It’s too early to say what the real consequences of President Donald Trump’s proposal to raise tariffs on imports of steel and aluminum would be, but this attempt to protect American jobs and tip the scales of unfair trade in favor of the U.S. is looking like it could prove ill-fated, with any good effects outweighed by the bad.
As with the threatened withdrawal from the all-important North American Free Trade Agreement, agriculture and U.S. farmers likely would bear the brunt of this misguided move. But agriculture is no stranger to being a target in trade disputes.
“The agriculture sector knows from experience that our ag exports are the first to be hit by retaliation,” said Brian Kuehl, executive director of Farmers for Free Trade. “Whether it’s our chickens in retaliation for tariffs on Chinese tires or U.S. apples and wine exports as a result of a Mexican trucking dispute, historically, agriculture always has the biggest target on its back.”
Backing up a bit, earlier this month, Trump proposed the application of 25 percent and 10 percent tariffs, respectively, to imports of steel and aluminum. While the administration did so with national security in mind, raising concerns about U.S. reliance on imported steel for defense systems, farm groups are justifiably worried about the unintended negative consequences on everything from Wisconsin cranberries to equipment manufacturers and the price tag on a John Deere tractor — especially in the current down farm economy.
Recognizing the value of our trade with Mexico and Canada, those countries would be exempt from the steeper tariffs as negotiators strive to craft a better NAFTA, but Agriculture Secretary Sonny Perdue has said that he still sees “legitimate concern” in farm country over Trump’s plan.
The bottom line is this: U.S. agriculture needs exports, now more than ever. They account for about a fifth of all U.S. farm income. Foreign governments paying jacked-up steel and aluminum tariffs could retaliate by raising their import tariffs on U.S. agricultural goods, making U.S.-sourced foods less competitive on the world market.
According to trade publications, many of American farmers’ top international customers — most notably, China — are also top producers of aluminum and steel. China, by far, is the world’s No. 1 steel producer and leading smelter.
Data from the USDA’s Foreign Agricultural Service shows that 33 percent of U.S. agricultural exports in 2017 went to the top aluminum-producing countries; 39 percent of U.S. agricultural exports in 2017 went to the top steel-producing countries. About 70 percent of U.S. ag exports last year went to countries that are top steel exporters to the U.S. Lower but still dramatic, more than half of U.S. ag exports that year went to countries that are top aluminum exporters to the U.S.
The stakes are higher for some states than others. More than 80 percent of Wisconsin ag exports last year went to countries that are top steel exporters to the U.S.
The National Pork Producers Council has expressed concern that the higher tariffs would lead not only to retaliatory tariffs on U.S. ag products but to lost American jobs. A recent study by Trade Partnership Worldwide, a private analytical firm, found that the proposed tariffs would cost the U.S. economy more than 179,000 jobs, with two-thirds of them in production and low-skill positions. The National Foreign Trade Council also announced the creation of the Alliance for Competitive Steel and Aluminum Trade to weigh in on the import tariffs. The alliance includes more than 30 groups, including NPPC.
“Confidence had really been building” in America’s Dairyland, according to U.S. Sen. Ron Johnson, R-Wis. “We made American businesses more competitive. We gave real tax cuts to Wisconsinites and Americans. There’s really a growing level of optimism because we’re returning certainty to the American and Wisconsin economy.”
But “the talk of canceling NAFTA and now imposing these steel tariffs has just interjected uncertainty in the economy where it wasn’t necessary. I’m really concerned that this is counterproductive,” he said.
In a recent letter to U.S. Commerce Secretary Wilbur Ross, Johnson said said these tariffs could undermine job-creating industries now thriving in Wisconsin, including food processor and distributor Seneca Foods. The European Union, in fact, has already proposed targeting more than 100 U.S. products, including Harley-Davidson motorcycles and cranberries, of which Wisconsin is the top producer.
On the winning side of the administration’s plan are a handful of shuttered U.S. steel mills with excess capacity that can be started up again, albeit at a delay, to meet increased demand. But there are too many losers in this deal, and all aspects must be considered carefully before moving forward.
Rural American voters turned out in force to put Trump in the White House, and as Americans for Farmers and Families spokesman Joshua Baca put it, they “are watching and listening” to him. “It is critical that he keeps his promise to protect farmers.”