American farmers in Trump-voting states may get hit hardest by a trade war
Should we hurt 300,000 soy farmers to help 150,000 steelworkers?
President Donald Trump's trade war with Beijing has U.S. farmers — especially soybean growers, whose number one export market is China — concerned for their future.
China has threatened to target the crop as part of a tit-for-tat over Trump's $60 billion in tariffs against Chinese imports, announced Thursday. Experts say that while everyday consumers won't see an immediate impact, it could knock 300,000 soy farmers out of the market, with long-term negative effects for their communities.
"When my dad taught me and his dad taught him how to farm, they didn't have to worry about China," said Rob Shaffer, a 48-year-old soy bean farmer in Illinois. Along with his brother, Shaffer grows soy, corn, and raises Angus cattle on the land his great-grandfather bought in 1920.
"Now we're on the global market," he said. "Everything I do is impacted by what's happening outside the U.S."
In any potential trade war, he's on the front lines. When the proverbial butterfly flaps its wings in Asia, the ripple immediately shows up in the price of soybeans on the Chicago Board of Trade, determining whether Shaffer will be able to profitably load his beans on a container ship to China in the fall.
In a press conference announcing the tariffs, Trump spoke of how China violated U.S. intellectual property rights while raising steep tariffs against American goods. "They're taking advantage of the United States, we're not going to let that happen," he said.
The announcement, combined with Facebook's privacy woes, sent the Dow Jones plunging 700 points.
On Friday, China fired back at Trump, saying it could slap retaliatory tariffs on billions of dollars of American products. In particular, it's coming after the $14 billion soybean business. And, as the number one buyer of U.S. soybeans, China has leverage.
American shoppers likely wouldn't see the impact of any trade war in the price they pay for Wheaties. If anything, losing an export partner could cause an increase in the existing commodities surplus and theoretically bring down prices for consumers. But there are ripple effects that can affect them down the line.
When the farmer gets hit, so does the corn seller, fertilizer seller, tractor sales office, and hardware store who depend on him for their business. It can hurt the income of the entire local community built up around them, slowing economic growth.
"There's collateral damage," said William Reinsch, Senior Adviser at the Center for Strategic and International Studies and the former president of the National Foreign Trade Council.
"If [a farmer] can't unload his soybeans, he loses money. Then the bank loses money if he has trouble paying his loans. The tax base in his community suffers," which can lead some communities to cut back on services like police, fire, and schools.
"If you look at communities in distress because of trade, there's a ripple effect," said Reinsch. "The people who are prosperous run out of money, and that erodes the tax base."
Trump says he is taking these measures to protect workers in the steel and metal industries, workers who largely voted for him.
But other voters in "Trump country" wonder whether the president is fulfilling the campaign promise that they want him to.
"The rural people of this country elected Trump on the basis that he would help put value back into small communities all over this country and bring a sense of pride and authenticity back to the slogan Made in America," Brandon Whitt, a Tennessee soy farmer, told NBC News.
"Tariffs on American soybeans will be a crushing blow" with a "ripple-down effect sure to come in all facets," said Whitt, who wrote in John Kasich in the 2016 presidential election.
This is exactly what China has in mind, said Wang Jiangyu, an international law associate professor at the National University of Singapore.
“This is China’s strategy: Those agricultural products that China included in its new tariffs were targeted at Trump's supporters, those states and people who supported Trump. Now the farmers have to suffer. It's a direct siege on Trump's political base — to wake him up,” said Wang.
And economists say that it doesn't make sense to hurt the nation's 300,000 soybean farmers to help its 150,000 steelworkers.
"If there was an epidemic of baldness, would we help hairdressers by putting a small tax on Rogaine?" said Sharon Traiberman, an assistant professor of economics at NYU. "We have a progressive tax system, and we should be making it more progressive and then using the proceeds to either directly compensate dislocated workers through unemployment insurance, or we can retrain them, or we can help them move to locations with better labor market prospects."
Back in Illinois, Shaffer says he's not sure how he'll weather the economic storm on the horizon. And he's less confident than his grandfather and father before him that he'll be able to pass the farm down to the next generation. But he has hope.
"The farmer is the eternal optimist. He puts seed in the ground in spring and hopes there's product in the fall," he said.