President Donald Trump’s escalating trade war with China and other major trading partners has Michigan agriculture leaders feeling the pinch.
In a call with reporters on Monday, members of the Agricultural Leaders of Michigan — which represents farmers and stakeholders from a wide swath of Michigan’s more than $100 billion per year agribusiness sector — stressed that much of the damage from Trump’s trade war could already be done. But getting that business back could prove challenging.
The challenge, according to Dave Armstrong, president and CEO of Greenstone Farm Credit Services, an agricultural real estate financing firm, is that several ancillary industries are looking at alternatives to Michigan farmers because of increasing prices.
“They have the ability at this point to start looking for alternatives to the supplies that we provide and pretty soon they make those permanent,” Armstrong said. “Once that happens, it makes it extremely difficult to get those markets back long-term. I think that’s a lot of the concern that customers that I talk to have about this.”
The Agricultural Leaders news conference — which was ostensibly to tout the need for the U.S.-Mexico-Canada Agreement [USMCA], a trade agreement to replace the North American Free Trade Agreement [NAFTA] — came just hours after China announced $60 billion in retaliatory tariffs against the United States.
The ratcheting up of trade tensions on Monday led to pain in the financial markets, with the Dow Jones Industrial Average losing more than 600 points.
Trump, in a Monday morning tweet, urged the Chinese to make a deal.
I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!
— Donald J. Trump (@realDonaldTrump) May 13, 2019
But reaching a deal could prove challenging, according to David Ortega, a faculty member at Michigan State University’s Department of Agricultural, Food, and Resource Economics, who co-authored a March report on support for more trade, but skepticism of trade policy.
According to Ortega’s report, 80 percent of China’s consumers want more trade, but only 62 percent view current trade policy with the U.S. as favorable.
“Approximately 68% of Chinese consumers find America’s current trade policy toward China to be unfair,” Ortega’s report says. “These statistics highlight the complexity associated with reaching a trade deal and signal the need for a paradigm shift in trade negotiations.”
‘Definitely doesn’t help’
Ken Nobis, a senior policy advisor for the Michigan Milk Producers Association, notes that further tariffs are unlikely to help dairy farmers in Michigan, but acknowledges that the worst of the damage is likely already done.
“From the dairy standpoint, we got hit really hard on the first round [of tariffs],” Nobis said. “This isn’t going to do us any more good. Not sure how much more harm it will do because a lot of our exporting companies lost the business they had to China, but it definitely doesn’t help.”
Michigan’s agriculture industry contributes in excess of $104 billion annually to Michigan’s economy, according to the Michigan Department of Agriculture and Rural Development.
U.S. Rep. Dan Kildee (D-Flint), a frequent Trump critic who serves in a congressional leadership role as one of his caucus’ top vote counters, said on Bloomberg News last week that he’s supportive of the Trump administration’s tough stance on trade with China. That’s because he hopes to see a sound deal that addresses “structural issues” like theft of U.S. intellectual property, rather than a quickly resolved bad deal.
“In this case, the biggest concern we have is that we not accept a deal that is largely a transactional resolution. I think that’s what China really wants and there’s some fear that’s what the president would accept,” Kildee said.
“So I take it as a bit of a positive sign that [U.S. Trade Representative Robert] Lighthizer and the president both seem willing to hold firm that we will require these structural changes …” Kildee said. “And the other structural problems we see in the way China operates and the way it affects the global economy and particularly the U.S.”
Still, Kildee acknowledged that the escalating trade war is hurting Michigan’s agricultural industry and said Michigan farmers “want to compete and they want to do it fairly,” as opposed to being paid via tax dollars due to the harm from tariffs.
Fast or slow?
Although there is no clear end in sight to the global trade tensions, Michigan’s agricultural executives say they’re hopeful that Congress will adopt the USMCA and ease some of the pain.
“With Michigan agricultural exports totaling more than $2.7 billion each year, trade is critical to our ag industry,” said Jim Byrum, president of the Michigan Agri-business Association. “The USCMA will help maintain the strong trade relationships we have with Mexico and Canada, and we urge Congress to take action to ratify the agreement.”
The USMCA would replace the 1994 North American Free Trade Agreement (NAFTA), which many have credited with decimating American manufacturing as companies moved production south to Mexico for lower labor costs. Vice President Mike Pence made the case for Congress to OK the USMCA during a speech at a Southeast Michigan auto supplier last month.
Kildee, for his part, said he isn’t necessarily looking for immediate passage of the proposed agreement. He would rather wait to see whether Mexico makes good on implementing labor reforms.
“I tend toward believing that we want to see real implementation and not fall victim to the notion that there are only so many grains of sand in the hourglass and this is all going to run out,” Kildee said last week. “We have time to let them implement before we have to take up any approval.”