Polls from all sources over the past months have underscored the dread, and even alarm that voters are feeling about tariffs. The tariffs that the Trump White House have placed on a number of products ranging across many countries have not only made headlines, but for some companies created shaky bottom lines. As an example in Wisconsin, Trek Bicycle Corp. says it would pay an additional $30 million in tariffs each year on bikes imported from China.
Wisconsin farmers face much uncertainty about their future prices and markets. This week World Dairy Expo will be held in Madison where trade and tariffs will be on the minds of many participants.
Unlike past years, when just the smallest farms, with herds of 50 or fewer cows, were closing, some big farms with herds of more than 300 cows are also succumbing to the pressures of building debt with little equity, Basse said. “It all depends upon how many years you can endure negative margins,” he said. (Dan Basse, an economist and founder of Chicago-based AgResource Company forecasts domestic and world agricultural price trends.)
Basse’s short- and long-term outlooks aren’t optimistic, partly because he believes China has the upper hand in its trade war with the U.S., and that will continue to limit demand. “We need to get that Chinese market open for U.S. dairy products if we’re going to see an end to this whole thing. The way the administration is negotiating, we have no idea when that’ll happen,” he said.
Wisconsin, like many rust belt states which felt the economic punch from the recession harder than most of the nation, is concerned about the threat of a trade war. A Reuters/Ipsos/UVA Center for Politics Poll found that a plurality of voters in the Badger State, which voted for Trump in 2016 like the others polled, have misgivings about our trade policy.
It is true that free trade and tariffs have been boiled into our political stew. It once was a truism that Republican voters were far more supportive of free trade than Democrats. That now has been up-ended with the reverse at play in our state. (I have been a decades long advocate of free trade.) The National Republican Party used to stand four-square for free trade, but not anymore. Trump has put his fingerprint over the long-held one of the GOP. With the power he wields over his base polls show pro-Trump voters view free trade negatively, and tariffs as a positive move.
The reason tariffs are now being mis-used as a policy is based on the wrong perceptions the general public has about free trade. Trump was able to play into those views, and use the economic unease people were feeling from the last recession, to help him win the presidency in 2016.
There is a broad perception that free trade is a boondoggle aimed at undermining the jobs and economic security of a segment of this state. What is troubling is that so many state residents turn aside when facts are presented about why free trade matters. In my files is the strong editorial from the Wisconsin State Journal dated January 2017. The words are still clear-headed. Reading it again shows the folly of those who wish to undermine free trade and erect foolish tariffs which will lead to a needless and dangerous trade war.
America enjoys a trade surplus with Mexico on services. And as U.S. Rep. Ron Kind, D-La Crosse, has pointed out, the U.S. has had a trade surplus in manufacturing, agriculture and services with all 20 countries it has bilateral trade agreements with. That includes Mexico, whose growing middle class wants to buy more of our products.
Both nations win when trade is done right.
Top imports into Wisconsin include clothes, shoes, bicycles and padlocks, according to Census data. Wisconsin’s top exports include aircraft and motor vehicle parts, computer and diagnostic machines, outboard engines and excavators.
In other words, we tend to produce more sophisticated stuff, so our exports provide more family-sustaining jobs here. And about 40 percent of the parts in a typical Mexican product sent to America originated in America, according to the Department of Commerce.
But it takes political leaders to step up as educators on the topic of trade and turn back the many falsehoods. The fear and angst from workers is not something to dismiss. We witnessed in 2016 what happens when economic unease mixes with a shameless demagogue. Therefore, it is a must that today’s leaders–or would-be leaders–anchor themselves to facts and use them to educate voters about the issues so central to our national discussions.
For instance, it needs to be stressed that automation is a bigger factor than trade deals in changing how people work and what jobs are available. And that trend is not slowing, but will only pick up speed. We need to adapt workers to the changing landscape of the working world–and not use old and out-dated arguments for political purposes.
Micahael Hicks is the Director of Ball State’s Center for Business and Economic Research and spoke to In Business about the facts in which the trade issue needs to be viewed if we are going to have insight of what needs fixing. The interview comes from 2017.
Hicks: No, I think a more nuanced approach to it is necessary. Absolutely, trade and competition with other firms, be they in Illinois or Mexico, or Maine, or China, can cause firms to close down. Those tend to be very concentrated. If you’re in Wisconsin, Illinois, Indiana, Michigan, or Ohio, we’ve seen now four or five decades of job losses in manufacturing in concentrated places. And so that looks a lot like trade, but the fact is that the United States today is producing more goods, more manufactured goods, than at any other time in its history.
In Wisconsin, the peak-manufacturing year is 2015, and we know for sure it was 2015 or 2016 in Indiana, probably 2016 when the data comes in, so free trade is not causing a reduction in U.S. manufacturing production. If we actually had less production, maybe that would be a major cause of worry, but we’re actually making more today than we ever have before, so it surely cannot be trade.
If all else fails let Wisconsin residents know that with a trade war comes higher price for beer. Trump’s tariff on aluminum imports will add cost to the beer that’s sold here in aluminum cans.
Now that we have the attention of the voters….