As Trump threatens Mexico, trade war fatigue sets in for Minnesota businesses and farmers

President Donald Trump's latest shot in the trade war he started a year ago ricocheted through Minnesota on Friday.

Brian Thalmann, who farms near Plato, said he felt "extreme frustration" after learning that Trump threatened tariffs on Mexico just as the two countries and Canada complete a new free trade deal. "We can't keep doing this. Our country is known for being a dependable, reliable supplier, and we've worked for years to build that reputation," said Thalmann, president of the Minnesota Corn Growers Association.

Trump late Thursday tweeted that he would impose 5% tariffs on nearly $360 billion of Mexican goods on June 10 unless Mexico does something to reduce the number of immigrants entering the U.S. at its border. He did not specify precisely what Mexico needed to do but said the tariffs would rise incrementally to 25% if nothing happened by Oct. 1.

The threat provoked stronger criticism than Trump saw from previous tariff threats, with Republicans in Congress, business executives and leaders of Mexico all pushing back. Trump began imposing tariffs on other countries in May last year, initially to help U.S. steel producers and later in response to partners' retaliatory actions.

The latest tariff threat also sent stock prices lower Friday, with manufacturers and food companies hit hard. General Motors shares fell 4%. Shares in 3M Co., Minnesota's most valuable manufacturer, closed down a half-percent, ending a punishing month in which the stock dropped 15% in value.

Tariffs on the nation's largest trading partner would increase the prices that U.S. consumers pay for cars, electronics, food and many other products. They also raise the prospect that Mexico would retaliate with tariffs of its own.

That would damage the free movement of parts and semifinished goods between manufacturing plants in the two countries. A prolonged tariff battle could scuttle ratification of the United States-Mexico-Canada Agreement, which is a new version of NAFTA, the 1990s free trade pact between the three nations.

Some business leaders criticized Trump for using trade policy as a weapon to deal with the rising number of immigrants coming chiefly from Central America through Mexico to the U.S.

"America's manufacturing workers should not be forced to suffer because of the failure to fix our immigration system," Jay Timmons, CEO of the National Association of Manufacturers, said in a statement. "These proposed tariffs would have devastating consequences on manufacturers in America and on American consumers."

General Mills, 3M, Polaris, Donaldson Co., Tennant Co., Pentair and Daikin Industries are some of the Minnesota companies with significant operations in Mexico. The tariff threat sent many scrambling to figure out their exposure and how they would respond to yet another supply-chain cost hike.

"We have not yet made final decisions about how best to address these potentially escalating tariffs since the news is very recent, but it is likely these actions will force the industry to raise prices to customers," Mike Schwartz, chief executive of Plymouth-based Daikin Applied Americas, said.

"I am hopeful that the U.S. and Mexico are able to quickly resolve these matters and eliminate these new tariffs," he added.

Minnesota businesses import $2.2 billion worth of goods from Mexico each year and export $2.3 billion, said Doug Loon, president of the Minnesota Chamber of Commerce.

"Trade is increasingly important to the bottom lines of Minnesota companies, and our North American neighbors are easily our largest trading partners," Loon said. "We encourage Congress and the president to isolate immigration and trade policy."

Mexico is Minnesota's largest export market for corn, poultry, wheat and dairy and its second-largest market for soybeans and pork.

Soy meal, some of it produced in Mankato, is also a major export to Mexico from Minnesota, said Joe Smentek, director of the Minnesota Soybean Growers Association. "It's an important export market for us, so any kind of retaliation against us for something that doesn't have to do with soybeans is just really disheartening," he said.

Farmers draw a distinction between the trade barriers Trump raised with China — which many see as justified in principle because of unfair Chinese trade practices — and those on neighbor Mexico.

Mexico is valued in part because of a transportation advantage. Corn loaded in southern Minnesota can travel there by rail.

With the Chinese soybean export market shut down for nearly a year and fields too wet to cultivate deep into the spring, another punched-up trade dispute is the last thing farmers need.

"I don't want to use the word desperate, but it's getting significant out there," Paap said. "We've got commodity prices below the cost of production, we've got trade disputes all over the place and no answers on that, and then we've got wet weather, planting delays."

Thalmann, the farmer near Plato, was fixing a broken tractor before heading out Friday afternoon with a goal of getting 150 acres of soybeans planted. "Now we're just proposing a tariff because of something totally unrelated to trade?" he asked. "We can't keep doing that."

With planting happening so late, there are fewer days to grow, and yield expectations fall by the day. In recent days, crop prices have risen on futures markets on expectations that the fall harvest will be smaller than in recent years.

Dee DePass • 612-673-7725 Adam Belz • 612-673-4405