Trade critical to U.S. farm economy, tariffs need to be removed

New data reveals dramatic jump in tariff-related costs

Carol Spaeth-Bauer
Wisconsin State Farmer

WAUKESHA - Every farmer knows what it's like to be in midst of a busy harvest season, especially like the one farmers face this year, with a day of sunshine and harvesting going full speed ahead when the combine breaks down. Half the day is spent finding the problem, getting a replacement part and fixing the machine, before the combine is up and running again. 

Wisconsin Farm Bureau President Jim Holte used the story of his broken combine to emphasize the impact of trade and tariffs on the agricultural economy. 

"Much like a combine is a crucial tool for harvest, trade is critical to the U. S. farm economy," Holte said. "The U. S. needs well-oiled trade relationships to make our economy run both efficiently and effectively."

Wisconsin Farm Bureau President Jim Holte talks about the impact of tariffs on farmers during a tariff town hall organized by Tariffs Hurt the Heartland at Husco International in Waukesha on Oct. 24.

Holte was one of six panelists of manufactures and business owners who joined Tariffs Hurt the Heartland, a nationwide grassroots campaign against tariffs, at a town hall on Oct. 25 at Husco International. 

New economic data compiled by the Trade Partnership showing that tariffs cost Wisconsin businesses almost $95 million in August alone, a 47 percent increase in tariff related costs from the same time last year. 

"On steel and aluminum tariffs alone, Wisconsin businesses shelled out $20 million extra that they never had to pay before," said Carrie Clark Phillips, director of policy and partnerships for Farmers for Free Trade. "And this is just the tip of the iceberg."

The data released at the town hall offered a "glimpse of the coming pain from the trade war," Clark Phillips pointed out, "and once the tariffs increase to 25 percent on this $200 billion worth of goods at the end of the year, these numbers will continue to trend sharply upwards." 

While the town hall discussed the impact of tariffs already in place, threats of nearly $1 trillion in more tariffs "coming down the pike" is concerning, said US Chamber of Commerce Midwest Region Executive Director John Kirchner.

Data compiled by the Trade Partnership shows that tariffs cost Wisconsin businesses almost $95 million in August alone, representing a 47 percent increase in tariff-related costs since the same point last year

Association of Equipment Manufacturers President, Dennis Slater, moderator at the town hall, said manufacturers have seen tariffs on steel and aluminum. With tariffs in place on the more than $250 billion worth of goods from China there are retaliatory tariffs imposed on the U. S. that are particularly hurting the American farmers. 

"From soybeans to corn, to fruit to specialty crops, farmers are being hurt by reduced demand, lower prices and the uncertainty in global markets," Slater said. "That hurts our industry a second time, as a strong equipment manufacturing industry relies on a strong agricultural economy to be successful."

Wisconsin farmers, manufacturers and business owners and employees met at a tariff town hall at Husco International in Waukesha on Oct. 25. A group of panelists discussed the real-world impact of tariffs on Wisconsin businesses and farmers.

Retaliatory tariffs of 28 percent on U. S. sourced soybeans have resulted in a sharp decline in China's purchases, according to a American Farm Bureau Market Intel report from Oct. 23. 

"Specifically, soybeans to China have fallen by 98 percent through channels along the Mississippi River," Holte explained. 

While producers may be pleased with continued trade talks, tariffs need to be removed "as soon as possible because of their impact on trade," Holte said. 

"The USDA currently projects the market year average price for soybeans at $8.60 per bushel," said Holte, "which is down 73 cents from the prior year and it's the lowest price in more than a decade."

Holte mentioned the trade agreement between the U. S., Mexico and Canada, which may be welcomed progress, but the tariffs are still in place and impacting farmers until the agreement is signed and ratified.

"Farmers are used to uncertainty, especially when it comes to Mother Nature and, unfortunately, broken equipment, but what they are not accustomed to is the ambiguity in markets and the hesitation on building trade relationships," said Holte. 

Holte urged leadership to continue working on trade negotiations, "but most importantly work to quickly remove tariffs that are more frustrating than a broken combine during peak season."

Every sector represented at the town hall stressed the negative impact tariffs are having on their industry. In agriculture, the immediate impact is profitability and long-term viability of farm businesses, Holte explained. 

Susan Quam, executive vice president of the Wisconsin Restaurant Association, talks about the impact of tariffs on Wisconsin's restaurants during a tariff town hall at Husco International in Waukesha on Oct. 25.

The restaurant industry is "kind of one step directly from the consumer," explained Susan Quam, executive vice president of the Wisconsin Restaurant Association. The restaurant industry is currently seeing issues related to supplier partners, such as equipment manufacturers that rely on stainless steel and electronic components that come from China, and have seen some "pretty unprecedented price increases in that area."

However, concerns for restauranteurs sit in the next round of possible tariffs that could affect the integrated supply system for food in the restaurant industry. 

Giving the example of the Friday night fish fry, Quam explained that most of the haddock, cod and pollock used for fish fries are processed in China, even if the product is caught in U. S., Canada or Gulf waters. 

When the next round of tariffs is implemented, Quam said they could see "some pretty hefty increases in just those costs alone." For restaurants with a slim profit margin of about 3 to 5 percent, especially smaller, independent restaurants, that can't change suppliers "at the drop of a hat" and are more at the mercy of the market, this a concern, according to Quam.

"So now we have restaurants who live and die by their Friday night fish fry and the crowds that they bring in. We are going to see a lot of push on that 3-5 percent margin," said Quam. "Because Wisconsin consumers are also pretty price sensitive. They don’t like to see their Friday night fish fry go up a dollar."

What happens if the tariffs are still in place one year from today?

In agriculture it's already compounding the issue of global oversupply of food products. Continued tariffs, or additional tariffs, are "just going to continue to drive the challenges in profitability for farmers," said Holte. 

Tariffs are the wrong approach for a number of reasons, explained Kirchner. 

"Tariffs are nothing more than a tax and they're not paid by the exporting country, but instead by American families and businesses," Kirchner explained. "It doesn't make sense to impose tariffs on allies and adversaries alike without regard for those that share the American commitment to free trade." 

While the administration's work on tax reform and regulatory reform has helped the economy to expand, "the tariffs put all this progress at risk," Kirchner added. 

“Today’s discussion showed the real-world impact that the administration’s tariffs have had on Wisconsin businesses,”said Slater. "It’s clear these tariffs hurt our economy and they hurt U.S. workers. Equipment manufacturers want to work with the administration to strengthen America’s trade position, but we need policies that open up foreign markets not ones that tax Americans.”