President Trump has been waging a trade war since early March, with China as his greatest adversary. Steel and aluminum manufacturing stood to benefit from these protectionist measures, but the U.S. agricultural sector is actually getting the raw end of the deal in this tit-for-tat dispute.
In the beginning of March, President Trump announced plans to place a 25% import tariff on all steel and a 10% import tariff on all aluminum. To follow through on his campaign promise of U.S. trade protectionism, the U.S. steel and aluminum manufacturing industry is the first group of intended beneficiaries. President Trump claims that unfair trade practices in other countries, namely China, have flooded the global market with these products, effectively lowering prices to uncompetitive levels.
The steel and aluminum manufacturing industry in the U.S. has seen a significant decline in jobs, with 135,000 people employed in the industry in 2000 compared to just over 83,000 in 2016, according to one source. However, industries that purchase steel and aluminum and rely on the current low prices actually employ far more people—6.5 million—than are employed on the manufacturing side. These industries include car manufacturers, beer companies, and the construction industry, to name a few. As a result, while these tariffs may be good news for a few tens of thousands of steel and aluminum manufacturers, over six million people employed by steel and aluminum buyers would likely be negatively impacted and possibly lose their jobs if production costs rise.
However, this only would have been the outcome if President Trump’s original plan to tax all steel and aluminum imports entering U.S. borders had become reality. The tariffs did go into effect at the beginning of April, but Canada and Mexico were immediately exempted from these trade restrictions. Before the tariffs had officially taken effect, the EU, Australia, Argentina, Brazil, and South Korea were granted temporary exemptions from the tariffs as well.
These trade exemptions are essentially being granted to political allies of the United States who threatened strict and politically targeted tariffs of their own in retaliation. These tariffs would have been imposed on quintessential American products, like Wisconsin cheese and Kentucky bourbon, that are produced in red majority regions (Wisconsin is Paul Ryan’s home state).
Politically, exempting these countries is a good idea because of this potential backlash, but these exemptions also severely undermine the original intention of the steel and aluminum tariffs. Canada, the EU, South Korea, Mexico, and Brazil are the top five sources of steel and aluminum imports for the U.S., with over $900 million-worth of imports coming from Canada and the EU alone. So which steel and aluminum exporters are affected by this policy? In one word: China.
Just like the retaliatory measures threatened by the exempted countries, China has its own punitive measures in mind. The potential targets of China’s tariffs are major U.S. agricultural export commodities like pork, soybeans, sorghum, tobacco, wine, and nuts. These products are chosen for specific, political reasons. The international community is well-aware of how the structure of our government impacts elections results. They know which districts voted red and which ones swung blue, which means they know that to impact the voters in red districts, they can target the industries that fuel their livelihoods. For instance, China is the largest consumer of both the pork and tobacco that is produced in North Carolina. As it happens, North Carolina went to Trump in the 2016 election. Not only is China retaliating against protectionist trade measures, but it also seemingly intends to aim their retaliation at President Trump and the Republican party directly.
The same can be said for taxing soybeans, most of which come from the Heartland that overwhelming votes Republican each election cycle. As for putting tariffs on wine and nuts, most of the nut exports come from California, which is a tried-and-true blue state. However, the Central Valley of California swings red and is the largest region of tree nut production in the country.
These politically-rooted trade tariffs may also help to explain why President Trump and his staff decided to exempt the countries they did. A reduced export market, or even a reduction in prices due to speculation, for Wisconsin cheese and Kentucky bourbon would not have been good for the political representatives of those districts. Such repercussions, however, seem unavoidable. When pork producers in North Carolina feel the repercussions of fewer sales and lower prices, they will tie their struggle directly back to President Trump’s decision to start a trade war with China.
As history continues to prove, the losers of trade wars almost always outnumber the winners. From the initial tariffs, the companies and their employees that rely on cheap steel and aluminum imports will suffer as production costs rise. Consumers of steel and aluminum products—like your thirst-quenching 12oz. can of PBR or a shiny Ford F-150—will suffer as higher production costs are pushed onto them. From China’s retaliatory measures, the U.S. farmers who produce the taxed goods will also suffer. Likewise, consumers in China will suffer from higher prices of these taxed U.S. agricultural products.
American farmers of competing products will also suffer because excess pork that cannot be exported will flood the domestic market, and consumers might switch from beef or chicken to the now-cheaper pork. With less beef and chicken consumption, corn and soy producers will also feel a hit. And with everyone’s prices falling, non-farm agricultural input industries will feel the trickle-down effect on top of revenue loss from rising steel and aluminum prices.
Because the steel and aluminum tariffs don’t even apply to the five largest exporters, the U.S. steel and aluminum manufacturing industry is not likely to experience a significant economic boost. In the end, Trump’s trade war managed to single out an openly hostile political adversary that was already facing steel and aluminum tariffs due to its unfair dumping practices. As a major importer of U.S. agricultural products, a disgruntled China ends up straining American farmers more than anyone else. And if it ends up hurting them so badly that they decide to release their frustration at the polls, there just might be a blue majority in the house this fall.
Sam Jones is a first-year AFE student with an interest in sustainable agriculture and food journalism. She is currently an intern at Culture Magazine and will be working on a flower farm this summer. You can read more of her work at culturecheesemag.com.