The first inklings of how President Donald Trump’s trade war might ripple through Minnesota’s economy are out, and the estimates are not good. In a new report, the state Department of Employment and Economic Development projects that about $641 million in state exports may be hit by countermeasures from other countries that are reacting to Trump’s tariffs.
Most affected will be goods bound for Canada, China, the European Union and Mexico. That takes in pork, soybeans, kidney beans, poultry, dairy, motorcycles, canoes, paper products, bread, steel, solar panels and more. If Minnesota grows it, processes it or builds it, punitive tariffs will probably affect it. The blows will be felt at the top — Hormel, Cargill and Land O’Lakes all do significant business in the Canadian market — and all down the line.
The European Union started its countermeasures in late June, with tariffs of up to 25 percent. Canada, Minnesota’s largest trading partner, began imposing tariffs over the weekend, to remain until the U.S. lifts its trade-restrictive measures. China’s retaliatory measures will kick in by Friday, with the threat of additional tariffs later on crude oil, coal, chemicals and, most worrisome for Minnesota, medical devices. So far, 80 percent of the goods affected by the Chinese tariffs will be pork, dairy and soybeans. For their part, the Chinese are preparing by reducing soybean tariffs for preferred Asian nations. Once other, more reliable supply chains are established, that business could be slow to come back.
And this is only the beginning of what could be a cascade of effects. Trump was angered recently by Harley Davidson’s announcement that it would shift production of more of its motorcycles overseas to escape European retaliatory tariffs. Despite the company’s contention that the move was not its preference but rather “the only sustainable option ... to maintain a viable business in Europe,” Trump erupted, threatening to tax the iconic company he once praised “like never before.”
Harley is not alone. Minnesota’s Polaris Industries is considering moving production of its fabled Indian motorcycle line to Poland to escape punishing tariffs while continuing its expansion into the prized European market. Right now the motorcycles are manufactured in Iowa, at a factory with more than 600 workers, and Polaris is one of the largest employers in the region.
Fanning the flames of a trade war, as Trump has done, with needless provocations, threats and little evidence of a coherent plan, could throw a wrench into an economy that had been humming along pretty well. The effects, once set in motion, may rapidly spin out of control and well past the point where governments can easily pull back.
At a Canada Day event in St. Paul last week — hosted by the Canadian consulate to emphasize the long partnership and goodwill among itself, the U.S. and Mexico — Mexican Consul Gerardo Guerrero was talking about NAFTA, but could have been speaking for many when he said, “This is a moment to demand our leaders negotiate with wisdom and goodwill.”
May those who most need to hear that message heed it.