Minnesota farmers, manufacturers say trade war is hurting them, not China

Speaking from the factory floor at Misco Speakers, CEO Dan Digre held up an invoice for $13,600 from U.S. Customs and Border Protection.

He received the bill in September — one of many since the trade war started — after importing parts from China. "People think China is paying the tariffs," Digre said. "No, Misco is paying the tariffs."

Farm and manufacturing leaders gathered at the St. Paul factory Wednesday — where 70 people assemble all kinds of speakers in a spotless space off Snelling Avenue — to tell anyone who will listen how damaging the trade war has been.

They described a new reality in which profits are suffering, global supply chains are upended and businesses must grapple with a new and confounding legal regime.

Minnesota businesses have paid an extra $704 million on products subject to Trump administration tariffs, including $72 million in September, according to data collected by the Trade Partnership and distributed by Tariffs Hurt the Heartland, a group organizing events across the country to raise awareness about the effects of the trade war.

That is just the cost of importing products. Tariffs also make U.S. exports less competitive. Since the trade war began, Minnesota exports have faced $372 million in new retaliatory tariffs from U.S. trading partners, including $30 million in September.

The pain for soybean farmers has been well-documented, and they have been compensated for some of that loss through an estimated $20 billion taxpayer bailout for farmers.

"The consequence that we're most concerned about in agriculture is that once you lose market, it's hard to get it back," said Kevin Paap, president of the Minnesota Farm Bureau.

Other types of businesses have received no bailout, and they are growing increasingly frustrated.

Matt Moore, the general counsel at Bloomington-based Quality Bicycle Products, said he maintains an internal "tariff awareness" e-mail list with 45 people on it, trying to keep track of which parts of their supply chain are subject to invoices from the U.S. government. The company employs 800 people and sells about 48,000 parts, accessories and bicycles.

"Our company has been involved in every single round of tariffs," Moore said. "Those tariffs add up to about 40% of our net profit."

Moore traveled to Washington D.C., to argue at hearings that bike helmets and safety lights should be excluded from the tariffs because they are safety items and bike helmets aren't even manufactured in the United States.

The products were dropped from one round of tariffs, but then later added to another. "I have no idea why," Moore said.

Companies can ask the Office of the U.S. Trade Representative (USTR) for a product exclusion, so that is what Moore did next, asking for six specific imports to be excluded. That was a solid week of work for Moore, he said.

"It's been a real drain on resources with no certain results, but the only way you can possibly get one is to try, so that's what we do," Moore said.

None of his applications has been approved, and chances are not good they will be. Of the roughly 44,000 applications for product exclusions submitted to the USTR, only about 4,800 have been approved, according to research conducted by the George Mason University Mercatus Center.

Digre, who said his profits have suffered by about 40% also, helped one of his competitors file applications for six product exclusions, including for a cold-forged steel component for speakers that isn't manufactured anywhere in the United States. None of those applications has been approved.

"There's no consistency. There's no theme," Digre said. "Very few seem to be processed, and very, very few seem to be granted."

The panelists on Wednesday stopped short of any direct political call to action. They called for the U.S. government to negotiate an end to the trade war and work harder to ratify a new free trade deal with Canada and Mexico.

But Moore said ruefully that a brief survey of Chinese history would indicate America's adversary in this trade war won't back down soon. A decadeslong civil war with an unknown number of deaths and multiple foreign invasions didn't break Chinese resolve in the 20th century, he noted.

"Do we really think they're going to knuckle under? Taking the long view?" Moore asked. "They're laughing at us."

Adam Belz • 612-673-4405 Twitter: @adambelz