A $2 billion hit on Iowa

EDITOR'S NOTEBOOK

BY ART CULLEN

Iowa’s economy stands to lose up to $2 billion in 2018 because of tariffs brought on by the Trump Administration, according to an analysis released last week by the Center for Agriculture and Rural Development at Iowa State University. The pork industry alone could eat a $1 billion loss, according to the highly respected economics modeling team at CARD.

Meanwhile, the Trump Administration has offered direct aid worth about $550 million to the state to soybean growers and other payments spread across the pork industry. The direct payments to soy producers figure at less than a dollar per bushel, when soybean prices are nearly $2 below the break-even cost.

The long and short of it is that Iowa farmers and pork outfits stand to lose money for a sixth straight year in no small part due to Trump’s trade wars. Consider pork: Over half of Iowa’s pork was going to China, Mexico and Canada, and we have ratified trade agreements with none of them. We believe we have a deal with Mexico that is contingent on Canada, which is not amused by President Trump. And, Trump last week slapped more tariffs on China, which in turn put tariffs on more of its products. This is turning into a trade war. On Sunday, the Chinese government placed a four-page insert in The Des Moines Sunday Register talking about Trump’s trade war and how nice the Chinese leader is, and how fun and funny he is, and how fondly he thinks of Iowa.

It boils down to politics as usual.

There might be a reason that Fred Hubbell is running close to Kim Reynolds in the Fourth Congressional District — almost unheard of. That according to the Iowa Poll last Sunday. The numbers were not released, but pollster Ann Selzer says it is close. That would suggest that Steve King is not exactly solid. One would suspect that $3 corn and a trade war might have something to do with it. This Republican program isn’t exactly working out in Sac County, one of the top corn and pork counties in Iowa, and one of the leaders in rural poverty and population decline.

It’s not going to work out well in the ag and manufacturing-heavy Upper Midwest where the Trump Tea Party gains have been so great.

CARD ran numbers assuming worst case and best, and then averaged them. Here is the haircut each takes just in Iowa from the Trump tariffs:

Corn: $333 million.

Soybeans: $545 million

Hogs: $776 million

Ethanol: $105 million

Total: $1.7 billion.

If Jimmy Carter did that they would elect Ronald Reagan.

If Donald Trump does that they are not going to give him a gold star.

Health care and Medicaid are the big state issues. But we’re already feeling the brunt of the trade war in softer futures markets and slower pork sales, which eventually lead to fewer hours at the pack in Storm Lake. CARD suggests that we also may already have lost important standing in world markets, as US soybeans now are trading at a discount to Brazilian beans. We are viewed as unreliable traders of a product with declining protein value. That damage is done. As the economists note, trading relationships change, and China is at the center of that change.

This has the potential to turn the Senate blue if Democrats can figure out how to seize on it — they probably will not. Trade is the sleeper issue in Iowa and across the Midwest this fall. You can’t just ignore a $2 billion hitjob on Iowa.