Iowa in the Cross-Hairs of Dependence on Agriculture Export vs Trump’s Trade Wars

April 3, 2017

Trump brings a great deal of tough talk on trade, with the latest, instructing his government to study for countries America has a trade deficit with. And in fact, one of the first actions Trump took, since entering the White House, is to kill the Trans Pacific Trade deal. The problem is that America is a major exporter of agriculture products. And Trump trade position is a sensitive issue, apart from America’s agriculture products could be hurt in a trade war, Trump’s is also talking tough on illegal immigrants and Mexican Wall. Like it or not, American agriculture depends on these Hispanic illegal immigrants. In fact, the cut off of illegal immigrants have been tried in several States. And in States with agriculture, massive damage to the state’s GDP was one result.

After 5 years of steady growth, U.S. agricultural exports declined in 2015 to $133 billion due to slower world economic growth, a strong U.S. dollar, lower exports of high-value products, and falling prices for bulk commodities. U.S. imports continued to grow at 2 percent in 2015 as the real exchange rate has made foreign goods cheaper in the U.S. domestic market. However, import gains were well below the 7-percent average for 2000-15, reflecting slower growth in global trade volume last year. These shifts in U.S. agricultural trade produced a trade surplus in 2015 about half of its 2014 value at $19.5 billion.

The value of U.S. agricultural exports declined in 2015, reversing 5 consecutive years of export growth. Since 2000, developing countries–led by China–had been the main drivers of U.S. export gains. Horticultural exports were the only product group to grow in 2015, up about $266 million, which increased its share of total U.S. agricultural exports to about 25 percent. In fact, horticultural products became the largest share of any group, surpassing livestock products, grains/feeds, and oilseed/products, which had combined losses in 2015 that accounted for nearly all of the decreases in export values.

University of Illinois news release (source

Donnelle Eller reported on the front page of Tuesday’s Des Moines Register that, “President Donald Trump’s decision to jettison the Trans-Pacific Partnership deal and renegotiate U.S. trade with Canada and Mexico could lead to a trade war that could put Iowa in the cross-hairs, worried state leaders told the Register on Monday.”

Ms. Eller pointed out that:

In 2015, Iowa exported $7.8 billion in commodities to the 11 countries that were to be part of the TPP. Through November of 2016, Iowa exported $6.8 billion in commodities to those same countries.

The Register article added that, “‘I would hope that President Trump wouldn’t take action that could start a trade war, given that it would damage the very people who helped put him in office,’ said Dermot Hayes, an Iowa State University agricultural economist.”

Meanwhile, the front page of the business section in Wednesday’s Minneapolis Star-Tribune contained a Reuters article by Mark Weinraub, which stated that, “U.S. President Donald Trump’s decision to back out of the Trans-Pacific Partnership (TPP) trade deal, a $62 billion market for U.S. farmers, provides a fresh threat to a slumping agricultural economy that has grown increasingly dependent on exports.

“Agricultural groups expressed disappointment over the move and urged the new administration to find alternative ways to boost product shipments to Asian countries.”

The Reuters article reminded readers that, “Trump won nearly two-thirds of the rural vote in November, with big agricultural states including Iowa, Nebraska, Ohio and Indiana all lining up for the Republican.”

Mr. Weinraub highlighted the importance of U.S. soybean exports, and explained that, “A 10 percent jump in soybean shipments during the third quarter helped spur the biggest gross domestic product gains in two years. The U.S. Department of Agriculture (USDA) expects 2016-17 soy exports to hit a record 2.05 billion bushels, accounting for nearly half of the recently harvested U.S. crop.”

Despite the general unpopularity of President Trump’s trade actions this week among many agricultural groups, the reaction within the broader, and larger, context of all of rural America may not necessarily be the same.

In November, USDA’s Economic Research Service (ERS) pointed out (“Rural America at a Glance, 2016 Edition”) that, “The total population in rural (nonmetro) counties stood at 46.2 million in July 2015, representing 14 percent of U.S. residents in 72 percent of the Nation’s land area.”

The report noted that, “[T]he overall rural employment level remains well below its pre-recession level. Meanwhile, urban employment has risen more than twice as rapidly in recent years and was 4 percent above its 2007 level by 2015.”

The fact that rural areas have not experienced a full employment recovery to pre-Great Recession levels, could be a variable that leads to different economic perceptions on trade issues.

Craig Gilbert reported on the front page of the Milwaukee Journal Sentinel Wednesday that, “And in last fall’s election, Trump’s stand on trade got strong backing from the rural and blue collar whites – mostly Republican, but including many independents – who pushed him over the top in Wisconsin.

Wisconsin’s rural voters were far more opposed to trade deals than the state’s suburban or urban voters: 64% said trade pacts with other countries take away jobs, compared with 26% who said they create jobs, according to exit poll data provided by Edison Research.

“And among white blue-collar voters in Wisconsin, who backed Trump by large margins, 61% said trade deals take away jobs. Just 24% said they create jobs.”

In addition to these political perceptions regarding trade in rural America, ERS also noted that, “Trends in agricultural prices have a disproportionate impact in farming-dependent counties, which accounted for 19.8 percent of all rural counties and 6 percent of the rural population in 2015. Declines in manufacturing employment, meanwhile, have particularly affected counties that are manufacturing-dependent-17.8 percent of rural counties with 22.5 percent of the rural population.”

With nearly four times as many rural Americans living in manufacturing dependent counties than in farming dependent counties, it may be difficult to predict how President Trump’s trade decisions will impact the “red”counties that made it possible for him to win the presidential election in November.

A Bloomberg article this week by Shannon Pettypiece and Alan Bjerga indicated that, “But manufacturing and service workers are more numerous in rural America, and Trump’s message was more narrowly focused on their needs than they were to agriculture’s, [Gary Blumenthal, president of World Perspectives Inc. in Washington] said.

‘When Trump is talking about trade he’s talking about factories,’ a big job generator in the industrial Midwest, where voters in small cities and rural areas gave Trump the victories that won him the White House, Blumenthal said. ‘Agriculture is a different fit.’

Meanwhile, in a separate Milwaukee Journal Sentinel article this week, Craig Gilbert noted that, “Those rural voters drawn to Trump out of economic frustration and a basic desire to shake things up may be the most likely to shift back if Trump doesn’t deliver or if Republicans overreach.”

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