Trump trade war cuts both ways

Granite City steel mill reopens, but Illinois soybean and hog farmers dread Chinese tariffs

 This central Illinois soybean farm could see reduced demand for its crop as China imposes tariffs on agricultural imports in response to President Trump's promised trade war. (One Illinois/Ted Cox)

This central Illinois soybean farm could see reduced demand for its crop as China imposes tariffs on agricultural imports in response to President Trump's promised trade war. (One Illinois/Ted Cox)

By Ted Cox

Illinoisans are discovering that President Trump's trade war cuts in both directions, good and bad, in a wide swath across the state economy.

The Chicago Tribune ran a story on Sunday about how a U.S. Steel mill in Granite City across the Mississippi River from St. Louis recently reopened after shutting down production in 2015. That was a result, the story said, of Trump's tariffs imposed on steel imports.

Some 2,000 workers were laid off at the end of 2015, but according to the story 800 have recently been hired back, about half of those coming from the ranks of those idled in the initial shutdown.

It's been an undeniable boon for the 800 workers and for the town of 29,000, but their enthusiasm and gratification for Trump's trade war aren't shared by hundreds of thousands of others across the state, especially soybean and hog farmers.

After tweeting on Twitter that "trade wars are good and easy to win," Trump recently imposed tariffs on $34 billion in Chinese goods in an attempt to reduce the U.S. trade deficit with the Asian economic powerhouse. China responded in kind, including a 25 percent tariff on U.S. soybean imports imposed just last week. Late Tuesday, the Trump administration more than doubled down, announcing it was considering another 10 percent tariff on $200 billion in Chinese products.

Illinois soybean farmers felt singled out. "As the nation’s top soybean-producing state, we continue to emphasize the need for free trade and access to markets," said Lynn Rohrscheib, a Fairmount soybean farmer and chairwoman of Illinois Soybean Growers, an organization representing 43,000 soybean farmers. "We are disappointed that agriculture continues to be placed in the middle of the tariff debate with China. We urge the Trump administration and China to rescind these tariffs that leave our farmers footing the bill. Instead, we are hopeful that continued negotiations can occur that will strengthen the competitiveness of our domestic industries while at the same time growing our agricultural export opportunities."

A Monday New York Times story suggested China's high demand for soybeans may minimize the damage, but soybean farmers have still seen prices drop on the U.S. open market.

In expectation of the tariffs — which China deliberately imposed on farmers as a group generally supportive of Trump in the 2016 election — soybean prices dropped through June from $10 a bushel to Tuesday's $8.53. On Wednesday morning, they slipped again to $8.35. Since 1959, soybeans have been as low as $2.08 and as high as $17.90 a bushel, registered in 2012.

Illinois produces an estimated 600 million bushels of soybeans a year, exporting almost two-thirds of that total.

Soybean farmers and other agriculture industries have taken to Trump's favorite medium, Twitter, to argue for #TradeNotTariffs.

According to a study by the Brookings Institution, a nonprofit public-policy organization based in Washington, D.C., Chinese tariffs were targeted to hit hardest on goods and industries located in U.S. counties Trump won in 2016. Mark Muro, of Brookings' Metropolitan Policy Program, said the Chinese policy "seems carefully selected to maximize agitation in mostly red counties that are oriented toward agriculture."

Illinois hog farmers face even stiffer losses with China imposing an additional 25 percent tariffs on pork imports, as hog futures are down across the board.

A CNBC story last week said the increase on the already high import taxes "essentially slams the door shut on U.S. pork imports into China." The story quoted Rabobank's Christine McCracken as saying, "At 81 percent net tariff, you're not moving any pork product into China."

Mexico also imposed tariffs on pork imports as Trump expanded his trade war to neighboring nations including Canada.

According to another Tribune story last week, as of 2016 Illinois's three largest trade partners were Canada, Mexico, and China, with exports topping $30 billion.

Trump has insisted on Twitter that "trade wars are good and easy to win," but according to the Huffington Post one thing worth mentioning is that his U.S. tariffs steered clear of any new taxes on goods imported from China for Ivanka Trump's clothing company.

What's more, a recent Capitol Fax post argued that the Granite City steel mill's reopening had as much to do with rising crude-oil prices — as it supplies steel for U.S. oil pipelines — as it did with Trump's protectionist tariffs.

In any case, the impact of the tariffs and the uncertainty about how long the trade war will last has Illinois farmers rattled.

"To say that that's a concern of the ag community in the district I represent would be an understatement," said state Sen. Andy Manar, of Bunker Hill. "How's it going to turn out? Nobody knows."