By Lucinda Shen
April 23, 2018

In retaliation to President Donald Trump’s proposed duties against Chinese imports, Beijing sought to hit back at the president’s voter base: announcing an equal dollar-figure of tariffs earlier this month on a list of 128 products including soybeans and pork.

To some extent, it’s already making its mark.

While U.S. officials emphasize that the tit-for-tat tariff announcements won’t devolve into a full-on U.S.-Sino trade war that leaves both nations worse off, the uncertainty dampening job creation in the U.S.—particularly in states that voted red during the 2016 presidential elections, says Torsten Sløk, chief international economist at Deutsche Bank Securities.

And that trend is not likely to stop.

“States which are impacted by trade war uncertainty have in recent months been accounting for a smaller share of total job growth,” Sløk wrote in a note to clients Monday. “The bottom line is that continued corporate uncertainty about (expenses and demand) is likely to weigh on job growth going forward.”

Deutsche Bank breaks down the impact of tariffs on U.S. states, many of which voted for Trump.

Sløk’s analysis comes after a surprisingly poor month for U.S. job creation. Non-farm payrolls—a figure that excludes jobs in the farming sector, as positions there are often seasonal—rose 103,000 in March. Economists had been expecting companies to be more open to hiring that month—a rise of about 193,000.

Looking into the numbers over a longer time frame, Sløk found that as trade war fears grew, a shrinking percentage of new jobs came from states that would be most impacted by the trade war.

Economists have also pegged the shortfall to poor weather in the month of March, when a string of Nor’easters swept through the country, grounding flights and forcing governments to pause operations.

Still, Sløk’s numbers do still point to a trend that has lasted longer than just March. The numbers point to months that have been tougher on several of the states that voted for Trump—an effect that is likely intended by Beijing. China appears to target Trump’s most visible voting base in the U.S., a group that includes farmers and steel workers, in a bid to strengthen its own negotiating power, says Gary Hufbauer of the Peterson Institute for Economics.

Roughly 67% of states that are most impacted by the tariffs, according to Sløk, are those that voted for Trump. Sløk defines the most impacted states as those that export the most soybeans (due to the 25% Chinese tariff on U.S. imported soybeans), or import the most steel, aluminum, cars, and airplanes (as Trump announced a 25% tariff on aluminum and and 10% on steel, which are in turn, used in cars and airplanes.)

As trade war fears continue, the Chinese and U.S. governments vacillate between inflammatory rhetoric and more calming ones. Meanwhile, Trump is still weighing another $100 billion in tariffs on Chinese imports.

Most recently, U.S. Treasury Secretary Steven Mnuchin said Saturday that he may seek to travel to China and negotiate with officials there on the topic.

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