BISMARCK - Amid a multi-fronted fight over international trade in the United States, experts said the effect on North Dakota's overall economy and government revenue may be hard to pinpoint.
Farmers and business leaders have expressed worry over President Donald Trump's trade moves, including an escalating trade war with China as well as tariffs on steel and aluminum. On Monday, Trump put in place tariffs on another $200 billion worth of Chinese goods, triggering Chinese retaliatory tariffs on $60 billion of American products, the Washington Post reported.
Meanwhile, negotiations over the North American Free Trade Agreement remained in limbo, as it remained unclear whether Canada would be included in a deal with Mexico.
David Flynn, chairman of the economics department at the University of North Dakota, said North Dakota is particularly vulnerable because of its reliance on trade with Canada, Mexico and China.
"We're a state that should be very, very concerned about it," he said.
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But Flynn said it's unknown what new trade deals will look like, noting those agreements are "incredibly complicated documents" that have varying effects on different industries.
Goods exports accounted for 10.5 percent of North Dakota's gross domestic product in 2017, when the state exported a record $5.8 billion, according to the Office of the U.S. Trade Representative. It is the country's seventh-largest agricultural exporting state, the office said.
But North Dakota agricultural producers are facing rising costs and dampened export opportunities thanks to tariffs, or taxes on imports, Flynn said.
"The outcomes there can be very negative for what is one of the key sectors for the state economy," he said.
Still, Creighton University's Mid-America Business Conditions Index, which covers a nine-state region that includes North Dakota, touted some recent positive news for the state's economy. It said earlier this month that North Dakota's index climbed to 76 in August from 69.6 in July - the scale ranges from zero to 100.
Ernie Goss, director of the university's economic forecasting group, said in a statement at the time that tariffs, trade restrictions and rising short-term interest rates would "slow regional growth to a more modest, but still positive pace, in the months ahead."
Meanwhile, taxable sales and purchases in North Dakota jumped by about 9.5 percent in the second quarter of 2018 over that same period last year, Tax Commissioner Ryan Rauschenberger's office said this month, marking the fifth straight quarter of growth. But the U.S. and China didn't exchange their first tariffs until July, after the quarter ended.
Rauschenberger, a Republican, said it would be "really difficult to pinpoint" any direct effects of tariffs in tax collection data. He said complete farm income data for calendar year 2018 won't be available for another year.
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Joe Morrissette, the director of the Office of Management and Budget, said "it was just too early" to predict the effects of trade disruption on future state revenues.
"Some of the negative impact will be mitigated by federal payments to ag producers," he said in an email. "The general assumption was that the impact is likely to be short-term."
A recent OMB forecast predicted revenues for the 2019-21 biennium, excluding oil taxes and transfers, would total $3.38 billion, 4.8 percent higher than what's projected for the current two-year budget cycle. Gov. Doug Burgum has called for budget cuts and a "conservative approach to spending."
Another forecast presented to state lawmakers this month warned that "trade wars are a risk" to the U.S. economy.
Jim Diffley, an economist for IHS Markit, a consulting firm lawmakers hired last year, said "a lot of activity in North Dakota depends upon derived demand from the rest of the U.S." But he said it's too early to say what effect recent trade moves have had on the overall economy.
"Economists are generally very worried about things like tariffs because they disrupt normal functioning of the economy," he said. "But the effects are very complex."
