sector. So a lot of the seafood that
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  Speaker 1: goes from Alaska to China is say, headed, gutted, frozen,
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  Speaker 1: and then is subject to further reprocessing in China, turned
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  Speaker 1: into file AT's turned into a retail product, some kind
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  Speaker 1: of value you added processing, and then it is sometimes
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  Speaker 1: consumed in the China market, but it is often consumed
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  Speaker 1: outside of China, so it's reprocessed in China and then
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  Speaker 1: re exported either to Japan, to the EU, or back
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  Speaker 1: to the US. And partly that's just because of the
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  Speaker 1: processing capacity and the labor that China has um that
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  Speaker 1: they can provide that many other countries cannot. So, Ralph,
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  Speaker 1: is this a more recent phenomenon, something that's happened in
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  Speaker 1: the last few years, or or has it been kind
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  Speaker 1: of a few decades. How would you how would you
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  Speaker 1: put that into perspective? The first thing I would know
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  Speaker 1: it is at a very high level. It's interesting that
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  Speaker 1: China is both the largest importer of fish from the
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  Speaker 1: US and China is also the largest exporter of fish
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  Speaker 1: to the US, and that reflects what Alexa was referring to,
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  Speaker 1: this very large volume of fish that flows to China
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  Speaker 1: for processing and then is returned all over the world,
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  Speaker 1: but including the United States. I'm not really sure the
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  Speaker 1: timing of this. This is something that certainly occurred over
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  Speaker 1: the last two to three decades. It's not something that
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  Speaker 1: happened overnight, but certainly it's not that is not something
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  Speaker 1: that would have been the case in the seventies of
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  Speaker 1: the eighties. I lived in China for a few years
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  Speaker 1: and there's definitely a large demand for seafood there, and
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  Speaker 1: uh I could see it myself and understand the relevance
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  Speaker 1: of the industry. But we we've also just established that,
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  Speaker 1: you know, we've talked about how the seafood industry is
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  Speaker 1: very big for Alaska. It's it's you know, far bigger
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  Speaker 1: than anywhere else in the United States. There's the reprocessing
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  Speaker 1: that goes on. Chinese the biggest importer and exporter of
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  Speaker 1: the seafood, as you mentioned. And now we have these tariffs,
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  Speaker 1: like Reed was talking about, we get this you know,
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  Speaker 1: big list in Chinese of all the products that are
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  Speaker 1: going to be subject to tariffs, and there's a lot
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  Speaker 1: of seafood on there. Senator Murkowski is tweeting about it.
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  Speaker 1: And now just recently we've had some more threats of
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  Speaker 1: tariffs from the Trump administration to put tariffs on incoming
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  Speaker 1: fish from China. So what does this all mean for
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  Speaker 1: the Alaska seafood industry. How is it going to affect things? Well,
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  Speaker 1: I would say that the first point is I don't
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  Speaker 1: think we really know because exactly how these tariffs are
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  Speaker 1: going to be implemented, both in China and in the
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  Speaker 1: US is really not clear. I think to to it's
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  Speaker 1: certainly not clear to me, and some people in the
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  Speaker 1: industry I've talked with are still very unclear. And as
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  Speaker 1: we indicated, probably we don't have a solid number, but
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  Speaker 1: probably uh that fish that's coming from Alaska, probably eight
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  Speaker 1: plus percent is going to be processed and re exported.
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  Speaker 1: Right now, China has the equivalent of free trade zones.
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  Speaker 1: Much of this fish flows in tariff free as long
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  Speaker 1: as then re exported, and I don't think the details
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  Speaker 1: of exactly how that arrangement is going to be affected
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  Speaker 1: by the call for a fiftcent tariff on US fish.
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  Speaker 1: I don't know if Alexa has a clear if she
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  Speaker 1: has heard people in the industry that have a clear
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  Speaker 1: sense of it. But the people I've talked to are
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  Speaker 1: very much we don't really know how this is going
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  Speaker 1: to affect us yet. I think that's true. I mean,
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  Speaker 1: certainly there are some impacts that we can imagine, we
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  Speaker 1: don't necessarily know the the scope and size of it. Um.
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  Speaker 1: I would also just say that you know, there's we're
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  Speaker 1: now talking about two different sets of tariffs, and the
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  Speaker 1: tariffs will hit different segments of the industry. So when
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  Speaker 1: we're talking about the tariffs that China has placed on
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  Speaker 1: top of US seafood going into the market, that's for
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  Speaker 1: domestic consumption. So that's going to hit companies that are
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  Speaker 1: really targeting the growing demand in China for imported seafood,
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  Speaker 1: which is tremendous, and that's going to impact the good
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  Speaker 1: work that companies have done and the good work that
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  Speaker 1: as ME has done over a number of years to
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  Speaker 1: develop a demand for Alaska seafood in China. So that's
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  Speaker 1: one piece of it. The second piece, then, is the
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  Speaker 1: proposed ten percent tariffs um the U s TR is
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  Speaker 1: proposing to place on goods coming back into the US
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  Speaker 1: from China, and that will really hit the reprocessing sector
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  Speaker 1: that we've talked about and would would basically be adding
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  Speaker 1: a tariff on US seafood coming back to US consumers
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  Speaker 1: from China. So ALEXA, with the tariffs, Alaska seafood exports
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  Speaker 1: have now gotten more expensive to one of its biggest buyers.
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  Speaker 1: What does that mean for Alaskan fisheries and fishermen and
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  Speaker 1: the people who deal with this every day. Well, I think,
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  Speaker 1: you know, I think the statement that it's sort of
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  Speaker 1: too soon to say how it would hit fishermen and processors,
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  Speaker 1: is accurate. Um, Certainly it's causing a lot of confusion.
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  Speaker 1: The tariffs are already causing headaches, some canceled orders, um,
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  Speaker 1: some companies rerouting products. You know, longer term, it's hard
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  Speaker 1: to say. Seafood pricing is so global and there's so
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  Speaker 1: many factors that impact it that it's it's really hard
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  Speaker 1: to say from point A to B it will increase
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  Speaker 1: pricing by this much. Um. Though certainly it could have
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  Speaker 1: an impact on pricing. You know, it will likely have
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  Speaker 1: an impact on where companies are sending their products and
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  Speaker 1: whether or not that trickles down to the fisherman. It
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  Speaker 1: it's really too soon to say at this point. But
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  Speaker 1: you know, certainly, in the heart of our salmon season
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  Speaker 1: in Alaska, having uncertainty is is not what anyone wants
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  Speaker 1: to hear. Ralph, I'm curious your thoughts on this. Have
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  Speaker 1: you ever seen any kind of trade war involving seafood
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  Speaker 1: in all your years studying the industry, And you also
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  Speaker 1: mentioned you were attending a conference on global fisheries. Is
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  Speaker 1: this a hot topic right now? Well, two things, Scott Scott.
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  Speaker 1: I'm only sixty seven years old, and I my entire
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  Speaker 1: life has been spent in the era in which we
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  Speaker 1: are lowering tariffs around the world. So this is a
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  Speaker 1: first in the lifetime for me, and I suspected is
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  Speaker 1: for most people who are living today. You have to
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  Speaker 1: go back almost a hundred years to see the kind
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  Speaker 1: of tariff change that this represents. In terms of the
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  Speaker 1: discussion at the meetings I'm currently at, certainly China was discussed,
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  Speaker 1: but it was really in this bigger context of look,
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  Speaker 1: China is not only a major market for fish because
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  Speaker 1: of its growing population and growing middle class, but also
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  Speaker 1: its role in this as the world's processor of fish
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  Speaker 1: and the importance that it has in the value chain.
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  Speaker 1: And it was really that long term discussion of China's
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  Speaker 1: crucial role to the future of seafood around the world,
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  Speaker 1: rather than the short on impact, which again because of
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  Speaker 1: as Alexa said, people just don't know exactly how that's
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  Speaker 1: going to play out. So in light of the recent tariffs,
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  Speaker 1: how feasible would it be for companies to move processing
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  Speaker 1: centers out of the tariff's line of fire. Well, certainly
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  Speaker 1: a lot of companies are looking at this and are
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  Speaker 1: sort of weighing different options. You know, there are other
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  Speaker 1: countries that do processing. Certainly there's some capacity in the US.
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  Speaker 1: Countries like Vietnam and Thailand are are pretty significant reprocessing
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  Speaker 1: centers for seafood. But realistically, there are not too many
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  Speaker 1: options to replace the capacity in China um for our
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  Speaker 1: products to be cut and repacked for consumers. We don't
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  Speaker 1: have that capacity or that labor force in Alaska. And
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  Speaker 1: then you know, looking at Vietnam and Thailand in places
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  Speaker 1: like that, shipping costs to those countries are higher than
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  Speaker 1: to China. And while there is a reprocessing sector, it's
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  Speaker 1: you know, it's been a little slow to grow and
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  Speaker 1: at this point cannot replace the volume that China does.
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  Speaker 1: And Ralph taking a broader perspective on Alaska's economy. Alaska's
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  Speaker 1: of course also known for the energy industry. And if
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  Speaker 1: this trade war widens, we we've had the President talking
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  Speaker 1: about how he's ready to uh start putting tariffs on
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  Speaker 1: all of the Chinese imports coming to America. I'm sure
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  Speaker 1: China would easily ratchet up too. Of American exports go
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  Speaker 1: to China. Does Alaska's economy stands take an even bigger
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  Speaker 1: hit if these tariffs start going on onto oil at
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  Speaker 1: gas Scott, would you mind if I back up and
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  Speaker 1: make a comment on the previous question about the ability
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  Speaker 1: to shift, because I think I think the point is
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  Speaker 1: if it became twenty or more expensive to process fish
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  Speaker 1: in China, over time, people would find alternatives, again expanding
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  Speaker 1: places like Thailand and Vietnam. But the bigger picture is
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  Speaker 1: China knows that China in the US are in the
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  Speaker 1: stage of of a trade war potentially where they're saying
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  Speaker 1: I'm willing to incur very big losses myself to retaliate,
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  Speaker 1: and you know that's not really the long run response,
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  Speaker 1: and the long run China is going to say what's
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  Speaker 1: in our economic long run interest, and it is not
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  Speaker 1: to impose a tariff on Alaska pollock and Alaskan salmon
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  Speaker 1: so that that fish goes to Thailand and Vietnam for processing.
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  Speaker 1: So I think this is very much like the rest
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  Speaker 1: of the trade discussions we're having. That is, how much
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  Speaker 1: of what's going on is posturing and what really happens
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  Speaker 1: in six months or a year is really unclear. And
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  Speaker 1: I actually from talking to people in the industry, I
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  Speaker 1: think there's an appreciation of that as well. And what
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  Speaker 1: about the bigger threat to Alaska's economy if you get
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  Speaker 1: oil and gas caught up in the trade war too. Well,
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  Speaker 1: there's two aspects. Oil prices of course a determine in
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  Speaker 1: a world market. It's a world commodity, and it's really
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  Speaker 1: very difficult to one country to impose attacks on a
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  Speaker 1: single country's oil exports because you'll simply shift oil markets
• 16:15
  Speaker 1: around the world. There could be an issue in Alaska
• 16:19
  Speaker 1: because Alaska is trying to build a liquefied national natural
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  Speaker 1: gas pipeline from the North Slope to a port in
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  Speaker 1: southern Alaska, and at present a primary partner in that
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  Speaker 1: is sinopek Uh, the Chinese energy company. And I'm sure
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  Speaker 1: that this concern that ratcheting up of tariffs on natural
• 16:43
  Speaker 1: gas in particular from Alaska would severely impact economics of
• 16:49
  Speaker 1: that project. All right, Well, this has been a really
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  Speaker 1: interesting discussion. Thank you for enlightening us about the seafood
• 16:56
  Speaker 1: industry in Alaska. Alexa Tonkovic of the Alaska See Food
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  Speaker 1: Marketing Institute and Ralph Townsend of the University of Alaska, Anchorage,
• 17:04
  Speaker 1: thanks for being with us on Benchmark. Thank you for
• 17:07
  Speaker 1: covering this Thanks very much for talking with us. Benchmark
• 17:14
  Speaker 1: will be back next week. Until then, you can find
• 17:16
  Speaker 1: us on the Bloomberg terminal, Bloomberg dot com, our Bloomberg app,
• 17:20
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• 17:24
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• 17:32
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