As China, U.S. move closer to trade war, Minnesota ag interests fret

Farmers in Minnesota fear that their success in international trade will impale them on the "tip of the spear" as China retaliates against 25 percent tariffs President Donald Trump announced Friday.

The White House placed the tariffs on $50 billion worth of Chinese imports to punish intellectual property crime and other unfair trade practices that the administration blames for a large trade deficit. But U.S. industries that have held their own in the global economy also stand to take a hit.

"I don't want China cheating on us," said Bill Gordon who grows corn and soybeans on a 2,000-acre family farm in Worthington, Minn. "Unfortunately, we're the golden egg for China to put pressure on."

The irony for Gordon and others in Minnesota's massive agriculture sector is that Trump's protective tariffs could cut significantly into the trade surplus that they worked hard to develop, leaving the country with an even larger overall trade deficit.

The Chinese have said they will place retaliatory tariffs on U.S. products but have not yet specified which ones. If they go after soybeans and corn, Minnesota could be badly hurt. Soybeans are the state's biggest export, and China is the state's biggest international soybean market.

"We grow more than we can use [domestically]," said Blue Earth County corn and soybean farmer Kevin Paap, president of the Minnesota Farm Bureau. "We need our international markets."

By selling more to other countries, farmers might be able to make up for most product sales lost to price increases in China, agricultural economists say. But a recent study published by the Agricultural and Applied Economics Association predicted a $2 billion to $3 billion annual hit to U.S. economic welfare if the Chinese retaliate to new U.S. tariffs with a 25 percent tariff on U.S. soybeans.

Being penalized for succeeding in global trade is one more twist in a brewing international trade war that comes as the president implements his "America First" trade policy, aimed in part at cracking down on what he said are China's unfair trade policies and its efforts to undermine U.S. technology.

"We're shooting ourselves in the foot," U.S. Rep. Erik Paulsen, R-Minn., said in a news release.

Paulsen said he was thankful the White House had spared some Chinese products used in American-made medical devices, including in Minnesota. "But on balance," Paulsen noted, "today was not a good day for American jobs. We've imposed import tariffs that will make it more expensive to buy and produce a whole range of goods here in the United States."

Paulsen said Chinese retaliation, "in particular on soybeans, will be especially damaging to Minnesota."

The productivity and robust sales of American agricultural products leave them in the cross hairs of anyone trying to gain leverage against the U.S.

When the countries facing off are the biggest players, the stakes naturally rise.

"The impact of trade conflict between the world's two largest economies will lead to serious consequences for economic growth and job creation and hurt those that are most vulnerable across the globe," Cargill Global Corporate Affairs Vice President Devry Boughner Vorwerk said Friday.

Cargill, the Minnesota-based agriculture and shipping giant, has consistently called for talks, not tariffs.

"Retaliatory measures will not solve the concerns raised by these two governments," Vorwerk said. "It is in the interest of both countries to come to the table around a negotiated solution such as a responsible trade agreement."

On his farm in Worthington, Gordon fretted not only about what might be done, but what could not be undone. He had just bought a trailer. It cost more than he thought it would. The reason for the 18 percent price hike, the dealer told him, was the tariff Trump applied to imported aluminum. Justified or not, the new price tag was there to stay.

Tariffs "have an effect down the line," Gordon said. They push costs up and then consumer prices up. "But they will never adjust back down because they don't have to."

Jim Spencer • 202-662-7432