US-China trade war may cut Los Angeles’ economic growth to zero, mayor Eric Garcetti warns during Hong Kong trip

As many as 200,000 jobs could be lost at two vital ports, with an expected 20 per cent drop in cargo, though mayor gives assurance that city’s economy is strong enough to weather the blow

PUBLISHED : Wednesday, 01 August, 2018, 12:15am
UPDATED : Wednesday, 01 August, 2018, 11:23am

Los Angeles’ economic growth could drop to a meagre zero-to-1 per cent in a “stupid” full-blown trade war, mayor Eric Garcetti warned on Tuesday, adding he expected a 20 per cent drop in cargo at the two southern California ports that are crucial entry points for Chinese goods to the United States.

The Port of Los Angeles, along with the adjoining Port of Long Beach, are vital to the city’s economy, and an all-out US-China trade war could result in the loss of as many as 200,000 jobs at the two ports, he said.

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“We can absolutely see loss of jobs, reduction of hours, and the trimming of wages. These are real effects on real people,” he told the Post during his visit to Hong Kong.

“There will be families in Los Angeles who will not be able to feed their children because there will be less hours at the dock. There will be construction workers who don’t have as much money to take home.”

Washington fired the opening salvo of a trade war between the world’s two largest economies when it placed a 25 per cent tariff on US$34 billion worth of Chinese goods in early July.

China responded with its own 25 per cent duty on the same amount of US imports. About two weeks ago, US President Donald Trump threatened to impose tariffs on all US$500 billion of imported goods from China.

Los Angeles is the busiest US container port and the No 1 hub for ocean trade with China. The port handled US$284 billion worth of goods last year, including US$145 billion with China.

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In the event of a full-blown trade war, Garcetti said the city’s GDP growth could be slowed to zero or just 1 per cent, whereas it could be 5 to 6 per cent without a trade dispute.

GDP growth for Los Angeles was 3.2 per cent last year over 2016.

Despite his warning on job losses and slower GDP growth, Garcetti said the Los Angeles economy was “strong enough to weather any trade wars or any conflicts with China”.

“We would be sad to lose Chinese investments, sad to lose Chinese tourists and students. But that’s not a reason to say OK to a stupid trade war we could maybe prevent.”

He said the trade war had had a ripple effect on the construction industry, as the price for Chinese steels increases. Plans to build 15 transit lines – light rails, bus ways and undergrounds – had been delayed, he added.

The mayor said there had been a slight downturn in Chinese investment in Los Angeles in certain sectors, such as real estate, but not in the technology industry.

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Despite the decline, the level of Chinese investment in the city was still higher than it was three or four years ago, he said.

Garcetti, a member of the Democratic Party, confirmed he was considering running for US president and would make a decision next year.

“I would love to continue being mayor of LA, but … I am troubled about what he has done to deteriorate our reputation and our engagement in the world,” he said, referring to Trump. “He is long on promises, but short on delivering them.”

On how the US should deal with China, he said both countries must engage in frank and honest dialogue.

“My policy would be to engage, to refresh the conversations. There are a lot of old and unfair rules that exist on trade,” he said.

What frustrates me about this administration is that it shoots first and asks questions later
Eric Garcetti, mayor of Los Angeles

“What frustrates me about this administration is that it shoots first and asks questions later. I think you have to ask questions first, and if things deteriorate, then you can take it from there.”

But he also said that China can no longer say that it is still a developing country, as it has already transformed into a global superpower.

“Trade war is an outcome, you need both sides to get along to avoid it,” he said. “I am not scared of ratcheting things up, to represent my country, if I think there is something unfair. But I start with a belief in trust, engagement, and inviting people to the table.”

Last year, a record 1.1 million Chinese tourists visited Los Angeles, up 6 per cent from the previous year. Garcetti hoped the growth would continue.

“Chinese love LA. I want them to see and share LA,” he said. “They spend a good amount of money there, sometimes double what other overseas travellers spend.”

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He continued: “It’s good for our economy, and it’s good for jobs. If people become anti-America in China, we would feel it.”

The mayor was in Hong Kong as part of a 10-day trade mission, having visited Japan, South Korea and Vietnam already.

“Hong Kong is a place where we feel at home because of the diversity, the openness, the innovation,” he said during a panel discussion on Tuesday with US business leaders who accompanied him on the trip.

Garcetti, who has been a vocal critic of Trump’s decision to pull out of the Paris climate accord, said the world needed Beijing to fight against global warming as China was the leader in carbon dioxide emissions.

He added that Los Angeles cut emissions by 11 per cent last year while creating more jobs at the same time.

“No presidents can tell us to stop,” he added.