As the US and China trade tariff threats, most analysts expect that talks will resolve the issue. But there are signs that an actual, short-term exchange of tariffs would be felt most acutely in battleground states like Ohio and Iowa, sometimes described as Trump country, as the midterm elections approach.
Donald Trump considering new $100bn tariff on Chinese goods as trade feud escalates
After the latest round of threats – Donald Trump threatening to impose another $100bn of tariffs, Beijing responding that it would “dedicate itself to the end and at any cost and will definitely fight back firmly” – the president was criticized inside his own party.
“He’s threatening to light American agriculture on fire,” said Ben Sasse, a Nebraska Republican senator and Trump critic who faces re-election in November. “Let’s absolutely take on Chinese bad behaviour, but with a plan that punishes them instead of us. This is the dumbest possible way to do this.
“Hopefully the president is just blowing off steam again but if he’s even half-serious, this is nuts. China is guilty of many things but the president has no actual plan to win right now.”
Trump claimed Americans would be better off in the long run. “I’m not saying there won’t be a little pain,” he told WABC Radio’s Bernie & Sid in the Morning in an interview broadcast on Friday. “We’re going to have a much stronger country when we’re finished, and that’s what I’m all about.”
New tariffs could take up to six months to implement, after deadlines for public and business consultations stretching to 22 May. The US would typically then introduce tariffs within 30 days but could wait up to 180 – into November and the midterm elections.
Analysts say the US is more vulnerable to Chinese tariffs on farming and manufacturing than China is to US-imposed tariffs on technology. In Iowa, farmers would be hit by soybean tariffs and makers of farm equipment, including John Deere tractors, would be affected too.
“You’re going to see hits across the board” including job losses, economist Chad Hart told the Des Moines Register.
In Sioux county, where Trump took more than 80% of the vote in 2016, 60-year-old hog farmer Marv Van Den Top told the paper: “I wouldn’t sit here today and say I will definitely support him again. This here could be a real negative for him.”
The Brookings Institution has offered a detailed breakdown of the likely effect of China’s proposed tariffs on jobs in industries including fresh and dried fruit and nut farming, stainless steel pipes, pork products, modified ethanol, scrap aluminium and wineries.
The Trump administration will want to be able to announce they’ve negotiated a great deal to avert this looming conflict
Geoffrey Gertz, Brookings Institution
“The Chinese government has always engaged very strategically on international trade and investment policy, so it shouldn’t be a surprise they’re doing so in this instance,” Brookings analyst Geoffrey Gertz told the Guardian. “They’ve learned how to navigate the rules of the international trade system to advance their own interests, including by threatening carefully targeted retaliation.”
Gertz predicted the US and China would reach a negotiated solution.
“Right now the US doesn’t have a clear set of objectives, let alone a feasible strategy to achieve them,” he said. “Ultimately the Trump administration will want to be able to announce they’ve negotiated a great deal to avert this looming conflict, and so I suspect in the end we’ll see some kind of negotiated deal.”
On Wednesday, the White House economic adviser Larry Kudlow said it was “possible” US tariffs would not go into effect at all.
“It’s part of the process,” Kudlow told reporters. “I mean, I would take the president seriously on this tariff issue. You know, there are carrots and sticks in life, but he is ultimately a free trader. He’s said that to me, he’s said it publicly. So he wants to solve this with the least amount of pain.”
‘A devastating effect’
If China does impose tariffs, soybean farmers would be hit hard. China is the most important consumer of US soybeans, purchasing about 1bn bushels annually, or 61% of total US soybean exports, more than 30% of production. Since the largest soybean producing states are Illinois, Iowa and Minnesota, Beijing is clearly looking to pressure Trump supporters.
A 25% tariff on US soybeans into China will have a devastating effect on every soybean farmer in America
John Heisdorffer, American Soybean Association
The American Soybean Association president and Iowa farmer, John Heisdorffer, warned: “A 25% tariff on US soybeans into China will have a devastating effect on every soybean farmer in America.” Heisdorffer also described “real money lost for farmers”, which would be “entirely preventable”.
Experts expect the effect of such tariffs to be felt in the short term, around the midterms. At first, farmers in Brazil, Argentina or Australia might step up to supply Chinese buyers. But in a note to clients, Goldman Sachs predicted China would seek supplies from the US in the long term.
On Thursday, the agriculture secretary, Sonny Perdue, said he had raised farmers’ concerns with the president. Perdue later tweeted: “US farmers are patriots [and] want to help defend their country against unfair trade practices.” He also quoted the president as saying: “Sonny, tell them we’re going to take care of our farmers.”
Soy farmers are not alone in calling for the administration to turn to dialogue. After China warned it would increase tariffs on American cars, Ford and General Motors called for talks. China imports nearly 270,000 US vehicles, worth $11bn. US imports of Chinese cars are negligible. Ford ships about 80,000 vehicles a year to China. Tariffs could also affect plans to shift production of the Focus to China.
The US aviation sector, which accounted for $13.2bn in exports to China in 2016, also urged the two sides to resolve their differences. The message was repeated across other industries.
Trump’s appointees are also talking down the prospect of a trade war. In an interview with CNBC, the commerce secretary, Wilbur Ross, said tariffs announced by China would affect a mere 0.3% of America’s gross domestic product. “So it’s hardly a life-threatening activity,” he said.
The president, however, seems persistent.