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* Tribune editorial…
“I probably just lost $50,000. That’s my first house.” So said Illinois farmer Aaron Wernz, speaking to a Wall Street Journal reporter after China announced it would put a hefty 25 percent tariff on U.S. soybeans, which Wernz grows. The tariffs will raise prices to Chinese buyers and cut their purchases, which could cost American soybean growers $1.7 billion. […]
Last month, the administration announced it would put new duties on all imported aluminum and steel, before deciding to exempt Canada, Mexico, the European Union and other countries. The chief target was China, which answered with tariffs on U.S. pork, fruit and nuts.
Then the Trump administration announced 25 percent duties on more than 1,300 Chinese products worth some $50 billion. Beijing countered with equal levies on $50 billion of 128 U.S. goods, notably soybeans, corn, cotton, chemicals and cars. There may be more tariffs to come.
* Sun-Times…
If China slaps a heavy tariff on soybean imports, 43,000 Illinois soybean farmers will scream. But so, too, will Illinois taxpayers as our state’s miserable economy takes another big hit. If China slaps a tariff on pork, some 2,000 Illinois pork farmers will howl, and so will we all.
State tax revenues will drop, revenues and profits for related businesses will take a dive, and good luck, Illinois, in clawing back to economic and fiscal health. […]
Illinois is the United States’ leading producer of soybeans, and China is our best customer. The Chinese buy almost 25 percent of the state’s output, about $1.75 billion in soybeans.
Last year, Illinois produced nearly 612 million bushels of soybeans, according to the Illinois Soybean Association. And about 114,000 people in Illinois have jobs thanks to that huge demand for soybeans and byproducts, such as soybean meal and biodiesel, according to the association’s marketing committee chairman, Austin Rincker.
Overall, revenues for Illinois farmers are down considerably in the last five years, in part because grain supplies have outpaced demands, but soybeans have been the exception. They have been profitable, Rincker says, “because of the demand in China.”
* But it’s not just farmers…
President Donald Trump’s move to slap $50 billion in tariffs on Chinese imports threatens to complicate and sharply drive up the cost of a much-ballyhooed contract the Chicago Transit Authority has struck with a Chinese firm to produce as many as 836 train cars.
The up to $1.3 billion pact was awarded two years ago to CSR Sifang America, now known as CRRC Sifang America, which is scheduled to deliver two prototype cars next year before beginning full production. Mayor Rahm Emanuel lauded the deal because, under its terms, Sifang would open a plant at 135th and Torrence, the first rail plant of any kind in many decades in the Pullman neighborhood, which once was the center of the nation’s rail-vehicle industry.
The new problem is that Sifang will only assemble the cars at 135th and Torrence. Their components will be made elsewhere, including in China, and Trump’s proposed new tariffs would impose a 25 percent duty on rail cars, their parts and components imported from that country.
The CTA’s contract includes a “buy America” clause requiring that at least 69 percent of the components in the cars assembled by Sifang be produced in this country. But that still leaves hundreds of millions of dollars’ worth in other components that could come from China and therefore be subject to a 25 percent tariff.
posted by Rich Miller
Thursday, Apr 5, 18 @ 3:22 pm
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Previous Post: Proft and Timpone defend and deflect
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It just means government will give more production subsidies to farmers to offset the tariffs.
Comment by Wylie Coyote Thursday, Apr 5, 18 @ 3:29 pm
All the farmers affected by tariffs can take heart by the knowledge that their heirs won’t have to pay estate taxes when their dead.
Vote accordingly
Comment by Norseman Thursday, Apr 5, 18 @ 3:32 pm
Trump disapproval rating here is 60% I thought I read somewhere.
Comment by Blue dog dem Thursday, Apr 5, 18 @ 3:39 pm
And Rauner stays silent?
Wouldn’t it be nice if we had a Governor who had a line of communication with the President who could possibly make a call to our state out when it’s about to lose a ton of money and jobs?
Comment by DuPage Bard Thursday, Apr 5, 18 @ 3:44 pm
Trump is adding injury to insult. There are ways to use tax policy to help shift jobs back to the USA. Tariffs are a poor choice.
We could put an excise tax on goods that are mainly used overseas. Use the revenues to help lower the cost of US production. It will be tricky to structure it so we don’t violate other agreements, but smart people can do it.
Comment by Last Bull Moose Thursday, Apr 5, 18 @ 3:44 pm
sorry…..for our state……
Comment by DuPage Bard Thursday, Apr 5, 18 @ 3:44 pm
VOTE to Trump
Comment by Anonymous Thursday, Apr 5, 18 @ 3:53 pm
=All the farmers affected by tariffs can take heart by the knowledge that their heirs won’t have to pay estate taxes when their dead.=
TO further that… Say a farmer has 1000 acres and makes 100k per year. Decent ground would easily bring $10k per acre, for a total value of $10m. After the $5.5m exception, they would owe 40% on $4.5m in inheritance taxes, which is $1.8m. THat’s 18 years of their entire income.
If they lose 20% of the value of their soybeans due to tariffs, but pay no inheritance tax, they are far better off.
Comment by m Thursday, Apr 5, 18 @ 4:04 pm
–Trump disapproval rating here is 60% I thought I read somewhere.–
What does that mean? Farmers have it coming? Is that how it works in your world of entitlement.
Comment by wordslinger Thursday, Apr 5, 18 @ 4:10 pm
Too bad our governor won’t stand up for residents who will be hurt by the stupid tariffs.
Comment by anon2 Thursday, Apr 5, 18 @ 4:11 pm
Old Blue knows exactly how these soybean farmers feel.
Comment by blue dog dem Thursday, Apr 5, 18 @ 4:15 pm
Making America Great by making China greater. Oy
Comment by MAGA-nonymous Thursday, Apr 5, 18 @ 4:26 pm
= It just means government will give more production subsidies to farmers to offset the tariffs. =
Quite offensive.
Has anyone asked the director of ag about this topic? He is quite intelligent about these things and I think it would be beneficial.
Comment by I Miss Bentohs Thursday, Apr 5, 18 @ 4:26 pm
Leo Gerard would also be an excellent source of information on this topic.
Comment by Blue dog dem Thursday, Apr 5, 18 @ 4:29 pm
–Old Blue knows exactly how these soybean farmers feel.–
Of course, you’re the biggest victim. We got it, believe me.
China represents 3% of the steel imports to the United States. Obviously, that’s cause for a trade war that will tune up all pork, soybean and corn producers.
https://www.reuters.com/article/us-usa-trade-factbox/factbox-top-steel-exporters-to-the-united-states-idUSKCN1GE10I
Comment by wordslinger Thursday, Apr 5, 18 @ 4:30 pm
I’ve been exasperated by China’s theft of our intellectual capital. Chinese consumers, who do not make that much, are going to love those food price increases.
Comment by Anonymous Thursday, Apr 5, 18 @ 4:32 pm
–Chinese consumers, who do not make that much, are going to love those food price increases.–
Who says they’re going to buy from the United States? 87% of China’s food imports come from countries other than the U.S.
Might be wise to put some money down on Brazilian soybean futures.
https://www.reuters.com/article/us-usa-trade-china-latin-america/brazil-soy-exporters-set-to-win-big-from-u-s-china-trade-spat-idUSKCN1HB2XK
https://wits.worldbank.org/CountryProfile/en/Country/CHN/Year/LTST/TradeFlow/Import/Partner/by-country/Product/16-24_FoodProd
Comment by wordslinger Thursday, Apr 5, 18 @ 4:40 pm
Word. Usually I give you credit for well thought out comments. Your ignorance on this topic is not like you. China overproduces steel. It lowers its prices on the global market to whatever price is necessary to move product. This lowers the price of US produced steel. Government subsidized. Just like our ag industry. Is this free trade? Is this market driven? Is this socialism destroying capitalism? You are sadly mistaken if you think I want entitlements. I just want a level playing field. I know that the American work ethic and ingenuity can compete with third world wages. What we can’t compete with is government sponsored industry..
Comment by blue dog dem Thursday, Apr 5, 18 @ 4:44 pm
BDD, 3%.
Comment by wordslinger Thursday, Apr 5, 18 @ 4:48 pm
Word. 3%. Your effort on the subject.
Comment by blue dog dem Thursday, Apr 5, 18 @ 4:50 pm
And why nothing but crickets from IL republican Congressmen on this?
Comment by jaykay Thursday, Apr 5, 18 @ 5:02 pm
–Word. 3%. Your effort on the subject.–
No, that’s the share of steel imports to the United States from China.
In 2016, the United States produced 88 million metric tonnes of steel. It imported 30 million metric tonnes, for a total of 118 million metric tonnes.
Of that, imports from China were 900,000 metric tonnes, representing 7/10ths of one percent of the market.
Tell me, what other producers with less than one percent market share dominate an industry in the United States, requiring a trade war?
http://americastradepolicy.com/steel-imports-report-united-states/#.Wsade9Twa70
Comment by wordslinger Thursday, Apr 5, 18 @ 5:21 pm
BDD - The case to be made then is why we would want to punish our farmers (and other viable industries) to benefit a U.S. steel industry that has largely disappeared? I would agree that the Chinese are bad actors but we have to be able to justify the decision and the consequences it brings. If we say, “I like what Trump is doing to the Chinese” does it also stand to reason that we like what he may be doing to the American farmer as a result?
And lets also make sure that we can justify what these tariff’s may potentially mean to other trading partners like Canada. Last I checked we seemed to think of them as an ally.
Comment by Pundent Thursday, Apr 5, 18 @ 5:26 pm
–a U.S. steel industry that has largely disappeared?–
Those blast furnaces off the Skyway are going 24/7. They ain’t roasting weenies.
Comment by wordslinger Thursday, Apr 5, 18 @ 5:30 pm
=Tell me, what other producers with less than one percent market share dominate an industry in the United States, requiring a trade war?=
Just like other commodities, prices are set in a global market. You could import no Chinese steel at all, they still have an impact on the market.
There are countries that import no US soybeans, their prices are still reflective of the impact of US soybeans. The US, Brazil and Argentina produce 5 times as much soybeans as the next 7 largest countries. It doesn’t matter if you import from one of those three countries, those three countries and their crops set the prices everywhere.
Comment by m Thursday, Apr 5, 18 @ 5:32 pm
–You could import no Chinese steel at all, they still have an impact on the market.–
So do many things, including supply chain proximity.
What’s the point of the tariffs, then?
Comment by wordslinger Thursday, Apr 5, 18 @ 5:36 pm
=What’s the point of the tariffs, then?=
So US steel makers can charge more domestically with less fear of Chinese competition I would assume.
I’m not advocating for the tariffs btw, just was commenting on the issue of Chinese impact on US domestic market.
https://www.npr.org/2018/03/08/591637097/china-churns-out-half-the-worlds-steel-and-other-steelmakers-feel-pinched
From the article, “China now produces about half of the world’s steel. It singlehandedly churns out as much steel in one year as the entire world did in 2000.”
Comment by m Thursday, Apr 5, 18 @ 6:08 pm
=Those blast furnaces off the Skyway are going 24/7.=
Point well made. And most steel production in the U.S. today is largely automated.
Comment by Pundent Thursday, Apr 5, 18 @ 6:15 pm
–And most steel production in the U.S. today is largely automated.–
U.S. Steel Gary works, built in 1908, once employed 30K, now about 5K. Still the largest mill in North America.
My son is a supplier there. Says it’s like walking through Dante’s nine circles — dark, dirty and lots of fire.
Comment by wordslinger Thursday, Apr 5, 18 @ 6:24 pm
“Say a farmer has 1000 acres and makes 100k per year. Decent ground would easily bring $10k per acre, for a total value of $10m. After the $5.5m exception, they would owe 40% on $4.5m in inheritance taxes, which is $1.8m. THat’s 18 years of their entire income.
If they lose 20% of the value of their soybeans due to tariffs, but pay no inheritance tax, they are far better off.”
Or just pay an attorney 5% of the value of your soybeans, form a trust and avoid all inheritance taxes.
It ain’t rocket science.
– MrJM
Comment by @misterjayem Thursday, Apr 5, 18 @ 6:25 pm
But tariffs won’t be bringing those 25K jobs back and isn’t that the point? Punishing China while simultaneously punishing our farmers and others seems a bit pointless.
Comment by Pundent Thursday, Apr 5, 18 @ 6:30 pm
135th and Torrence is in Hegewisch/South Chicago area, not Pullman. There’s a map with 77 Chicago communities that someone isn’t using.
Comment by Get It Right Thursday, Apr 5, 18 @ 7:04 pm
==U.S. Steel Gary works, built in 1908, once employed 30K, now about 5K==
This is my main problem with these tariffs - the ROI part of it. I read somewhere that the US steel industry currently employs about 155,000 people. You’re going to take the option that hurts steel consuming companies that employ many more people, plus companies that make things like bourbon and motorcycle and all kinds of other stuff, and lord only knows how many farmers - just to help the 155,000 steel workers? Surely there is a way to help steel workers without the damage this is going to cause. It doesn’t make any sense.
Comment by Lester Holt’s Mustache Thursday, Apr 5, 18 @ 7:07 pm
–From the article, “China now produces about half of the world’s steel. It singlehandedly churns out as much steel in one year as the entire world did in 2000.”–
Yes. Your point being?
China produced 832 million metric tonnes last year. And exported, to the world, less than 10% of it, 73 million metric tonnes. (They’re building a lot there).
900,000 metric tonnes were exported to the United States. Another 29 million metric tonnes were imported from other countries, another 88 million metric tonnes were produced in the United States.
Again, China steel has less than one percent market share in the United States.
On the other hand, the United State is risking its 13% share of the China ag import market. The 150 of so other countries that provide the other 87% of China’s imports can fill that gap.
Who’s showing better cards here, you think?
https://www.trade.gov/steel/countries/pdfs/exports-china.pdf
https://wits.worldbank.org/CountryProfile/en/Country/CHN/Year/LTST/TradeFlow/Import/Partner/by-country/Product/16-24_FoodProd
Comment by wordslinger Thursday, Apr 5, 18 @ 7:30 pm
I just checked soybean futures. They are around 10 and a half up a buck from a few months ago….no farmer has lost anything.
Comment by Not a Billionaire Thursday, Apr 5, 18 @ 7:39 pm
I don’t know if the actions taken against China will have the desired effect. They’ve been bad actors for a long time. Perhaps calling them out will get them to adhere to agreements. Frankly, their overall behavior demands action.
I’ll wait two months and see how this develops. Frankly, JB’s tax plan, which he won’t reveal, scares me more than the trade war at this point.
Comment by SSL Thursday, Apr 5, 18 @ 7:50 pm
SSL. Excellent stuff.
Comment by blue dog dem Thursday, Apr 5, 18 @ 8:35 pm
I am sick of all the winning.
Comment by illinifan Thursday, Apr 5, 18 @ 9:23 pm
TO further that… Say a farmer has 1000 acres and makes 100k per year. Decent ground would easily bring $10k per acre, for a total value of $10m. ===After the $5.5m exception, they would owe 40% on $4.5m in inheritance taxes, which is $1.8m. THat’s 18 years of their entire income.
If they lose 20% of the value of their soybeans due to tariffs, but pay no inheritance tax, they are far better off.===
I’m going with “it’s all moot, because if you are this close to the margins while operating at that scale, you’re going to lose the farm long before you croak.”
Comment by Graduated College Student Thursday, Apr 5, 18 @ 10:11 pm
===I know that the American work ethic and ingenuity can compete with third world wages.===
That’s news to our current business leaders.
Comment by Graduated College Student Thursday, Apr 5, 18 @ 10:13 pm
===I know that the American work ethic and ingenuity can compete with third world wages.===
“Third world” countries aren’t steel exporters. The 1970s lingo doesn’t quite reflect reality.
And 75% of steel used in the United States is domestically produced. So it appears many here can cut it.
Comment by wordslinger Thursday, Apr 5, 18 @ 10:35 pm
Illinifan. Excellent stuff as well.
Comment by Blue dog dem Friday, Apr 6, 18 @ 2:30 am
$9100/yr .not third world for sure.
Comment by Blue dog dem Friday, Apr 6, 18 @ 2:34 am
no new $70000 trucks this year. rough
Comment by seenthebigpicture Friday, Apr 6, 18 @ 7:45 am
I’m certain for most of you that Trump can’t do anything correctly. But keep in mind that by arguing against Trump’s effort to take down the barriers to US exports, you are now arguing against the interests of the United Steel Workers, UAW and others.
Comment by Downstate Friday, Apr 6, 18 @ 7:59 am
I honestly don’t care where steel is produced, but apparently very little of the steel used in the US is Chinese.
Comment by Ron Friday, Apr 6, 18 @ 8:02 am
It’s absolutely worth keeping an eye on, but this cake ain’t even close to being baked yet. Keep watching.
Comment by A guy Friday, Apr 6, 18 @ 8:24 am
I’m sure the guy who might be losing $50,000 might have another view.
This dismissiveness of the potential negative impacts on real people blows my mind.
Comment by Demoralized Friday, Apr 6, 18 @ 8:35 am
==I’m certain for most of you that Trump can’t do anything correctly==
And I’m certain there are people who believe Trump can do no wrong. But that’s also a pointless statement.
Being against a policy doesn’t equate to anything except being against that policy. I don’t care if it’s Trump or the Easter Bunny. Trade wars aren’t a good thing.
Comment by Demoralized Friday, Apr 6, 18 @ 8:38 am
Dem. Trade wars are bad. But 16 yrs of indecisevness at the WTO have not curtailed Chinas blatant violations of basic free trade agreements. How do you propose to fix these problems ?
Comment by blue dog dem Friday, Apr 6, 18 @ 8:44 am
—Trade wars aren’t a good thing.
So it’s okay that US Auto makers have an import duty in Germany that is 4 times what we charge the German car companies?
And it’s okay that a car imported into CHINA costs approximately twice the US price because of their import taxes.
If you are okay with the status quo, what would be a trigger point for you to say “enough”?
Comment by Downstate Friday, Apr 6, 18 @ 8:50 am
I do believe that Trump is focusing on real problems but more often than not the solutions are reckless and irresponsible.
For example we do have an immigration problem from Mexico. But most illegal entries these days are individual flying to the U.S. and never leaving. Trade wars and border walls are symbolic gestures that rile people up but accomplish nothing meaningful and can bring a whole but of consequences.
Comment by Pundent Friday, Apr 6, 18 @ 8:52 am
Trump has a point. A 345 billion trade deficit is unsustainable. Our country will eventually be bought out from under us.
Comment by wondering Friday, Apr 6, 18 @ 9:25 am
Getting into a trade war with China is a bit foolish.
Technically the US could really make China hurt in the long run because they ship more goods to us ($505 bil) than we do to them ($130 bil), but that is missing a major point. [http://money.cnn.com/2018/04/06/news/economy/china-options-trade-war-us/index.html]
It’s unlikely the US will hold out during the short term pain. Trump is limited to at most another 6 & 3/4 years. China’s government is much more “stable” and has a history of market manipulation and rabid suppression of dissention. The hurting US workers and farmers will vote the Republicans out and “normalize” trade relations long before China caves to the trade war, so all the economic pain will be for nothing.
TL;DR
The economic pain facing Illinois from these tarrifs will be for nothing because the Chinese will utilize political and economic manipulations to hold out long enough to win any trade war with the US.
Comment by Chicago_Downstater Friday, Apr 6, 18 @ 9:35 am
Rookie economist here – Let’s say he gets $150 billion of export tariffs and so there are another $150 billion of tariffs on imports coming to this country. Isn’t this just a $150 billion tax increase on the American consumer? Didn’t he just wipe out the tax decrease he and other Republicans have been crowing about?
What a about a part that built in the US is tariffed as it goes to China to be assembled and then is tariffed back when part of a completed product to be sold in the US? Double taxation?
Comment by NOT Milton Friedman Friday, Apr 6, 18 @ 9:50 am
Cost of living will go up, no doubt. But, this race to the bottom against third world wages will cost far more, long term. Call it a tax or wage arbitrage, it won’t work long term.
Comment by wondering Friday, Apr 6, 18 @ 10:33 am
=I’m going with “it’s all moot, because if you are this close to the margins while operating at that scale, you’re going to lose the farm long before you croak.”=
Welcome to the reality of the American farm. Massive investments in ground and equipment, tiny margins.
=Or just pay an attorney 5% of the value of your soybeans, form a trust and avoid all inheritance taxes.=
The inheritance tax is still owed when it goes in. Establishing corporations and gifting shares is now the preferred method but there is still serious tax liability, just not as bad as 40% federal plus whatever your state charges.
=Yes. Your point being?=
Simply that the country producing 50% of the world’s steel sets the prices everywhere. It’s not complicated.
=On the other hand, the United State is risking its 13% share of the China ag import market. =
Agree. Again, I’m not advocating for the tariffs. But the idea that Chinese steel doesn’t affect US domestic steel prices is incredibly foolish.
Comment by m Friday, Apr 6, 18 @ 11:19 am