A second Trump trade war, but on steroids?
A new report should alarm our compliant state leaders
Iowa’s Republican leaders proved years ago they’d abandon their free trade credentials to please Donald Trump.
In 2018, they bit their lips when Trump launched a trade war against China and other countries that led to US soybean exports plummeting. And last year, they kept their mouths shut when Trump proposed a trade agenda that included a universal baseline tariff on all imports.
The plan’s implications were so stark that one Republican farm state lawmaker, who was not identified, described it as “f…g suicide for rural communities.”
So, it’s not surprising we didn’t hear a peep last week when the Washington Post reported that Trump is considering imposing a 60% tariff on all Chinese imports if he’s re-elected.
That would be five times the current average rate.
Those who pay close attention to trade—and who don’t have to placate MAGA to get re-elected or further their careers—are stunned.
“Tariff of Abominations Redux,” read the headline on a Tax Foundation article.
Such a huge tariff, the article said, would upend business relationships with suppliers, divert trade flows to get around the tariffs and impose “immense” costs on people in the US and China.
It would also likely mean “closing” the export market for a lot of American products, including agriculture. The article concluded: “It would be an abomination.”
A columnist at Bloomberg said the Trump plan would be a fiscal disaster.
The Trump strategy apparently is to ratchet up the pain on China with punishing tariffs to force it to change its ways.
He tried that in his first term.
Free traders say it was an unmitigated disaster. The Trump protectionists argue the opposite.
Dueling letters on the Wall Street Journal’s opinion page last fall centered on the impact to manufacturing. Trump’s chief trade adviser said his trade policy worked, and that manufacturing grew. But ex-US Sen. Phil Gramm co-authored a letter arguing the manufacturing gains were due to de-regulation and tax cuts and that the tariffs reversed the trend.
As for agriculture, we already know what happened after Trump imposed tariffs on China and other countries. The expected retaliation led to a loss of $13.2 billion for selected commodities in the US from mid-2018 through 2019, according to the USDA, with the biggest chunk of the damage dealt to Iowa, where annualized losses totaled $1.46 billion.
Trump tried to backfill with government checks—paid for by American taxpayers—but it still hurt. (The cost of his steel and aluminum tariffs, meanwhile, were passed through to US importers.)
Agricultural trade with China has improved since then, according to a 2022 USDA report, but these days the economic relationship between the two countries is still quite tenuous. Biden has kept the Trump tariffs in place, even as Treasury Secretary Janet Yellen has tried to soften the edges of US policy.
Meanwhile, there is bipartisan distaste for China among many lawmakers in Washington, D.C.
In December, a bipartisan House committee recommended a reset in US economic relations with China. And it issued a very specific warning for rural communities and the agricultural economy.
The panel, in a report, recommended the USDA and the US trade office search for alternative markets in the event of an escalating trade conflict—and that Congress consider additional funding to “offset retaliation for farmers and ranchers, US exporters and other American workers” according to an article in Successful Farming.
In other words, more aid and less trade.
All this adds up to an uncertain future for a huge economic driver in Iowa, no matter who occupies the White House next year. But we do know this: At least under Biden, our trade relationships haven’t deteriorated to the point where farmers have had to rely on government assistance as much as they did in 2020, when nearly 40% of net farm income came from government checks.
What might happen in a trade war on steroids?
The prospect of a 60% tax on all goods from China would undoubtedly trigger massive retaliation and have an unprecedented impact on our modern, interconnected economy.
This is a big, bad warning sign that carries huge risks for a state like Iowa. According to one estimate, 400,000 jobs in this state are supported by trade.
In other words, it’s not the time for our political leaders to keep their heads down and hope this problem just goes away.
We don’t know what a Trump presidency next year would mean for our democracy, although there’s plenty of reason to worry about that. But we do know what a Trump presidency would mean for Iowa’s trade-dependent economy.
We’ve already seen that movie, and the sequel promises to be even uglier.
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