In the State of the Union on Tuesday, President Donald Trump is expected to address his use of tariffs, which have unleashed a devastating trade war with China, targeting a total of $360 billion worth of goods between the two countries. In his 2018 address, Trump called for “trading relationships to be fair and to be reciprocal,” promising that Americans would finally get theirs. Instead, Trump’s desire to end intellectual property theft and reduce the trade deficit with China has harmed United States businesses and angered Midwestern farmers, traditionally a Trump stronghold.
This year, when the president takes the floor in the House Chamber, a group of farmers will be listening closely. Tom Mueller, a family farmer from Edgington, Illinois, was invited by Representative Cheri Bustos (D-Illinois). “The reckless trade policies coming from the White House seriously threaten the future of family farms like mine,” he said in a statement Monday. “I’m afraid the president’s trade war has lost markets for us long-term.”
Others will join on Wednesday: A coalition of more than 100 farmers, retailers, and manufacturers will call for congressional oversight on tariffs and an end to the trade war, Politico reports. The group’s spokesman, former Congressman Charles Boustany, has called the tariffs “crippling” for the industry.
Trade negotiators are now up against a March 2nd deadline, when U.S. tariffs on Chinese goods would increase, a move that economists predict could do even more damage. In his address on Tuesday, Trump is likely to claim that his aggressive strategy has already benefited trade policy, the New York Times reports. But the state of the trade war indicates otherwise.
The First Casualties of the Trade War: Soybeans
The trade war began when the Trump administration, seeking to punish China for its trade practices, placed tariffs on Chinese solar panels and washing machines. As tensions escalated, the administration used national security to justify further tariffs on steel and aluminum from China and other nations. China retaliated by targeting more than 600 products, including cotton, wheat, dairy, wine, fruits, nuts, soybeans, and pork.
Although the tariffs were intended to put pressure on the Chinese economy, American farmers have felt the bulk of the pain. China is the world’s largest importer of soybeans, and, for years, the U.S. was its biggest supplier. (American farmers exported 60 percent of their soybean crop to China in 2017.)
That changed in 2018, when the news of the tariffs sent prices for soybeans, corn, wheat, and other commodities plummeting: American exports of products targeted for retaliation are down 37 percent. Pistachio farmers alone have lost $380 million in revenue, and soybean prices hit a 10-year low last summer, according to the bipartisan non-profit Farmers for Free Trade, which has mobilized against Trump’s tariffs. Now, the Farm Bureau predicts that China, once the second-largest market for $19.6 billion in U.S. agricultural goods, could drop to the fifth-largest in 2019.
Bankruptcies in Trump Country
Farmers are already feeling the effects: The Star Tribune reports that 84 Midwestern farmers filed for bankruptcy over a 12-month period ending in June of 2018, more than double previous years—with more yet to come, according to the Federal Reserve Bank of Minneapolis.
As the trade war has dragged on, farmers also faced the possibility of China pivoting to South American producers, introducing demand problems that could set the industry back years. One analysis found that further changes in trade policy could harm both countries, while giving an economic boon to the U.S.’s soybean rival, Brazil. In the face of this threat, industry representatives argue that neither China’s recent promise to buy more soybeans, nor the $12 billion from the Trump administration in emergency relief, has been enough to solve this problem.
“If the trade conflict with China continues much longer, it will likely leave lasting scars on the entire agricultural sector as well as the overall U.S. economy,” Amanda Countryman, an associate professor of agricultural economics at Colorado State University, wrote for the Conversation in 2018.
Consumers Could Be Next
Consumers have been insulated from most of the pain so far, but a newer round of tariffs, which went into effect in September of 2018, targeted goods that will affect American consumers directly. According to a report from the Peterson Institute for International Economics, Trump’s tariffs on $200 billion of Chinese imports could include household and consumer goods like computers and furniture. An analysis from the National Taxpayers Union Foundation, a conservative advocacy group, put the total net cost of the administration’s trade taxes at $132.55 billion for the year, noting that this “easily surpasses the annual burden imposed by Obamacare’s taxes.”
Research shows that reducing trade barriers has a disproportionate impact on low- and middle-income households, which devote a larger proportion of their income to consumer goods. If the White House doesn’t make progress on trade talks, experts warn, everyday Americans will bear the costs.
