No nation was ever ruined by free trade. ~ Benjamin Franklin
The US-China trade war is continuing and will get much worse on Tuesday. First initiated during President Trump’s initial term, US tariffs on specific imported Chinese products ranged from 10% to 50%. As of February 4, tariffs on all Chinese imports will be 10% above any existing tariffs. The president didn’t forget the other 2 nations that we trade most with. He also increased US tariffs on Canadian and Mexican imports to a stunning 25%. Kaja Kallas, the European Union’s chief diplomat, correctly labeled them saying, “There are no winners in trade wars.”
The president’s Order contains a clause that will increase US tariffs if Canada, China, or Mexico retaliate. All three governments already have promised to answer Mr. Trump’s higher levies with their own retaliatory tariffs on US exports including Florida orange juice, Tennessee whiskey, Kentucky peanut butter as well as other goods.
On October 15, 2024 Donald Trump stated that of the 470,000 entries in Webster’s English Dictionary, “Tariff is the most beautiful word in the dictionary.” Now as president again, he’s attempting to beautify America. His new tariffs will not be beautiful; they will be ugly, especially for consumers.
Tariffs have a long history of creating revenue for public potentates. The world’s first tariffs of record were established by English King Henry VII in 1489.
Henry VII (1457-1509) Wikipedia
Three (3) centuries later, the US Tariff Act of 1789 was promptly enacted by the newly-created US Congress. This law allowed only the US government to levy uniform tariffs, no state can create tariffs. Tariffs remained the primary source (up to 90%) of US federal revenue for well over a century. Tariff revenues now provide about 2% of federal revenues. Before the president’s January 31 tariff proclamation, the average US tariff across all products was 2.77%.
Today the US has increased tariffs on all imported Chinese goods. Such an escalation will raise prices for companies and consumers likely accelerating domestic inflation. Higher US tariffs have incited additional retaliation from Canada, China and Mexico, further ratcheting up a trade war that has already exacted economic harm for each country.
Hundreds of products’ prices were subsequently increased by President Trump’s first Chinese tariffs started in May 2018. They were imposed on $200 billion (B) of Chinese imported goods that represents 40% of Chinese imports to the US. The list of tariffed Chinese items included everything from “frozen retail cuts of meat of swine” all the way to “furniture of plastics.” China predictably retaliated with new tariffs on roughly $60B US exports into China, that represented 46% of 2017 US exports to China. Although China has certainly stretched WTO rules to its advantage, it’s doubtful that the president’s current hardball tactics of raising tariffs will be worth the pain and cost that will harm US exporters and consumers.
A prominent paradox of the president’s tariff increases is his nascent administration’s justification for the new tariffs’ anticipated loftier tax revenues. Higher tariff revenues will serve as a means of justifying the president’s extension of sizeable tax cuts for the wealthiest Americans.
The US imports more goods from China than any other nation in the world. In 2022, China accounted for 16.5% of all US imported goods. This fact is reflected in the sizeable, continuing trade deficits the US has with China, $279.4B in 2023. China’s dramatic economic growth over the past decades has been principally export driven. It is the leading exporter of goods in the world, ahead of the US. China’s exports of goods represent a hefty 18.6% of its GDP. In 2023, total US goods’ and services’ exports represented 11% of our GDP.
In this assessment of our trade conflict with China, I focus specifically on US farmers who have endured heavy and direct economic cross-fire from the president’s trade war. More than 20% of US agricultural exports face reciprocal tariffs from China and other countries.
I examine an incongruous pair of agricultural products, soybeans and lobsters that have been subject to Chinese tariffs. Before the president initiated his new tariffs, the US exported to China $21.6B of soybeans and $128.5 million worth of live lobsters. I will soon dive into marine crustaceans, but let’s first consider the humble soybean.
Soybeans. Soybean plants are widely grown for their edible bean. US farmland is awash with soybeans. They are now planted on 86 million acres of American farmland, more than any other crop. Thus, soybeans are very BIG agriculture in the US. They are our nation’s single largest agricultural export; almost double that of corn. This is one reason why China imposed a retaliatory 25% tariff on US soybean exports. Another reason is based on where soybeans are grown – in bright red, Trumpian mid-western states. In addition to being the source of all things in the tofu universe, soybeans are widely used in animal (especially pig) feedstocks, and as an ingredient for biodiesel fuel and astoundingly even crayons. Fermented soy foods include soy sauce.
About 60% of US soybeans are exported. The Chinese market dominates US soybean exports. However, the Chinese tariffs on US soybeans have transformed that situation. China retaliated in 2018-19, with tariffs on US soybeans entering China which caused US exports to plunge by 98% into the country.
The Chinese imported only $15.1B of US soybeans in 2023. They’ve been buying more Brazilian and Argentinian soybeans instead. Also distressing for US soybean growers is that 2024 year-end prices per bushel have collapsed to August 2020 soybean prices. The USDA/ERS expects 2024 net farm income (a measure of farm profits) to drop by 1.1%. “It’s a big concern,” said David Williams, a Michigan soybean farmer. The trade conflict, which President Trump initiated with steel and aluminum tariffs in 2018, has spread far afield.
US soybean farmers have taken it in the beans with respect to their livelihoods due to Trump’s tariffs. These reliably Republican farmers notably complained to the Trump administration about the first Chinese punitive tariffs. The US government responded to these grievances by providing $3.6B in unplanned, taxpayer-paid fiscal assistance to soybean farmers to offset their financial distress caused by price and income drops.
Lobsters. Lobsters are large marine crustaceans. North Atlantic lobsters are found off the ocean coasts of New England and Canada. The largest lobster ever caught weighed 44 lb. They are sold and shipped as living animals. The biggest producer and exporter of American lobsters is the state of Maine. Lobster is an acquired taste for some, but they’re eaten by increasing numbers of consumers. It is a staple in North American seafood markets and is featured on many restaurants’ menus.
For New England and especially Maine, lobsters have long been a fragile business. In 2023, Maine’s 4,800 lobster fishermen (there are very few women who commercially catch lobsters) “landed” 93.1 million (M) pounds of live lobster; that’s just 58% of 2016’s catch and the lowest since 2009. The lobster industry has often experienced significant ups and downs. In 2019, US lobster exports to China dropped more than 40% due to China’s retaliatory tariffs and stringent inspections. But in 2023, the US exported $182M worth of live lobsters to China, after the Chinese eliminated both their tough Covid-related inspections for imported food and some of the punitive, retaliatory tariffs that eliminated virtually all US lobster exports to China during several prior years.
Mark Barlow is the owner of Island Seafood, a large business that ships live Maine lobsters around the world. Barlow mentioned that as soon as China slapped its 25% tariff on US lobster exports, he told his sales team, “China’s dead.” His Chinese customers confirmed his expectation. “I don’t think there is [a] way to import US lobster,” one Chinese buyer stated. Barlow confirmed the Chinese tariff was a significant blow for Maine. As he put it, “The orangutan in Washington woke up from a nap and decided to put tariffs on China, and then Chinese stopped buying [Maine lobster] immediately. We’re getting absolutely slaughtered.” Maine’s drop in lobster sales became Canada’s bounty. Instead of buying Maine lobsters, the Chinese purchased Canadian ones. Trumpian tariffs threw US lobstermen overboard.
Although it's unlikely, introducing stronger US tariffs on hundreds of imported goods might eventually benefit some US manufacturers who are not subject to the tariffs. But Maine lobstermen and Minnesota soybean farmers will suffer again from their lobster losses and soybean sorrows. Their travails will coincide with millions of US consumers who will be paying extra for imported goods like vegetables, petroleum, automobiles and medical drugs. Mexican avocados will become pricier, and Trump’s happier, go figure.
One estimate of the increased costs we will face because of these tariffs is at least $1,170 per household. The president’s provocative tariff policy – mimicking President William ("I am a tariff man.") McKinley’s failed policy preferences – does not appear to be a winning economic strategy, even if he blames it on DEI programs.
