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Why Trump's China spat has 2018 consequences

President Donald Trump's decisio...

Posted: Apr 5, 2018 10:32 AM
Updated: Apr 5, 2018 10:32 AM

President Donald Trump's decision to crack down on Chinese trade practices may seem a world away from the rural roads of Martin County, Minnesota, the self-proclaimed "Bacon Capitol of the USA."

But as the President and Republicans prepare to protect their majorities in the House and Senate in November, China's tit-for-tat trade skirmish with Trump looms large.

"I think the marketplace is speaking for itself. Hog futures are down. Stock market is down," says David Preisler, the CEO for the Minnesota Pork Board said Wednesday. "There are some pieces in the President's trade policy that we really like, but this is a big piece that we don't."

The stock market would end up closing up 200 points Wednesday afternoon.

Though Republicans and industry experts in key congressional districts from Minnesota to Florida argue that Trump has been good for their bottom lines, they acknowledge that a trade war that makes it harder for American products to be sold in key Chinese markets would not reflect well on Trump's trade rhetoric -- or his midterm hopes.

Most of the biggest pork producing counties are in red states, including Iowa, where there is a competitive House race, and Indiana and Missouri, two states that will be home to competitive Senate races in 2018.

The tariffs also target a host of orange and citrus products, many of which are produced in Florida, home to a host of key House races and one Senate contest, and California, where many political analysts believe the balance of the House could be decided.

US-China trade battle: How we got here

And tariffs on soybeans, a cash crop for much of the Midwest, could impact key Senate races in North Dakota and Ohio, two states in the top 10 of soybean producing states.

Trade war concerns also threaten to dampen Republican plans to focus 2018 campaigns on the -- until now -- booming US economy, fueled in part by this year's tax cut, the top GOP legislative accomplishment.

Minnesota's pork country

The new tariffs have put one Republican vying for office in Minnesota's 1st Congressional District, Jim Hagedorn, in a tough place. He supports the President, but it was noticeably difficult for the Republican to defend Trump's recent trade rhetoric.

"This is a very serious and crucial matter," Hagedorn said. "My position as someone who would like to represent Southern Minnesota is that we need to do everything we can at the federal level to expand exports and create new markets for our goods."

Hagedorn, who grew up on a grain and hog farm near Truman, Minnesota, has openly touted Martin County's "Bacon Capitol of the USA" moniker. He owns a T-shirt with the logo, he said, and thinks making it easier for pork producers to ship their product worldwide is something the administration should aim to support.

Hagedorn's district includes Minnesota's entire border with Iowa and has been represented by Democrat Tim Walz since 2007. But he decided to run for governor in 2018, opening up a race in a district where Trump beat Democrat Hillary Clinton by 15 points.

But the Republican was clearly worried about Trump's latest volley with China.

"I trust the President is going to do everything he can to make sure our farmers have markets globally and we are not penalized," he said.

Not unique to Minnesota

Hagedorn's predicament -- a Republican running in a district that is now feeling pressure from Chinese tariffs -- is now common across the United States: China's moves, announced over the last few weeks, strategically targeted products in areas key to the President.

Trump and many inside the White House reject the idea that the United States is slowly walking into a trade war with China.

The President tweeted Wednesday that because the United States already has a sizable trade deficit with China, it's impossible to lose a trade war.

"When you're already $500 Billion DOWN, you can't lose," he wrote.

But multiple top White House officials have looked to cushion that possibility of a trade war by arguing that not only is the United States trying to avoid a tit-for-tat with China, but that the tariffs are just posturing.

Larry Kudlow, the President's new top economic adviser, said Wednesday that he is negotiating with tariff threats is just "part of the process."

"I'm not a fan of tariffs. But I think the President is completely right to take these actions now," Kudlow said.

The issue is even more complicated for Terry Branstad, Trump's US ambassador to China, who served six terms as the governor of Iowa, the leading pork producing state in the country.

"I don't want to see a trade war," Branstad told CBS last month. "I want to see us work together to resolve these differences."

But Democrat Brad Ashford, a former House member who lost his Nebraska seat in 2016 but plans to run again in 2018, seized on the tariff news and foreshadowed potential political messaging.

"Attention soybean growers, pork producers and the Nebraska businesses and communities that depend on them in #NE02, you can express your opposition to Trump's trade wars, by voting against one of his biggest enablers @RepDonBacon this November," he wrote.

A long time coming

Trump has long talked about the new for more protectionist trade policies. In fact, it is one of his most consistent and long held beliefs. Because of this, many of these industries were preparing for tariffs long before they were imposed this week.

But the fact that the reality of a trade war is now far more real, most are looking to Washington for guidance. Some are hoping that this is nothing more than positioning, others are preparing for limits on the Chinese markets.

"We are disappointed that China has placed an additional 25% tariff on US pork exports," the National Pork Producers Council said Tuesday night. "We recognize that the US and China are negotiating, and we are hopeful that the 25% tariffs on US pork will be short lived."

That sentiment was echoed by the beef industry.

"It is unsettling to see American-produced beef listed as a target for retaliation. Sadly, we are not surprised, as this is an inevitable outcome of any trade war," Kent Bacus, director of International Trade and Market Access for the National Cattlemen's Beef Association, said in a statement.

Trump's initial decision to impose sizable tariffs on steel and aluminum and crack down on China's intellectual property violations led China to respond by imposing tariffs on 128 products ranging from pork, meat and fruit to steel pipes with a range of tariffs. The United States responded on Tuesday by publishing a list of about 1,300 Chinese exports that could be targeted for tariffs, including products from China's aerospace, tech and machinery industries. China, late on Tuesday, responded in kind, proposing tariffs on aircraft, soybeans and automobiles.

And Republicans, including some close to Trump, have already begun looking to soften the blow with Trump's base of voters.

"We want free and fair trade and to be quite honest there are issue with China," Kim Reynolds, Iowa's Republican governor, said this week. "We need to figure out a way to hold them accountable but we need make sure that we are not having untended consequences by getting into a trade war. Nobody wins a trade war."

Even Sonny Perdue, Trump's agriculture secretary, told an audience at Michigan State University on Tuesday that the administration doesn't want to make farmers "sacrificial lambs in this trade war."

"In my conversations with the President, he's not going to let the big agriculturals be a pawn in this issue," he said, according to the Detroit News.

Speaking at the university, the Perdue added: "We're not going to let farmers be sacrificed on trade wars."

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