Louisiana businesses scrambled Thursday to understand the impact of President Donald Trump’s swept new tariffs on the state and its industry, many supported it because of higher prices and the uncertainty that the trade war could bring.
Trump said Wednesday that he has placed 10% of all import duties on the whole US and that he has a significantly higher obligation to import from many trading partners, including a 34% tariff on China and a 20% tariff from the European Union.
Administration officials and Republicans from the Louisiana Legislature delegation argued that tariffs would lead to increased trade transactions and increase domestic production over the long term. Economists say new tariffs are likely to raise the price of American goods by thousands of dollars each year, whilst slowing the US economy.
In Louisiana, industry groups, large and small, and small businesses, were enduring potential tumultuous changes. Car dealers, home builders, restaurants and even coffee roasters expect consumer prices to be high. There are some fears that large-scale industrial projects in the state could stall as raw materials costs skyrocket and demand for petrochemicals and other materials rises.
As the stock market fell in response to Trump’s announcement, Bob Arceneau, owner of Orleans Coffee, a special bean wholesale roaster based in New Orleans, thought about what the price of raw beans imported from Brazil, Colombia, East Africa and “all countries in Central America.”
“No one is immune to this,” Arcenu said. “Starbucks is planning to raise prices. McDonald’s is planning to raise prices.”
Energy sector concerns
No one knows the complete impact of the latest tariffs on Louisiana’s economy. However, an analysis from the Federal Reserve Bank of Dallas in 2018 estimates that Louisiana, a leading exporter of sophisticated products and a concentrated concentration of petrochemical plants and other capital-intensive industries, could see a 7% decline in total state products if a trade war is violated between the US and China.
Greg Upton, executive director of LSU’s Center for Energy Research, said the new tariffs are likely to have a significant impact on investment in Louisiana’s energy sector.
The US produces more energy than it needs in the country, and relies on foreign markets to buy fuels, chemicals, plastics, fertilizers, and other products manufactured with an excess supply of it. Many of these exports come from Louisiana.
“What’s probably going to happen is that other countries will follow the tariffs on the products we’re exporting,” Upton said.
As of December, businesses had announced new investments worth around $116 billion in Louisiana’s energy manufacturing sector to support these exports. However, Upton said he hopes these projects will stall.
“I think this kind of international trade and tariff uncertainty will definitely affect delaying investments that are being made,” Upton said.
Additionally, it is unclear how new taxes on steel and other imports will affect the cost of materials needed to build these new plants, Upton said.
Chance to lead the “manufacturing renaissance”
Louisiana officials said they hope that recent investment victory will last despite tariffs. Economic Development Secretary Susan Bourgeois said the policies of both Trump and Gov. Jeff Landry “lead Louisiana to a string of economic victories.”
She pointed to Hyundai’s recent announcement that it plans to build a $5.8 billion steel factory in Ascension Parish.
“Louisiana is important for the successful American manufacturing renaissance,” Bourgeois said. “We believe that decisions that are good for the long-term strength of the American economy are good for Louisiana’s prosperity.”
Republican U.S. Sen. John Kennedy reflected bourgeois points on future economic growth, but provided a note in an interview with CNN on Thursday.
“In the long run, he’s right,” Kennedy said regarding Trump’s desire to change the balance of global trade. “But… in the long run, we’re all dead. Short-term issues are important too. No one knows how the impact of these tariffs will affect the economy.”
A spokesman for the Louisiana Business Industry Association declined to comment, noting that he was holding a meeting with members this week to get feedback on new trade policies. The Port of New Orleans said it is closely monitoring the situation.
“We will continue to work with our customers and partners to adapt to market changes and meet supply chain needs,” said Port Nora spokesman Kimberly Cars.
Braces for impact
Other industry leaders in the state were hoping for potential impact. Stan Harris, president and CEO of the Louisiana Restaurant Association, said Trump’s tariffs will raise costs “over a wide range of items.” Dan Mills, CEO of the Greater New Orleans Home Builders Association, said tariffs would make building homes more expensive when the country faces a severe shortage of housing.
He said industry lobbyists are trying to convince the Trump administration to issue sculptures for home builders on items like electric transformers.
The new tariffs will be in addition to the previous announcement of a 25% tax on automobile imports that came into effect overnight on Wednesday.
Troy Duhon, the largest Louisiana-based car dealer, said there’s no doubt that prices are about to rise sharply with 39 dealers in eight states.
“In 30 days, the price will rise from 4% to 15%, depending on the vehicle,” Duhon said.
“The administration has dropped an atomic bomb on the industry,” he added.
Staff writer Anthony McAuley and the Associated Press contributed to this report.
