It’s official: President-elect Donald Trump promises that on Day One, or Jan. 20, 2025, that his first executive action will be to put 25% tariffs on all imports from neighbors Canada and Mexico, and with a kicker of a 10% tariff levied against Chinese imports.

Trump makes many promises, and this pledge to start an international trade war may well be a bluff hoping for concessions from at least Canada and Mexico. Even if these radical tariffs are executed, we will see for how long they last before concessions are made. Trump is a gamer and always counting on his bluster to force some results to fall out of the sky for which he can claim unprecedented success.

Trump’s play is a high stakes game that could create a world trade war, international economic crisis, raining hell on America’s families and businesses with supply shortages and dramatically higher prices. If Social Security recipients think the Trust Fund is in trouble now, just wait.

In 1929 America’s stock market crash was largely an American crisis. But soon America First and protectionists enacted the Smoot-Hawley Tariff Act. President Herbert Hoover and the Congress raised U.S. tariffs on over 20,000 imported goods resulting in an international trade war, with retaliatory tariffs by other countries reducing U.S. imports and exports by nearly 70% during the Great Depression. This gamesmanship by Hoover and America First propagandists not only drove the U.S. into the Great Depression but ensured it would impact much of the world.  And then came the rise of fascists, World War II and up to 85 million human deaths.

Let’s consider what these tariffs could mean for just one critical economic Nebraska interest: agriculture. To provide context, we should consider who Trump is poking with his massive tariff promises. Mexico is America’s largest trading partner with nearly $480 billion in imports in 2023, followed by China with $448 billion, and Canada with $430 billion in imports.

 Trade war games, even just talk, have potential consequences. Take China, for example. China will retaliate with its own tariffs, creating an escalating trade war. Within months, all those relatively cheap Chinese consumer goods we buy daily, let alone all those inputs that keep our industries humming, will experience higher costs at best, and at worst massive supply chain disruptions. Now let’s focus on what this could mean for Nebraska agriculture.

 Agriculture is huge, ranking among Nebraska’s top three economic engines. According to the Nebraska Department of Agriculture, “Nebraska Agriculture Depends Upon World Markets.” From this same source, Nebraska is the nation’s fifth largest agricultural exporting state, valued at $10 billion alone in 2022. When exports are strong, commodity prices are higher and net farm income robust.

The Federal Reserve Bank of Kansas City, in a Nov. 15, 2024, report, raises warning signs of a weakening farm economy with prices comparable to 20 years ago, not even adjusting for inflation. This report highlights dropping farm income, rising debt, reduced capital investments, fewer farm machinery purchases and deteriorating balance sheets. Yearly closing prices for corn have dropped from $6.79 in 2022 to just $4.23 in 2024, or by nearly 40%. When dramatically higher production costs are considered, the numbers are even more depressing. Nebraska agriculture is already struggling. The loss of international markets would deepen us into severe recession.

 Canada, Mexico, and China are major agricultural trading partners. When Trump during his first term in the White House started a trade war with China, Nebraska exports to China dried up, forcing the Trump administration to pump billions in farm welfare to commodity farmers to offset losses. Farmers hate welfare and just want fair prices, and robust international trade is key to strengthening profits and income, not unreasonable tariffs and trade wars. 

 Even if Trump’s tariff promises are simply bluffs, other nations are more than capable of shifting where they buy farm products or other U.S. goods. China quickly pivoted its farm purchases to South America and other producing nations, undermining Nebraska’s exports long-term and maybe permanently. Damage is already being done by Trump’s illogical obsession on tariffs, and Nebraska’s farmers, agricultural related businesses and consumers will suffer the consequences. The world of nations is learning that conceding to bullies only invites more bullying. They are likely to play tough with Trump this time around. Stay tuned as this story unfolds.

This story was published by Nebraska Examiner, an editorially independent newsroom providing a hard-hitting, daily flow of news. Read the original article: https://nebraskaexaminer.com/2024/12/20/trumps-tariffs-and-nebraska/

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