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Minnesota full of winners and losers in brewing trade war

Illustration by Gary Meader / News Tribune

If a trade war is coming, Minnesota will be a battlefield.

Since President Donald Trump announced tariffs on select imports of steel and aluminum last month, cheers and jeers have reverberated around the state. As proposed, the Iron Range will directly benefit from increased steel production and prices. Meanwhile, many farmers will take a direct hit to their bottom line.

"We are the epitome of the pros and cons of tariffs," said Tony Barrett, economics professor at the College of St. Scholastica. "There are winners, and we're in one of the winning regions. ... And then you have the soybean farmers of our state who are possibly going to lose a significant market."

Pork and soybean farmers, among others, will likely bear the brunt of China's retaliatory tariffs on U.S. goods.

"It's just not fair to throw U.S. farmers under the bus to help out another economic segment such as the steel industry," Southern Minnesota farmer Wanda Patsche recently wrote on her blog, mnfarmliving.com.

Economists by and large say that trade should be free — that goods should cross borders without being taxed. Because what starts as a single, targeted tariff, history and recent events show, snowballs into increased prices across many other industries that eventually end up hitting consumers.

"With $100 billion in tariffs — that's a $100 billion tax increase. That hurts," Barrett said, referring to the president's most recent tariff threat on Chinese imports.

While the pain of all the tariffs and counter-tariffs will be spread widely, Barrett said, the gains will be highly concentrated in regions with steel mills and iron mines.

"I believe that tariffs have helped in the past as far as the Iron Range economy is concerned," said state Sen. David Tomassoni, DFL-Chisholm. "Just the fact that U.S. Steel opened their steel mill down in Granite City (Illinois) and put 500 people back to work, which is actually the place where Keewatin Taconite sends their pellets, is all a good indication of how it helps the Iron Range economy."

The Iron Mining Association of Minnesota said the tariffs protect a vital U.S. industry that has for too long been undercut by unfair trade practices from foreign competition.

"We need to secure our steelmaking capabilities," said Kelsey Johnson, the association's president. "This is a step the country needed to take 30 years ago or more."

In 2002, Range lawmakers and mining advocates complained the Bush Administration's steel tariffs did not go far enough to protect taconite, though they also did not like seeing them go when the tariffs were rescinded in late 2003.

"What's going to prevent us from being back in the same cycle?'' Jonathan Holmes, then-general manager of Ispat Inland Mining Co. near Virginia, told the News Tribune at the time.

The same question lingers over today's tariffs.

"I know this posturing has a lot to do with negotiations, and we don't have the final agreement," Johnson said.

If miners and those who benefit from their success have been riding a high, farmers have been feeling a "really high level of anxiety," said Perry Aasness, executive director of the Minnesota AgriGrowth Council.

"Trade with China has been a good thing for agriculture," he said. "We're a net exporter, so we have been helping the trade deficit. ... We're fourth among states in terms of total volume of agricultural exports."

Growers and food companies, which AgriGrowth represents, are worried they'll lose access to a key market, disrupting a business deeply ingrained in the world economy.

Patsche, the farmer, wrote that "we don't dictate our selling price."

"If we can't sell as much pork through exports (because of the tariffs) (it) means we will have an oversupply of pork, which will result in lower market prices, which will result in a smaller check for us, which will more than likely mean we will lose money," she wrote.

It may yet be too early to predict what will ultimately happen with the tariffs, and new wrinkles — like the revived possibility of entering the Trans-Pacific Partnership trade deal — are added daily.

"The best scenario is cooler heads prevail, both sides sit down and try to resolve these differences," Aasness said.

Barrett said that for Northeastern Minnesota and the steel industry, the best-case scenario is the tiff brings China in line with global trading standards — an all-out trade war would be catastrophic. But a certain level of damage has already been done.

"What has happened so far is more important symbolically," Barrett said. "The United States has led the world in globalization since the end of World War II. Now the president has pivoted 180 degrees, and we are becoming more protectionist."

Brooks Johnson

Brooks is an investigative/enterprise reporter and business columnist at the Duluth News Tribune.

(218) 723-5329
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