This is not a political rant. This is a plea for rational thinking.
In 1985 John Cougar Mellencamp’s song Rain on the Scarecrow he described the loss of family farms across the Midwest and plains states. President Carter’s decision to stop grain exports from U.S. farms to the Soviet Union, as punishment for the Soviet invasion of Afghanistan, made it impossible for many farmers to sell their crops, which led to defaulted loans and repossessed land that had been in families for generations. President Reagan finally lifted the embargo, and a rush of grain buying by the Soviets immediately afterwards helped save farming communities.
One farmer who survived the turmoil said, ”I know how we all feel about the Soviets, but on the other hand, I guess they’re not going to shoot us with food.”
Last year U.S. agricultural exports totaled $140.5 billion, which was the third-highest level on record, according to the United States Department of Agriculture. In their November press release last year, the U.S. Secretary of Agriculture Sonny Perdue was quoted, “I’m a grow-it-and-sell-it kind of guy. If American agricultural producers keep growing it, the USDA will keep helping to sell it around the world.”
In that same announcement, they noted that China finished the fiscal year as the United States’ largest export customer, with shipments valued at $22 billion, followed closely by Canada ($20.4 billion), Mexico ($18.6 billion, a 6% gain from 2016), Japan (up 12% to $11.8 billion) and the European Union ($11.6 billion). Exports are responsible for 20% of U.S. farm income, drive rural economic activity, and support more than one million American jobs both on and off the farm, according to the USDA.
For comparison, the U.S. imported $976 million in steel from China in 2017, up from $906 million the year before, which represented 2.9% of the total 35.6 million tons we import from all countries.
Last Thursday, President Trump approved tariffs of 25% on steel and 10% on aluminum imports, exempting Canada and Mexico, for now. There’s not a day on the farm when a farmer doesn’t touch steel. Tractors, combines, and other equipment manufactured by Illinois-headquartered John Deere are scattered around most farm property, so this alone will have an impact.
The European Union is now looking at retaliatory tariffs against U.S. exports, including bourbon (sorry Kentucky), orange juice, cranberries, and peanut butter, while China is targeting our soybeans and grain exports. Other U.S. exports not directly tied to farming included Harley-Davidson motorcycles, Levi Strauss & Co. jeans, motor boats and t-shirts. China, the largest buyer of American sorghum products, announced it was launching an anti-dumping probe into U.S. sorghum imports.
All this is beginning to have a biblical eye-for-an-eye ring to it.
Since the end of WWII, trade among countries has been one of the biggest drivers of lower cost goods and services, and an escalation in the standard of living all over the globe. If you are better at growing crops and I’m better at producing clothing and we focus on what we do best, we can trade crops for clothing and we’ll both be better off. This dynamic has changed American farming, the garment trade, and the automotive industry to name only a few.
I realize the dynamic isn’t always positive, because competition means lower prices and being the winner today doesn’t necessarily mean you’ll remain there. My hometown of Portsmouth was once known as the shoe capital of the world before Italian imports came to the U.S. Textile companies along the south-east coast were hit by imports in the 1980s, and the coal and steel industries have declined over the years due to a multitude of reasons.
Tariffs on imports will do more damage to many, many companies and consumers and will have a much longer-lasting effect. Other presidents have tried this too, with little positive impact. President Barack Obama’s tariffs on Chinese tires cost American consumers an estimated $1.1 billion in return for preserving 1,200 jobs in the domestic tire industry, while President George W. Bush’s duties on foreign steel destroyed some 200,000 jobs in other sectors, exceeding the total employment of the American steel industry.
Like it or not, our world is very financially interdependent. We may feel giddy with power as we make pronouncements against other countries, but the morning-after hangover is coming.