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  • Writer's pictureMadeline Kim

U.S. farmers fear a crippling trade war

Ever since Donald Trump announced he was running for president, he remained skeptical of the status quo of trade. His "America first" vision involved pulling out of the Trans-Pacific Partnership (TPP) and hefty negotiations with the North American Free Trade Agreement (NAFTA). He pledged to declare China a currency manipulator. Trump claimed that ultimately, he can bring back jobs to America. However, the people who Trump appealed to and promised to help are now becoming fearful for a trade war that will ultimately hurt them.

Earlier this month, Trump threatened to burden Chinese goods with a hefty $100 billion tariff. Consequently, U.S. Treasury Secretary Steven Mnuchin, on CNBC, recognized the "potential of a trade war," which led to Dow Jones plummeting. The Chinese government responded to the threat of a tariff by saying that it would "fight at any cost." This included a proposed retaliatory tariff on soybeans, corn, and other row crops, biting at the farmers here in the U.S.

Even those who believe that the U.S. is being taken advantage of by unfair trade policies and demand change are wary of the potential trade war. Farmers, especially, are beginning to fear a trade war and what that would mean for them. Already, the threat of a trade war was enough for the price of soybeans to plummet. If tensions were to escalate to a trade war, Americans should anticipate higher price tags on imported goods. Conversely, struggling farms would be slashing prices to try to make ends meet, if they can even stay in business at all.

As bleak as some farmers' futures may be, not all have lost faith in Trump or are completely disenchanted. Some perceive the threat of a tariff to be a gateway for negotiations. A threat would catch attention; striking a deal would come after. Some others do believe that he acted harshly, but regardless of the possible motives, there is a theme that ties all the speculations: hope that Trump would be a man for the working class. After being left unsatisfied during the Obama administration, farmers wanted someone who would bring something different and who would change the status quo. Clinton would deliver no change; Trump, on the other hand, would.

Unfortunately, the change that was anticipated was not the fear of a trade war. Yes, the U.S. has a trade deficit of approximately $375 billion. However, slapping on tariffs is not the way to go. This resonates with the 1930 Smoot-Hawley Tariff Act during Herbert Hoover's term. The Great Depression made isolationism appealing, and the act appeared to be a potential solution to pull the U.S. out of the depression and protect U.S. farmers against agricultural imports. However, this tariff led to the over-production of agricultural goods, causing farmers to drop their prices. Farmers cannot indefinitely drop prices; once they pass the break-even point, selling their crops would cause them to lose profit, not gain profit, leading them to go out of business. More than a thousand economists urged Hoover to veto the bill, but the bill was signed and the depression was further exacerbated.

Just as it was in the 1930s, there is not much room for optimism in Trump's threat to burden China with tariffs. If the mere threat of a tariff was enough to trigger a change in prices in soybeans, it is hard to imagine the reach of actual tariffs implemented. Additionally, this would create further tensions with China, something the U.S. cannot afford to do. There is a significant reason Trump is reluctant to explicitly label China a currency manipulator despite the fact he promised to do so on the campaign trail. In 2017, Trump tweeted, "Why would I call China a currency manipulator when they are working with us on the North Korean problem?" If the U.S. has strained relations with China, Trump would have a harder time pressuring North Korea to de-nuclearize. Given the potential stakes and unpredictable behaviors of North Korea, Trump cannot ruthlessly provoke China for possible personal gain.

Of course, no single person or political figure can singlehandedly start a trade war, and President Trump is no exception. However, trade is essential to the U.S. economy and President Trump does have power and influence. If he truly wants to put "America first," perhaps he should reconsider provoking a major trade partner and instead create policies that would actually benefit the working class and those he promised to help.


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