WASHINGTON: Iowa farmer Bob Hemesath is worried that US agriculture will pay dearly if Donald Trump wins Tuesday’s presidential election and makes good on a vow to swiftly impose a 60 percent tariff on Chinese goods and at least a 10 percent levy on all other imports. It could be a much worse rerun of the Republican former president’s 2018-2019 trade war with China that hit US farm goods with retaliatory tariffs and shifted Beijing’s purchases to Brazil and Argentina, said Hemesath, who grows corn and soybeans and raises hogs on 2,800 acres of land in northeastern Iowa.
"When we start putting tariffs on others, usually the retaliatory tariffs end up on American agricultural products,” said Hemesath, who chairs the Farmers for Free Trade advocacy group. "What I worry about is that when you do those kinds of things, you lose that market share, and you just don’t get that market share back,” he said. Hemesath declined to say who he was voting for in the election.
Economists say that Trump’s tariff plans, likely his most consequential economic policy, would push US import duty rates back up to 1930s-era levels, stoke inflation, collapse US-China trade, draw retaliation and drastically reorder supply chains. Hemesath’s concerns were echoed in a recent study by the National Corn Growers Association and American Soybean Association, which forecast that a new China trade war could prompt deeper US crop export losses, push down already depressed domestic prices and cement a shift of China’s imports to Brazil and Argentina.
Trump, who is in a neck-and-neck race for the White House against Democratic Vice President Kamala Harris, has called tariffs "the most beautiful word in the world” and argued that his plans would rebuild the US manufacturing base, grow US jobs and incomes and earn trillions of dollars in federal revenues over 10 years. Economists universally agree tariffs are paid by the companies that import the products subject to the duties, and they either pass on the costs to consumers or accept lower profits.
The duties, if fully imposed, would raise effective average US tariff levels to 17.7 percent, the highest since 1934, according to the conservative-leaning Tax Foundation. The plans have drawn comparisons to the Smoot-Hawley Tariff Act of 1930, which sharply raised US tariffs, triggering retaliation and a global collapse of trade that helped worsen the Great Depression. In the aftermath of World War Two, countries scrapped this "beggar-thy-neighbor” 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 Trump is taking, I think would totally destroy that system,” said Maurice Obstfeld, an economics professor emeritus 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 hikes of their own and "you basically open the door to a sort of free-for-all in trade policy, which I think, among other things, is very confusing for businesses,” Obstfeld said. — Reuters
Overall US-China trade would plunge 70 percent from levels already reduced by Trump’s 2018-2019 China tariffs that were maintained and recently increased by Democratic President Joe Biden, said Bernard Yaros, lead US economist at Oxford Economics.
Yaros said the post-tariff landscape would not shrink the overall US trade deficit, but trigger a "great reordering of trade flows” with other countries that could be costly in the short run.
Harris, who replaced Biden as the Democratic presidential candidate after he ended his campaign in July, has slammed Trump’s tariff plans as "a national sales tax” that will cost US families up to $4,000 a year. Yale University’s Budget Lab estimates that the total reduction in annual household income under 10 percent global and 60 percent China tariffs would be $2,576 including the impact of retaliation, but could reach up to $7,600 if Trump makes good on comments in which he said he could impose a 20 percent global tariff and 200 percent levy on some goods from Mexico, including autos.
The Yale lab, staffed by some former Biden administration economic and tax advisers, calculates that Trump’s tariffs would initially raise the level of consumer prices by 1.2 percent to 5.1 percent, or about seven to 31 months of normal inflation at the Federal Reserve’s 2 percent annual target.
A Trump campaign spokesperson responded by citing a study from the Coalition for a Prosperous America, a tariff advocacy group, which shows that a 10 percent universal tariff would not cause "meaningful price increases” and would, when combined with offsetting tax cuts, generate $728 billion worth of economic growth and 2.8 million jobs. Inflation did not significantly increase after the 2018-2019 Trump tariffs of 7.5 percent to 25 percent were imposed on $370 billion worth of Chinese goods.
But his proposed 60 percent tariff would hit Chinese consumer goods, ranging from toys to T-shirts, with dramatically higher duties and the 10 percent universal tariff would apply to more than $3.8 trillion in annual US imports. -- Reuters