The Trump administration portrays its confrontational stance as a means of forcing multinational companies to bring factory production back to American shores. Mr. Trump has described trade wars as “easy to win” while vowing to rebalance the United States’ trade deficits with major economies like China and Germany.
Mr. Trump’s offensive may yet prove to be a negotiating tactic that threatens economic pain to force deals, rather than a move to a full-blown trade war. Americans appear to be better insulated than most from the consequences of trade hostilities. As a large economy in relatively strong shape, the United States can find domestic buyers for its goods and services when export opportunities shrink.
.. Before most trade measures fully take effect, businesses are already grappling with the consequences — threats to their supplies, uncertainty over the terms of trade and gnawing fear about what comes next.
.. Christine Lagarde, warned this past week about trade conflicts. “It would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe and Germany.”.. The Trump administration’s decision to reinstate sanctions on Iran has lifted oil prices, adding pressure to importers worldwide... Europe’s economy is weakening, with Germany — the continent’s largest economy — especially vulnerable... Across Europe, steel makers fret about an indirect consequence of Mr. Trump’s tariffs — cheap Chinese steel previously destined for the United States, now redirected to their continent... Mr. Trump portrays trade hostilities as a necessary corrective to the United States’ trade deficits with other nations. But economists and business leaders note that many imports are components that are used to manufacture goods at American factories... Electrolux, the Swedish manufacturer of household appliances, recently postponed plans to upgrade a stove factory in Tennessee, citing uncertainties created by the tariffs... Under Nafta, Mexico has grown into the world’s largest importer of American apples. But sales are down because the price has gone up by nearly one-fifth in the past week alone... Chinese pork producers have turned their sights to Brazil and Argentina, the only countries that now produce enough soybeans to offer a potential alternative to the American supply.
Will Trump Crash the Farm Economy?
Many people don’t even know these scandals exist — they generally don’t lead in Sean Hannity’s or Tucker Carlson’s world.
.. One smaller manufacturer — a Trump voter — told me that his costs to produce his product nearly doubled overnight, and that his business has already been hurt by the tariffs. Prices didn’t rise only after the tariffs were announced; they started rising when Mr. Trump floated the idea.
.. Senator Joni Ernst and Iowa’s agriculture secretary, Mike Naig, both say the tariffs will hurt Iowans, and Mr. Naig says we need to expand markets, not shrink them. Senator Chuck Grassley said something similar, on Fox News: “Tariffs do not put America first — low barriers and expanded access do.”
.. China has already responded with its own tariff on pork, which will have a dire impact on Iowa. Iowa is the nation’s largest pork producer, producing three times as much pork as the next-highest state.
.. with commodity prices down and the tariffs imposed, approximately 10 percent of our farmers probably won’t make it this year, and 10 percent more will likely fail next year. They also shared the news that in Iowa, larger agribusinesses are buying up smaller farms that are in financial trouble, and that people are starting to make comparisons to the farm crisis of the 1980s, when approximately 10,000 Iowa farmers lost their farms.
.. Even Representative Steve King, the avid Trump supporter and Iowan every liberal loves to hate, is worried about a new farm crisis.
.. Dairy farmers are particularly hard hit, suffering through four years of declining prices. It’s gotten so bad, dairy farming organizations are giving out suicide hotline numbers, as farmers are committing suicide in the hope that their insurance will save the family farm.
.. “It gives Democrats a generational opportunity to do the political work with farmers they haven’t done since the 1980s farm crisis,”
.. “Democrats do farm policy really well but are terrible at farm politics. Republicans do farm politics really well but have a history of doing terrible farm policy.”
.. With the multiple scandals, rampant corruption and the Mueller investigation, the only thing keeping him near 40 percent approval — and most important, approval among most Republicans — is a strong economy. That, and Fox cheerleading. But if he tanks the rural economy, he and his legacy are in deep trouble.
.. Furthermore, if the rural economy turns sour, much of rural America will abandon Mr. Trump, and Fox may have no choice but to follow.
Trump’s Tariffs Prompt Global Threats of Retaliation
The European Union detailed a three-step plan to penalize $3.5 billion of American trade — the same amount of European steel and aluminum the bloc estimates would be harmed by the planned tariffs. It proposed taxing American exports including bourbon, bluejeans, orange juice, cranberries, rice and motorcycles.
A European Union official said that the bloc had been preparing for the announcement for months and that everything was in place for a swift, proportionate response.
.. The measures were intended to put pressure on politically sensitive areas, trade analysts said. Harley-Davidson motorcycles are made in the home district of Speaker Paul D. Ryan, Republican of Wisconsin. Orange juice comes from the swing state of Florida. Restrictions on Kentucky bourbon could add pressure on the Senate majority leader, Mitch McConnell, who is from the state.
.. Retaliation could hit hardest in many of the rural communities that were strongholds for Mr. Trump. Farmers are among America’s largest exporters, and often become a target in trade spats
.. She said the agricultural community was “rightly nervous” about the prospect.
.. Canada and Mexico were America’s No. 1 and No. 3 largest agricultural markets in 2016, and South Korea is a major market for beef, corn, pork and fresh fruit
.. The United States exports cotton to Turkey and wheat and dairy to Brazil, other major suppliers of steel.
.. Peter Navarro, a top White House trade adviser, said he did not believe any country would retaliate, “for the simple reason that we are the most lucrative and biggest market in the world.”
“They know they’re cheating us, and all we’re doing is standing up for ourselves,” he added.
.. if the United States was willing to impose penalties like these on its close trading partners, other countries would be less eager to negotiate trade deals with the United States. “What is the benefit of having a special relationship?” he asked. “I think there could be a lot of unintended and unforeseen consequences.”
America’s Glaring Weak Spot in a Trade War? The Lowly Soybean
How might China respond? One possibility is soybeans. The country imported $12.4 billion of American soybeans last year to feed its pigs. China relies on these imports to keep feed prices low, which in turn keeps low the politically-sensitive price of pork. The meat is China’s staple protein, and a sizable component in household budgets.
.. But China is arguably now in a better position to handle disruption from American soy. Food price inflation has been running negative for over a year thanks to agricultural reforms, rebounding pork supply and a worldwide grain glut. The strengthening Chinese yuan is also weighing on the price of imported foodstuffs.
.. U.S. farmers’ leverage with China, meanwhile, is exceptionally weak. Farm debt is high and incomes are falling.
Global soybean prices remain mired at barely half their 2012 peak. And Brazil, America’s main competitor for the Chinese soy market, is growing another bumper crop.