Idaho could be casualty in the trade wars

July 14, 2018

Steve Taggart

We are in the midst of a rapidly expanding trade war.

Four months ago, President Donald Trump told us trade wars were “good, and easy to win.” He was — and is — grossly wrong.

The U.S. started the slugging match by imposing tariffs on steel and aluminum. Since then the European Union, Canada, Mexico and China have struck back. And nearly every day there is a new round, escalated by the U.S. or our trading partners. The goods impacted by new tariffs have soared past $100 billion. Billions more are on the way.

This is the largest outbreak of trade restrictions since the Great Depression when Congress passed the horrid Smoot-Hawley Act that cut U.S. exports by 40 percent and was a significant factor in the devastating 25 percent unemployment rate in the 1930s. The strong U.S. economy will mask the full impact for a while — but not permanently.

Unfortunately, the casualties from the current trade war are rapidly mounting here in Idaho, especially for Idaho agriculture:

Mexico purchases 25 percent of all U.S. dairy exports and just imposed a punishing tariff on U.S. cheese. Idaho’s massive dairy industry will pay the price.

Canada is targeting U.S. yogurt, another key Idaho dairy product.

Mexico is hitting frozen potatoes with a 20 percent retaliatory tariff that will have particular impact in the Magic Valley.

Canada has slapped prepared or preserved beef with a 10 percent tariff. Idaho’s beef producers will suffer.

And China just jumped U.S. beef tariffs from 12 percent to 37 percent.

This is after a bit more than a month. Despite some upbeat talk from Idaho agricultural voices that Idaho farms, dairies and ranches will only be marginally impacted, the long-term impact will be diminished Idaho farm exports. Already, our worldwide competitors are stepping into the breach. These are only opening salvos. It is likely to rapidly get much worse.

Other losers are Idaho consumers. Already the cost of buying a washing machine or dryer has jumped 10 percent. Expect prices for a wide array of products from clothes to vehicles to electronics to leap. Trump is threatening to hit European automakers next, which will hurt their Idaho auto dealers and their buyers.

There are real problems with foreign trade. China has long abused U.S. companies, inventors and creators by stealing their intellectual property, both overtly and covertly.

Idaho’s Micron is a key example. Recently it was reported that Chinese interests stole Micron semiconductor designs from a subcontractor in Taiwan. Worse, a court in China just determined that Micron is barred from selling computer chips in that country (derivatives of what was stolen from Micron).

China deserves to pay a high price for that kind of grotesque theft. But broad trade restrictions are more of a blunderbuss than a scalpel. What we need is concerted action with our allies to cut off markets for Chinese technology thieves and their ilk.

But the Trump tariffs — by targeting our friends around the world — has minimized that potential leverage. Our allies are furious — including countries like Great Britain, Japan and Canada — all of which should be helping us protect U.S. patents and copyrights.

Smoot-Hawley was a huge mistake nearly 90 years ago. The latest U.S. effort will also end poorly without a sharp reversal of course.

Idaho’s political leaders and candidates need to vigorously raise their voices in opposition on behalf of Idaho agriculture, Idaho companies, and Idaho consumers. Failure to do so is a dereliction of duty.

We have a model worthy of emulation in Utah GOP Gov. Gary Herbert: “I think this administration believes tariffs will help our people. But I believe protectionism could be catastrophic.”

Steve Taggart is an Idaho Falls attorney specializing in bankruptcy with considerable real estate experience. He was previously a political consultant and ran a congressional office in Washington, D.C. This column first appeared at Idaho Politics Weekly.

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