Impact of tariffs and a trade war

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The State Capitol Building’s golden dome makes it easy to spot when nearing Iowa’s largest city. 

Annelise Wells

The United States and China have been threatening trade tariffs back and forth since March. However, majority of these threats have just been discussion and not yet turned into policy.

But David Swenson, associate scientist in the department of economics, says that we can not discount these threats as nothing. Even though they are mainly  rhetoric, they have a real life impact on the United State’s economy. 

“What we’ve engaged in is a rhetorical trade war, and it does have consequences for the markets,” Swenson said.

If the duties become reality, both the Chinese and United States economies will be negatively impacted.

“[Trade wars] are harmful to all economies involved,” Swenson said. “They will slow the rates of growth of everybody who is engaged…as well as interfere with all other countries’ rates of growth, so this is just simply harmful.”

Specifically, these tariffs could cause even more problems for Iowa’s struggling agriculture economy.

“A trade war with China will disproportionately impact Iowa and it will make an already bad farm sector depression worse,” Swenson said.

These threats and uncertainties impact farmers not just in Iowa, but all over the country when it comes time to make decisions on what crops to plant.

Swenson said this would be the first year nationwide that soybeans were going to exceed corn planting on an average basis, but that may change because  of the threat of duties on exporting soybeans. 

“If all of a sudden things get topsy turvy come springtime, what do you do? Do you go ahead and go ahead with soybeans even though there’s this threat of higher tariffs, or do you go into corn, which aren’t making a profit either?” Swenson said.

Overall tensions first started rising when the Trump administration imposed tariffs on imported aluminum and steel in early March.

Even though Iowa is not a major steel producing state, it is a prominent steel consuming state. This tariff has already increased costs to farmers for their agriculture equipment such as machinery, grain bins, and fence posts, Swenson said.

In response to these tariffs, China responded with duties of their own. The Chinese government proposed $3 billion in tariffs on a list of 128 U.S goods.

These tariffs keyed in two items specific to Iowa, pork and ethanol. 

“Those are two things that Iowa produces more than any other state,” Swenson said.

The Chinese government also included soybeans to potentially be taxed from the United States. Since Iowa is the second leading producer of soybeans in the country, this has a similar impact to the potential tax on pork.

If this trade war becomes reality, overall prices of pork and soybeans would have to go down. It’s going to have a depressing effects on prices producers of pork and pork processors, Swenson said.

“All of the producers of the agriculture commodities that are restricted are going to have to find alternative markets or they are going to have to lower their prices one way or the other in order to make them competitive worldwide,” Swenson said.

Nobody can predict if these tariffs will actually turn into policy in the foreseeable future.

“Where we are right now is everybody has had their say,” Swenson said.”Now what we have to see is how much of this gets worked out.”