Pop Quiz! Q: What three things do the following states have in common; Indiana, Ohio, and Missouri?
A: 1) Both have “vulnerable Democratic Senators up for reelection in 2018, 2) All three are in the top ten of soybean producing states, and 3) All of them went for Trump in 2018.
Getting into a trade war with any other country is never a good idea, for the simple fact that everybody loses. But getting into a trade war with a country like China is a car wreck looking for an intersection, simply because almost all of the major industries in China are either directly or indirectly controlled by the Chinese government, making it much easier for them to coordinate, control, and survive the increased costs of the tariffs.
Case in point. Trump has announced tariffs on Chinese goods such as electronics, washing machines, and medical devices. Woop-de-doo. China’s industries will simply increase the per unit price to the American companies they supply, forcing the companies to increase their prices on the items in stores to make up the shortfall. Trump doesn’t have that luxury. It’ll be individual store chains and manufacturers who will have to deal with the increased cost of production or sales due to the increased price of Chinese imports.
And what did China decide to impose a tariff on? Soybeans. That’s right, soybeans. Which is not good news for American farmers, since China is the largest importer of US raised soybeans. But imposing a tariff on soybeans holds a rather unique problem for American producers.
Soybeans are not washing machines, or home entertainment centers. You can’t just hire overtime to ramp up production. Soybeans have to be planted, and once they’re harvested, they have a limited shelf life.
US soybean farmers have already fixed their crop plans for this year, hell, a lot of the crops have most likely already been planted. If China hoists a 25% tariff on soybeans, it’s going to be the US farmers that will have to eat it. And they’ll have to eat it, producers plan their crop in response to planned demand. If they don’t sell to China because of the tariffs, who do they find to buy off of those extra soybeans? And if US soybean buyers know that soybean producers have a glut of soybeans on their hands, they can bid less for their soybeans, knowing that the soybean sellers will have to sell at the lower prices just to get rid of them, rather than let them rot for a loss.
This is where Indiana, Missouri and Ohio come in. Those are all top ten soybean producers, all went for Trump in 2016, and all have Democratic Senators that the GOP would love to unseat. If what I’ve heard is correct, the US and China have about 6 weeks until they have to either impose the sanctions, or forget about it. If Trump imposes tariffs, and China responds, the impact is going to be felt in soybean producing states immediately. And those people who make their living from soybeans are going to blame Trump. Which should make the idea of Democratic incumbents holding their seats a much more doable lift. And it’s not just Senators, every House member is going to have to run in 2018, including in Iowa, which is also in the top ten soybean producing states.
And you know what else China has proposed putting a nice fat tariff on? beef. And guess what? Everybody’s favorite Canadian import, Calgary Teddy Cruz is up for reelection in 2018. Think Chinese tariffs on imported beef, which is one of Texas’ mainstay exports, is going to go over big with Texas voters? China doesn’t require Texas beef, they can get it from Argentina, among other places, but what do Texas ranchers do with all of that surplus beef? And do US beef buyers start offering lower purchase prices for beef, knowing that the ranchers are flush with the stuff?
One of the first laws that politicians learn in the cradle id the law of unintended consequences. This is not much of a problem for Trump, since he doesn’t even seem to properly understand the intended consequences of his actions. But, in a year where the GOP, following the upset election of Trump were hoping to pick up 3-5 Senate seats, it would be poetic justice if the impulsive actions of their own President torched that dream once and for all.