Retaliatory tariffs could target Idaho agriculture, economists say

Trade tariffs are currently at about half the level they were during the Smoot Hawley era, which is commonly thought of as exacerbating the Great Depression, but if a new level of tariffs is imposed on Chinese imports, total tariffs will be at three-quarters of that level.

That’s according to Geoff Black and Anne Walker, two members of the Boise State University College of Business and Economics, who explained the history of tariffs at an event on June 25.

After the Great Depression and World War II, countries avoided tariffs, but they have been creeping up again, imposed by both the U.S. and other countries in retaliation to U.S. tariffs.

Idaho hasn’t been affected by retaliatory tariffs as much as Iowa, North Dakota, South Dakota and Nebraska, which emphasize pork and soybeans, both targets of retaliatory tariffs, Black said. But altogether, targeted U.S. exports have fallen by 11%, Walker said, citing one recent paper that calculated the loss at $7.8 billion or 0.04% of the gross domestic product.

Canada and Mexico together are a $1.07 billion export market for Idaho, while China is a $353 million market. Agriculture accounts for 28% of exports to Canada – primarily potatoes, canola, beans and cattle – and 21% of exports to Mexico – particularly malt, potatoes, dairy and apples. There have been increased tariffs on apples and on dairy, which accounts for $14 million of sales from the Treasure Valley alone, Black said.

Agriculture accounts for 7% of exports to China – primarily dairy, potatoes, corn, apples and cherries, Black said. In fact, China is Idaho’s third-largest market for apples and cherries, and retaliatory tariffs on these products are now 50%, he said.

Altogether, six trading partners have imposed retaliatory tariffs again U.S. agriculture, primarily on soybeans, the second-largest export to China at $12 billion in 2018. But tariffs have also been imposed on commodities such as fruit, sugar, nuts and most grain sorghum, Walker said.

In general, farmers bear the brunt of retaliatory tariffs, which could have ongoing effects such as whether U.S. farmers will ever regain Chinese markets, as well as future investment decisions of U.S. producers, Walker said. So far, the U.S. economy is doing well enough overall to overshadow tariffs’ negative effects, but they will likely have ongoing impacts, she said. While U.S. tariffs favored market sectors located in politically competitive regions, retaliatory tariffs have targeted those same regions, which offset the benefit of the U.S. tariffs, Walker said.

A number of world economic organizations are concerned about a global economic slowdown caused by the tariffs, as happened in 1930 with Smoot Hawley. According to the Federal Reserve Bank of New York, tariffs have caused an $831 loss of income per household, Walker said. Bankruptcies in the farm belt are also rising, she added.

It’s true that tariffs – some of which were imposed to protect U.S. jobs in industries such as steel, aluminum, solar panels and manufacturing washing machines – have saved some jobs, but at a high cost, Walker said. Tariffs have saved approximately 35,000 jobs, but at an average cost per job of about $200,000, according to one study she cited. In the steel industry, the average cost per job is $650,000, Black said.

China, for example, has lowered tariffs on U.S. competitors as well as raising them on U.S. producers, and the result is that there is now a 14 percentage point difference between China’s average tariff on U.S. goods compared with goods from the rest of the world, Walker said.

Import tariffs are having an effect as well, Walker said, noting that the U.S. now has some form of trade protection on 14.9% of total imports, and almost half of all Chinese imports. Of these, tariffs on 12.6% of total imports have been imposed in 2018 alone, she said.