One of the last regions settled en masse by Europeans, California’s trajectory long has been linked to its partners across the Pacific. Yet these ties could be deeply impacted by President Trump’s immigration and global trade policies, as well as resulting blowback by the authoritarian regime in Beijing.
In recent decades, California has become something of a China junkie. With China on the route to what some predict will be hegemonic power, there’s a set who eagerly wish to promote the idea of “Chinafornia.” The pattern of dependency can be seen in how our industries depend on China for their production. For some companies, like Apple, China provided the capacity to produce products cheaply without suffering heavy GHG impacts in state. China’s coal-based pollution allowed these congenitally “virtue signaling” firms to retain their “green” street cred.
Yet as a trade war looms, California could find itself without key markets, investment capital and sources of supply for its increasingly de-industrialized economy. Any reduction in immigration, and related investment flows, could dent real estate values, particularly in such speculator-driven markets as Irvine, downtown Los Angeles and Koreatown. There could be political ramifications as well given the close ties between China and California officials, including an alleged spy working as a driver for Sen. Dianne Feinstein.
California’s historic trade ties
Asia has always been a kind of ace in the hole for California. The state’s economic emergence in the early 1900s was tied directly to rising trade with Japan, China and the country’s new imperial outpost, the Philippines. These connections, wrote the Los Angeles-based journalist Harry Carr, changed our region from “a hick town” and turned it “into a city.”
Of course, some of our early entanglement with the Pacific was profoundly oppositional. Deep-seated fears of Asian immigrants engendered harsh racial restrictions, including bans on property ownership. The massive buildup against Japan during the Second World War sent tens of thousands of Japanese residents, including citizens, to concentration camps, but also initiated the region’s first great wave of industrialization.
Since the war California has benefited from its Asia ties in generally more positive ways. Asian importers, such as car companies, tended to use the Port of Los Angeles and set up their local headquarters here. Investors, particularly from Japan in the 1980s, buoyed the state property market. New immigrants from China, Korea, south Asia and Vietnam brought a tremendous work and entrepreneurial ethos to the state, helping to revitalize communities from the San Fernando and San Gabriel valleys to wide swaths of Orange County.
The challenge of Trump
Over the past half century, both parties have tended to be friendly both to globalization. Yet now the state’s establishment is being rocked by Trump’s assault on both generous immigration policies and China’s unfair trading practices. China’s mercantilism alone has been linked by labor-aligned groups with the loss of millions of jobs. There’s a stark class division here; the upper classes have largely benefited while many higher-wage job opportunities for middle- and working-class Californians have disappeared.
The current Trumpian policies could change this, forcing companies to rely more on citizen workers and local capital. Silicon Valley tech firms, now dependent for 40 percent of its workforce on largely Asian imports, will have to compete for domestic labor with regions and companies that operate in more reasonably priced markets. This could benefit local workers and sub-contracting firms.
To be sure, some California exporters — notably in the Central Valley, Hollywood and Silicon Valley — could find some markets shut off to them. Yet, in the longer run, China will likely suffer more in a trade war, given its almost four times larger volume of exports than come from the U.S., weaker domestic markets and massive indebtedness. Trump’s approach could force it to compromise on key trade issues in ways that benefit our exporters.
Can we benefit from the new reality?
Given the extraordinary anti-Trump mood in the state, it may seem discordant to see any good in Washington’s trade stance. California is home to nearly 40 percent of all Chinese home purchases in the U.S. These investors are one primary cause for the insane property-price inflation that has effectively chased young American families from the state. Would it be a tragic loss to lose the capital expended by non-resident foreigners who buy property largely as a kind of safe deposit box? Some two-fifths of these investors, according to a one real estate study, do not intend to live in their homes.
Policies discouraging shifts of work to China also could help reorient our business from just originating ideas to making products. This could prove a potential boon to the state’s suffering working class and for the environment, by shifting production to relatively clean California from coal-dependent China.
We are right to be offended by the xenophobia associated with the Trump policies. But if a crisis in Chinafornia spurs the state to think about decreasing our dependence on China, perhaps we can begin to promote development that helps not just speculators, investors and oligarchs, but ordinary Californians.
This article first appeared in The Orange County Register.
Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.