Iowa farmer Bob Hemesath told Reuters he was worried that US agriculture would pay a heavy price if Donald Trump wins Tuesday’s presidential election and follows through on his pledge of 60% tariffs on Chinese goods and at least 10% on everything products become reality.
It could be a much worse repeat of the former Republican president’s 2018-2019 trade war with China that hit U.S. farm products with retaliation and shifted Beijing’s markets to Brazil and Argentina, said Hemesath, who grows corn and soybeans and raises hogs on 2,800 acres of land in northeast Iowa.
Trump argues that his plans will rebuild America’s manufacturing base, increase US jobs and incomes, and bring the federal coffers trillions of dollars in revenue over the next 10 years.
“When we start imposing tariffs on others, usually the retaliatory tariffs end up on American agricultural products,” said Hemesath, who chairs the advocacy group Farmers for Free Trade.
“What I worry about is when you do things like that, you lose that market share and you just don’t get that market share back,” he said. Hemesath refused to say who he was voting for in the election.
Economists say Trump’s tariff plans, possibly his most influential economic policy, will push U.S. import tariffs to 1930s-era levels, fuel inflation, collapse U.S.-China trade, provoke retaliation and will drastically rearrange supply chains.
Those concerns are echoed in a recent study by the National Corn Growers Association and the American Soybean Association, which predicts a new trade war with China could cause greater losses to U.S. crop exports, push lower already depressed domestic prices and boost China’s import shift to countries such as Brazil and Argentina.
Trump, who is neck-and-neck with Kamala Harris for the White House, called tariffs “the most beautiful word in the world” and argued that his plans would rebuild America’s manufacturing base, increase jobs and incomes in the US and generate trillions of dollars in federal coffers over the next 10 years.
Economists generally agree that tariffs are paid by the companies that import the products subject to the tariffs and either pass the cost on to consumers or accept lower profits.
Tariffs: Trump will jump to 17.7%, highest since 1934
The tariffs, if fully imposed, would raise real average U.S. tariff levels to 17.7 percent, the highest since 1934, according to the conservative Tax Foundation. There are comparisons to the Smoot-Hawley Tariff Act of 1930, which sharply raised US tariffs, prompting retaliation and a global collapse in trade that ultimately exacerbated the effects of the Great Depression.
In the wake of World War II, countries scrapped this approach in favor of a rules-based trading system with much lower non-discriminatory tariffs and what is now the World Trade Organization at its core.
“The approach that Trump is taking, I think, is going to completely destroy this system,” said Maurice Obstfeld, professor emeritus of economics at the University of California, Berkeley, who served as the International Monetary Fund’s chief economist from 2015 to 2018.
Other countries would respond with tariff increases of their own, and “we’re basically opening the door to a kind of free-for-all in trade policy, which I think, among other things, is very confusing to entrepreneurship,” Obstfeld said.
Total US-China trade will sink 70% from levels already reduced by Trump’s 2018-2019 China tariffs and maintained or even increased recently under Joe Biden, said Bernard Yaros, chief US economist at Oxford Economics.
Yaros said the post-tariff landscape would not shrink the overall US trade deficit, but would cause a “major realignment of trade flows” with other countries that could be costly in the short term.
Reduction of up to $7,600 in annual income
Harris, who replaced Biden as the Democratic nominee for president. since his campaign ended in July, he has blasted Trump’s tariff plans as a “national sales tax” that would cost US families up to $4,000 a year.
Yale University’s Budget Lab estimates that the total reduction in annual household income from 10% tariffs globally and 60% in China would be $2,576 including the impact of retaliation, but could be as high as $7,600 dollars if Trump does impose a 20% global tariff and 200% levy on certain goods from Mexico, including cars.
The Yale lab, which is staffed by some of the former Biden administration’s economic and tax advisers, estimates that Trump’s tariffs would initially raise the consumer price level by 1.2 percent to 5.1 percent.
A Trump campaign spokesman responded by citing a study by the Coalition for a Prosperous America, a pro-tariff group, that shows a universal 10 percent tariff would not cause “substantial price increases” and, if combined with offsetting tax cuts, will generate $728 billion worth of economic growth and 2.8 million jobs.
#Trumps #Tariffs #Surge #Disrupt #Trade #Flows #Increase #Costs #Retaliate
