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Alexendar Heil Talks “Path to a Trade War” at Newark CRE Summit

Aug 8, 2018
by Josh Anderson

NEWARK, NJ — The ongoing headlines about the “trade war” the US is embroiled in – specifically with regards to China — is a major part of any economic outlook, it may not have the exact impact you expect. Just ask Dr. Alexander Heil, Chief Economist in the Planning and Regional Development Department of the Port Authority of New York and New Jersey, who was the Keynote Speaker at CapRE’s 2018 Newark CRE Summit. A large part of Heil’s presentation honed in on what the rising tariffs mean for the global economy. Below we highlight the first half of Heil’s “Path to a Trade War” discussion, drawing on the slide below.

“There is a lot of talk going on about trade wars. Why are we getting into a trade war, when did we get into a trade war, how do we get into a trade war?” he asked the room of attendees. “You’ll find that there are several steps to get there. It seemed that it actually happened fifteen years ago. But it wasn’t actually that far in the past.”

Alexander Heil, Chief Economist in the Planning and Regional Development Department of the Port Authority of New York and New Jersey

“So we had tariffs on solar panels and washing machines. That seems like a distant memory, but there actually were already plenty of tariffs imposed on solar panels and washing machines that already existed – there were plenty of them in 2014, the claim made was that there was unfair competitions for domestic producers,” Heil continued.

What happened next, according to Heil, is that the U.S. imposed a tariff — but that was just the first step. “We had the first retaliatory action and then that expanded into steel and aluminum – 25% and 10% respectively on those products,” he explained. “And then there was retaliation by European countries, and Canada imposed retaliatory tariffs as well. We then retaliated further, with step three, which then escalated further into now a much broader range – 1300+ of Chinese important products that are now going to be hit with import tariffs.”

“I think of now as of right now, $34.2 Billion is the current state of affairs of the $50 Billion of tariffs have been imposed on Chinese imported goods,” surmised Heil. “There are now retaliatory tariffs that are happening and coming from the other side – we’ve all read about Harley Davidson, whose motorcycles are being sold in Europe. The tariff being added adds $2200 USD to the price of a Harley Davidson in Europe, which if you think about it, that’s a significant increase in the sticker price of a motorcycle, for a new customer. That’s meaningful and it’s significant.”

“So as part of my step three here, for what’s a trade war, there are now discussions about what is a much broader application of trade tariffs, talking not only in the $50 Billion USD range, but now we’re talking in the several hundred billion dollar range – perhaps $400 Billion USD or $500 Billion USD in Chinese imports,” Heil revealed.

“There is this whole notion about how business practices in China – and there is a fair point about intellectual property rights and how they’re treated in China – and what U.S. companies have to go through to be able to operate in China,” shared Heil. “And some of these have counter-intuitive outcomes and results – for example if China were to behave and allow a lot of those companies to operate more directly and without restrictions, it may actually lead to more U.S. employment moving overseas, rather than less, so we should think about how some of these incentives are structured. Again, we are talking about hundreds of billions of products being subject to tariffs and at that point, the consequences for the economy are pretty severe…”

Continue the New Jersey conversation. Check out our upcoming events. For more from Heil, check out previous CapRE Insider Reports:

Dr. Alexander Heil is the Chief Economist in the Planning and Regional Development Department of the Port Authority of New York and New Jersey. As Chief Economist, Dr. Heil provides strategic leadership on regional economic issues to the agency. He is responsible for developing and managing the agency’s economic research and analysis agenda, helping to ensure that the agency’s major investment and policy decisions are informed by sound economic principles and analysis, and increasing awareness of the region as a unified economic entity by regional governmental, business, and civic leaders.

 

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