Alaska: Front Line in the Global Trade War

in the US and around the world. On this week's episode, we look at how Trump's tariffs on Chinese imports, along with China's retaliation, are threatening America's great northern frontier of Alaska, a state that happened to vote big for Trump and Republicans in Welcome to Benchmark. I'm Scott Landman, an economics editor with Bloomberg News in Washington. Joining me in our d C studio is Reid Picker, who's interning the summer

as a reporter with our US Economy team. She recently wrote about how Alaska's seafood industry is getting caught up in the trade war. Read thanks for joining us on the podcast. Glad to be here so read why did you look into this topic? I started looking into this topic originally because we had just received the list from China of the retaliatory tariffs on the thirty four billion dollars worth of Chinese goods that the US was putting

on their products. So when I was looking at this list, the first thing that I noticed, well, when I was reading the Google translated version, the first thing I noticed was the amount of seafood on this list. And then the next day, when I was on Twitter, I saw a tweet from Alaska Senator Lisa Murkowski on how the tariffs could impact the Alaska seafood industry, and the story was born. And when you were reporting it and looking into this, what struck you or surprised you the most?

I think what surprised me the most was the sheer size of the relationship between the Alaska seafood industry and China. So close to a billion dollars worth of Alaskan seafood goes to China each year, making up almost a third of all of the seafood exports from Alaska. And that was amazing, and it was a scale that I had

not anticipated. All Right, well, we're gonna find out more about those details from two guests who are based in Alaska and are highly knowledgeable about the state seafood industry and its importance to the economy there. On the phone with us from the state capital of Juno is Alexa Tonkovic. She's the executive director of the Alaska Seafood Marketing Institute.

It's a partnership between the industry and the state. And also on the line we have Ralph Townsend, an economics professor at the University of Alaska, Anchorage and director of the school's Institute of Social and Economic Research. Alexa and Ralph, thanks for joining us on Benchmark. Thank you happy to be here, very pleased to be here to talk about this important topic. So first, Alexa, we just heard a little bit about background on the seafood industry in Alaska

from read here. Can you tell us some more about the size of Alaska's seafood industry, how much it employs, how important it is to the state? Absolutely, um, the Alaska seafood industry is really a vital pillar of the state's economy. In for example, sixteen, we've produced five point six billion pounds, an x vessel value of one point seven billion, and a first wholesale value of four point two billion. It directly employs more workers than any other

private sector industry in Alaska. Sixty thousand people directly employed by the industry. Not counting multiplier effects, it's the third largest basic sector job creator after oil and gas. In the visitor industry and looking at national impacts, nationally a hundred thousand full time equivalent jobs, five point to billion and annual labor income and twelve point eight billion economic output.

So it's not only important for the state of Alaska, but I would argue important for the country overall and alexa. What are the main kinds of fish and seafood that come from Alaska's waters. Well, certainly we're well known worldwide for things like Alaska salmon, of which there are five different species. Were also known for crab king crab certainly gets a lot of publicity. Alaska also produces a ton

of whitefish. The largest fish by volume is Alaska pollock, which you have probably had in a fish sandwich or in fish sticks or fish tacos. We produce flatfish, We have hall of it, we have black cod, sable fish, multiple species of crab cod. It's really there's a lot of variety. There's also a lot of more specialty products like row scallops, s cucumber, gooey duck. The list kind of goes on and on and Ralph, I know that you've studied fisheries and seafood for a long long time.

Can you put into context Alaska seafood industry with other parts of the or the United States or or the rest of the world. Well, in terms of the United States, Alaska is far and away the most seafood dependent economy in the nation. Uh no state would come close to the significance. And Alexa just outlined the size of the fishing economy in Alaska, and it's it's simply in many of the states, fishing is visible, it's something that people know is there. But in Alaska it is a base

industry in the economy. So can you tell us about how it's processed in other countries like China and then sent back to the US or to other countries. Yeah, Well, China is our largest trading partner and it's also a

major reprocessing sector. So a lot of the seafood that goes from Alaska to China is say, headed, gutted, frozen, and then is subject to further reprocessing in China, turned into file AT's turned into a retail product, some kind of value you added processing, and then it is sometimes consumed in the China market, but it is often consumed outside of China, so it's reprocessed in China and then re exported either to Japan, to the EU, or back

to the US. And partly that's just because of the processing capacity and the labor that China has um that they can provide that many other countries cannot. So, Ralph, is this a more recent phenomenon, something that's happened in the last few years, or or has it been kind of a few decades. How would you how would you put that into perspective? The first thing I would know

it is at a very high level. It's interesting that China is both the largest importer of fish from the US and China is also the largest exporter of fish to the US, and that reflects what Alexa was referring to, this very large volume of fish that flows to China for processing and then is returned all over the world, but including the United States. I'm not really sure the timing of this. This is something that certainly occurred over

the last two to three decades. It's not something that happened overnight, but certainly it's not that is not something that would have been the case in the seventies of the eighties. I lived in China for a few years and there's definitely a large demand for seafood there, and uh I could see it myself and understand the relevance of the industry. But we we've also just established that, you know, we've talked about how the seafood industry is very big for Alaska. It's it's you know, far bigger

than anywhere else in the United States. There's the reprocessing that goes on. Chinese the biggest importer and exporter of the seafood, as you mentioned. And now we have these tariffs, like Reed was talking about, we get this you know, big list in Chinese of all the products that are going to be subject to tariffs, and there's a lot of seafood on there. Senator Murkowski is tweeting about it.

And now just recently we've had some more threats of tariffs from the Trump administration to put tariffs on incoming fish from China. So what does this all mean for the Alaska seafood industry. How is it going to affect things? Well, I would say that the first point is I don't think we really know because exactly how these tariffs are going to be implemented, both in China and in the US is really not clear. I think to to it's certainly not clear to me, and some people in the

industry I've talked with are still very unclear. And as we indicated, probably we don't have a solid number, but probably uh that fish that's coming from Alaska, probably eight plus percent is going to be processed and re exported. Right now, China has the equivalent of free trade zones. Much of this fish flows in tariff free as long as then re exported, and I don't think the details of exactly how that arrangement is going to be affected by the call for a fiftcent tariff on US fish.

I don't know if Alexa has a clear if she has heard people in the industry that have a clear sense of it. But the people I've talked to are very much we don't really know how this is going to affect us yet. I think that's true. I mean, certainly there are some impacts that we can imagine, we don't necessarily know the the scope and size of it. Um. I would also just say that you know, there's we're now talking about two different sets of tariffs, and the

tariffs will hit different segments of the industry. So when we're talking about the tariffs that China has placed on top of US seafood going into the market, that's for domestic consumption. So that's going to hit companies that are really targeting the growing demand in China for imported seafood, which is tremendous, and that's going to impact the good work that companies have done and the good work that as ME has done over a number of years to

develop a demand for Alaska seafood in China. So that's one piece of it. The second piece, then, is the proposed ten percent tariffs um the U s TR is proposing to place on goods coming back into the US from China, and that will really hit the reprocessing sector that we've talked about and would would basically be adding a tariff on US seafood coming back to US consumers from China. So ALEXA, with the tariffs, Alaska seafood exports have now gotten more expensive to one of its biggest buyers.

What does that mean for Alaskan fisheries and fishermen and the people who deal with this every day. Well, I think, you know, I think the statement that it's sort of too soon to say how it would hit fishermen and processors, is accurate. Um, Certainly it's causing a lot of confusion. The tariffs are already causing headaches, some canceled orders, um, some companies rerouting products. You know, longer term, it's hard

to say. Seafood pricing is so global and there's so many factors that impact it that it's it's really hard to say from point A to B it will increase pricing by this much. Um. Though certainly it could have an impact on pricing. You know, it will likely have an impact on where companies are sending their products and whether or not that trickles down to the fisherman. It

it's really too soon to say at this point. But you know, certainly, in the heart of our salmon season in Alaska, having uncertainty is is not what anyone wants to hear. Ralph, I'm curious your thoughts on this. Have you ever seen any kind of trade war involving seafood in all your years studying the industry, And you also mentioned you were attending a conference on global fisheries. Is this a hot topic right now? Well, two things, Scott Scott.

I'm only sixty seven years old, and I my entire life has been spent in the era in which we are lowering tariffs around the world. So this is a first in the lifetime for me, and I suspected is for most people who are living today. You have to go back almost a hundred years to see the kind

of tariff change that this represents. In terms of the discussion at the meetings I'm currently at, certainly China was discussed, but it was really in this bigger context of look, China is not only a major market for fish because of its growing population and growing middle class, but also its role in this as the world's processor of fish and the importance that it has in the value chain.

And it was really that long term discussion of China's crucial role to the future of seafood around the world, rather than the short on impact, which again because of as Alexa said, people just don't know exactly how that's going to play out. So in light of the recent tariffs, how feasible would it be for companies to move processing centers out of the tariff's line of fire. Well, certainly a lot of companies are looking at this and are

sort of weighing different options. You know, there are other countries that do processing. Certainly there's some capacity in the US. Countries like Vietnam and Thailand are are pretty significant reprocessing centers for seafood. But realistically, there are not too many options to replace the capacity in China um for our products to be cut and repacked for consumers. We don't

have that capacity or that labor force in Alaska. And then you know, looking at Vietnam and Thailand in places like that, shipping costs to those countries are higher than to China. And while there is a reprocessing sector, it's you know, it's been a little slow to grow and at this point cannot replace the volume that China does. And Ralph taking a broader perspective on Alaska's economy. Alaska's

of course also known for the energy industry. And if this trade war widens, we we've had the President talking about how he's ready to uh start putting tariffs on all of the Chinese imports coming to America. I'm sure China would easily ratchet up too. Of American exports go

to China. Does Alaska's economy stands take an even bigger hit if these tariffs start going on onto oil at gas Scott, would you mind if I back up and make a comment on the previous question about the ability to shift, because I think I think the point is if it became twenty or more expensive to process fish in China, over time, people would find alternatives, again expanding

places like Thailand and Vietnam. But the bigger picture is China knows that China in the US are in the stage of of a trade war potentially where they're saying I'm willing to incur very big losses myself to retaliate, and you know that's not really the long run response, and the long run China is going to say what's in our economic long run interest, and it is not to impose a tariff on Alaska pollock and Alaskan salmon so that that fish goes to Thailand and Vietnam for processing.

So I think this is very much like the rest of the trade discussions we're having. That is, how much of what's going on is posturing and what really happens in six months or a year is really unclear. And I actually from talking to people in the industry, I think there's an appreciation of that as well. And what about the bigger threat to Alaska's economy if you get oil and gas caught up in the trade war too. Well, there's two aspects. Oil prices of course a determine in

a world market. It's a world commodity, and it's really very difficult to one country to impose attacks on a single country's oil exports because you'll simply shift oil markets around the world. There could be an issue in Alaska because Alaska is trying to build a liquefied national natural gas pipeline from the North Slope to a port in southern Alaska, and at present a primary partner in that

is sinopek Uh, the Chinese energy company. And I'm sure that this concern that ratcheting up of tariffs on natural gas in particular from Alaska would severely impact economics of that project. All right, Well, this has been a really interesting discussion. Thank you for enlightening us about the seafood industry in Alaska. Alexa Tonkovic of the Alaska See Food Marketing Institute and Ralph Townsend of the University of Alaska, Anchorage, thanks for being with us on Benchmark. Thank you for

covering this Thanks very much for talking with us. Benchmark will be back next week. Until then, you can find us on the Bloomberg terminal, Bloomberg dot com, our Bloomberg app, as well as podcast destinations such as Apple Podcasts, Spotify, or wherever you listen. We'd love it if you took the time to rate and review the show so more listeners can find us, and you can find us on Twitter, follow me at scott landman Feed, You are at at R E A D E P. And Alex's Alaska Seafood

Marketing Institute is at Alaska Underscore Seat Food. Benchmark is produced by tofor Ford. HEAs the head of Bloomberg Podcast is Francesca Levy. Thanks for listening, See you next time.