WASHINGTON — As Cargill CEO David MacLennan and other business leaders gathered in Switzerland last week to warn of the damage an international trade war is doing to the world economy, U.S. Rep. Sean Duffy, R-Wis., introduced a bill to give President Donald Trump more ammunition in that conflict.
With MacLennan fretting on Bloomberg News about the financial hits caused by Trump’s current tariff and trade actions, Duffy, whose district borders much of Minnesota’s eastern edge, offered the U.S. Reciprocal Trade Act. The bill gives Trump added power to impose tariffs and cut trade deals that cannot be rescinded without a “disapproval resolution” supported by two-thirds of the members of Congress.
“My legislation would give the President the tools necessary to pressure other nations to lower their tariffs and stop taking advantage of America,” Duffy said in a statement. “The goal … is NOT to raise America’s tariffs but rather to encourage the rest of the world to lower theirs.”
The bill faces very long odds in the House controlled by the Democrats. But with 18 cosponsors, including first-term Minnesota Rep. Pete Stauber, the bill shows how the president’s hard-core supporters back his protectionist policies and how those policies conflict with many of America’s biggest employers.
Stauber, a Republican whose district includes the Iron Range and has benefited from Trump’s tariffs on foreign aluminum and steel, blamed “one-sided trade relationships” for “the loss of millions of American jobs, the exodus of thousands of American companies overseas, and failure to sell American products in the global market.”
Trump welcomed the bill’s supporters to a White House meeting Thursday. He recognized Duffy and Stauber individually at the gathering, calling Stauber “Mr. Hockey Player” and congratulating him for flipping Minnesota’s Eighth District House seat from Democrat to Republican. The president praised the tariff and trade bill as a way of reducing the nation’s foreign trade deficit.
“If somebody is charging us 100 percent tariff, and we’re charging them nothing, we’re entitled to charge the same tariff as them,” Trump said of the bill’s intent. “And what’s going to happen, I think, from a practical standpoint, is they won’t be charging us tariffs anymore. We’ll see. Or we’ll charge them a lot.”
Trump and the bill’s supporters believe increased presidential tariff and trade powers will allow the U.S. to quickly gain leverage over international trading partners who tax U.S. products at high rates. The bill lets presidents raise taxes on foreign products if the countries making them tax a corresponding American product at a high rate.
Trump said that will make American products more competitive, which, in turn, will increase sales, allowing U.S. manufacturers to expand and create jobs filled by Americans.
In an interview with Bloomberg News at the World Economic Forum in Davos, Switzerland, Cargill’s MacLennan took a starkly different stance. The CEO bemoaned tariffs Trump placed on Chinese imports to the U.S. and the retaliatory levies they sparked against U.S. soybeans.
“This is not a good moment in the long term for the ag economy in North America,” MacLennan said. “We went from 30 million metric tons [of soybean exports to China] to zero overnight.”
Cargill, the Minnesota-based agricultural distribution giant, helped get those soybeans to Chinese markets.
The Chinese already have found alternative sources for soybeans and also changed the way they find protein for their diets, MacLennan told Bloomberg. It is those “second- and third-order consequences of this trade war” that concern him most, MacLennan said.
Duffy’s bill represents an escalation in the America First protectionist economic theory that has governed many of Trump’s actions. Trump has placed tariffs on imported steel and aluminum to rebuild the metals industry in the U.S. On Minnesota’s Iron Range, mines that were once shuttered have reopened. Elsewhere in the state, however, costs to manufacturers that use steel or aluminum in their production processes have risen by double digits. The result is higher prices for businesses in the supply chain and, ultimately, end users.
“We should not delegate more power to the president,” Sen. Tina Smith of Minnesota, a Democrat, told the Star Tribune. “The president has pursued an erratic trade policy” that her business constituents see as “random and haphazard.”
Trade groups representing many of Minnesota’s business and agricultural interests have banded together to form coalitions opposing the president’s existing tariffs.
Many economists from the left and right disagree that the president’s protectionist tariff and trade strategy will work as he believes in what has become a global economy. They also think expanding the ability of presidents to make moves without congressional consent is a mistake that will compound an already bad situation.
Duffy’s bill is “clearly at odds with the order that underpins the prosperity” of Minnesota’s multinational corporations, such as 3M, Medtronic, Cargill, Hormel, Target and Best Buy, which employ thousands of state residents, said Robert Kudrle, a professor of international trade at the University of Minnesota.
Big retailers, such as Minnesota-based Target Corp. and Best Buy, would be “hurt badly” by expanding the president’s tariff and trade deal powers, University of Minnesota trade specialist Tim Kehoe predicted. Both companies rely heavily on foreign supply chains, and uncertainty about costs will “kill their planning process.”
Kehoe believes an increasing reliance on tariffs will “cause more outsourcing” of jobs by U.S. companies. To avoid tariffs, “you locate production facilities overseas in the market where you want to sell,” he explained.
Minnesota’s critical soybean sales have been among the sectors hardest hit by the tariffs. Sales to China all but disappeared as Trump applied tariffs to $250 billion in Chinese imports to the U.S. and the Chinese retaliated by slapping a 25 percent protective levy on U.S. soybeans sold to the world’s second-largest economy. Soybean sales to China, which were down 98 percent in 2018, started again after the Trump administration delayed a tariff increase from 10 percent to 25 percent on $200 billion of Chinese imports that was slated to take effect in January.
U.S. and Chinese officials have until March 1 to strike a deal or the new tariffs are scheduled to take effect.
Speaking to Bloomberg in Switzerland, Cargill’s MacLennan placed the situation in his perspective.
“We are sending some American beans to China with this 90-day cooling off period,” he said. “But it certainly isn’t anywhere near the volumes that they were before.”
He also warned that “even if we went back to normal, what has happened to protein consumption patterns in China and sourcing … is something that concerns me.”
Democratic U.S. Rep. Dean Phillips, the corporate executive just elected to represent a district that includes Cargill and several other major Minnesota economic players, said trade policy was a major issue for business people he spoke to during his 2018 campaign.
“Isolationism will hurt us in ways we never imagined,” Phillips said. “Isolationism is not the way of the future.”