A WSJ column by Daniel Henninger this morning piqued my interest. It, like many recent opinion pieces from the Journal, discussed the recent tariff talk and subsequent trade war in which we find ourselves.
The Chinese have reacted to Trump’s bluster by threatening to install their own tariffs (read: taxes on consumers). Beyond targeting the economy writ large, the Chinese have pinpointed certain commodities and products that particular states produce more than others. Primarily, as Ficlking and Ran write in Bloomberg, the targets appear to be states which Trump would need to carry to win reelection:
The weight of the retaliation comes down to six categories: Cars, soybeans, plastics, tobacco, sorghum and chemicals. There’s a canny political strategy buried in that list: The first three sectors are heavily concentrated in Midwestern states stretching from Ohio to Wisconsin that flipped from supporting Obama in the 2012 election to Trump in 2016. Tobacco and sorghum farms, too, tend to be in traditionally conservative areas of the South — Texas, Virginia and North Carolina — where Democrats have been making increasing inroads.
A few cents extra for cans of vegetables may go unnoticed by some consumers, but a 25% tariff on tobacco could have quite an impact on North Carolina farmers. Couple that with earlier tariff threats on pork, and almost all of the major agriculture groups in North Carolina will be worse off because of Trump and his trade war.
Senator Burr said that he favors open trade, of course, but that “sometimes you have to use a different tactic, and I think clearly that is what the president is doing.”
I have no doubt that Burr is a free trader, but I do doubt that he actually believes the president is one too. Larry Kudlow, Trump’s new economic advisor, has said that Trump “is a free trader at heart,” which means nothing. His actions differ from whatever the typical Republicans claim he thinks deep down, and his actions are what affect everyday Americans. Even as the prospect of steel tariffs increases steel prices, other industries are having to cut their workers to keep up with higher costs. Put simply, Trump is robbing Peter to pay Paul.
What does this look like as political strategy? For starters, the Chinese are targeting industries that would affect states essential for the Republicans if they hope to maintain majorities in the fall. So producers like tobacco and hog farmers in North Carolina, for example, will be hurt by this.
On top of that, the tariffs will also make certain Chinese products more expensive. Look on the bottom of almost any package and read where it is made — if it says Made in China, you just might pay a little bit more next time you buy that item. So consumers in North Carolina will be hurt by this.
Finally, the premier legislative accomplishment of Republican-controlled Washington is the tax cuts. However small they were for those who received them, a lot of people will in fact pay a little bit less in taxes this year. Nancy Pelosi was excoriated for calling the bonuses and savings “crumbs,” but apparently an increase on goods doesn’t matter. “So who in the world is going to be too bothered by six-tenths of a cent?” wondered Wilbur Ross. Someone should tell the billionaire cabinet secretary that a lot of North Carolinians scrape by on the margins. What little money North Carolinians may have gotten back in tax cuts could very well be reversed by an increase in the price of goods.
If the positive effects of tax cuts are wiped out by the party enacting them, for what reason would North Carolinians reelect them?
Note: In an earlier version of this article I neglected to qualify the tariffs as prospective. Some will not take effect for about two months, while others have repercussions felt today.