Trump’s Tariffs Hurt Wisconsin Economy

With friends like Donald Trump, the Wisconsin economy needs no enemies.

The retaliation by foreign governments to his sledge-hammer tactics in raising tariffs on incoming products, so far mainly on steel and aluminum imports, is already having a boomerang blowback on Wisconsin manufacturers. Examples:

• It is raising the costs of raw materials and therefore prices of Regal Ware’s cookware and appliances, making it harder to compete with its exports – 65% of its revenue. Regal Ware employs 200. Will its employment drop if its sales drop?
• Ditto for other steel and aluminum users like Briggs & Stratton, Ariens and Mercury Marine. Wisconsin is the second most manufacturing intensive state, so this state, which helped Trump win the presidency with its ten electoral votes, will be disproportionately affected by his growing trade war.
• New counter-tariffs by Mexico on U.S. food products will slam the state’s dairy industry. Mexico buys nearly one-quarter of our dairy output. Sartori Cheese says the blowback will be “pretty devastating.” Canada has also slated tariffs on dairy products.
• Ditto with pork exports for companies like Johnsonville Sausage. Mexican tariffs will go to 20% from 10% on July 5.
• Ditto with soy beans, a big crop here.
• Miller-Coors prices will rise because the costs of aluminum cans will rise. Higher prices generally spell lower unit sales.
• Thousands of suppliers down the supply chain, like Serigraph, which makes graphic parts for the whole goods manufacturers, will also see reduced business.

The puzzle in all this trade turmoil is that trade issues with our North American allies are not that big a deal. By far, the biggest trade deficits are with China and Germany. We are not that far from trade neutral with Canada.

The solution with those two countries is not to restrict their low-priced imports, which help the American consumer. It is to persuade and push those two countries to buy more American goods. China has already made a preliminary $50 billion offer in that direction. Isn’t that the better way to reduce the trade deficit?

In another dimension, the Trump Administration is obsessively attacking immigration in all forms, even legal immigration, to the detriment of Wisconsin. The president wants to cut legal immigration, which has been around the million level of entrants for years, to half of that.

The problem: with a very low unemployment rate, Wisconsin employers can’t find enough workers. There are more job openings that job applicants.

The worker shortage is especially acute for dairy farmers, who rely heavily in immigrant labor. Some dairy farms will have to shut down.

Long term care is another industry that will be crippled without a low-cost labor supply.

Even Wisconsin Manufacturers and Commerce, the state’s biggest business lobby that is usually lock-step with the Republican Party, opposes the Trump Administration on immigration policy.

Long and short, it hard to see how President Trump’s volatile trade and immigration policies help this state.

The president is good at picking fights. Twitter insults against foreign leaders are a dubious bargaining tactic. (I am trying to think of an instance where insults helped cut a deal in business or government.)

He is good at ripping up foreign policy agreements that took years to negotiate with allies. These are allies like Canada and France who have been with us in every war. Their boys died next to ours. Why not respectfully rework these agreements instead of just walking away?

He is outstanding at reducing levels of trust with partners and established
institutions.

I like the theory that world trade promotes world peace. Countries are less likely to go war if they are trading partners. Or if there is a lot of cross-border investment. Please, China and Russia, buy more U.S. real estate and assets.

On the very bottom line, business likes certainty and predictability so it can invest for the long term. If the president’s men spelled out their trade strategy, that would offer some certainty. As with other major policy arenas, they haven’t promoted an often-missing Plan B.

If their approach is a lot of rhetoric, insults and wild slap shots, world trade will suffer, and Wisconsin employers and employees will suffer more than most. Wisconsin generally has a trade surplus – more exports than imports.

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.