Minnesota’s three most important trading partners are Canada, Mexico and China. The state now faces trade sanctions from all three, courtesy of President Donald Trump’s ham-handed attempts to wring concessions at any cost.
And the costs are mounting. Before Trump started threatening allies, Minnesota pork producers had been projecting a tidy profit of $10 per pig. David Preisler, CEO of the Minnesota Pork Producers Association, said in an e-mail to congressional members that because of retaliatory actions taken by China and now Mexico, pork producers are projecting a loss of $15 per pig.
“That is a big swing,” he said in an e-mail, “and the only material thing that has changed is the trade situation.” Should retaliatory actions continue and widen, the effects would be felt throughout the U.S. economy and particularly in Minnesota, which owes much of its import/export growth to North American trade.
Trump has been plain about what he intends to do. He has not wavered since he was a candidate. Free trade as the U.S. has practiced it is anathema to him. It is increasingly clear that he prefers what some call “managed trade,” also known as protectionism — an outmoded economic practice discarded decades ago by Western democracies.
The notion that America can protect some industries such as coal and steel, dictating terms to the rest of the world while not suffering any ill effects, borders on magical thinking and invites serious economic dislocation and worse.
Driving all of this is a leader whose worldview rejects any win-win scenario. For Trump there are only winners … and losers. That is putting U.S. allies — particularly Canada and Mexico — in a precarious position. A “deal” in which Trump crows that he won and they lost will be difficult for leaders in those countries to get ratified by their governments.
Trump wants to jettison three-way talks in favor of separate agreements with Mexico and Canada. That “divide-and-conquer” approach would effectively end the trilateral North American Free Trade Agreement.
U.S. Rep. Erik Paulsen of Minnesota, a Republican lead on trade issues in the House, told an editorial writer that further attempts to undermine or withdraw from NAFTA talks could finally cross a line.
“Those of us in Congress who have to sign off on these trade agreements continue to believe that a more modernized, enhanced NAFTA is the right approach,” he said. Attempts by the president to unilaterally withdraw from the treaty would, he said, draw a legal challenge from Congress. “We would lay the groundwork to say that is not allowable, and I would be a party to that. These tariffs already threaten to derail a booming economy.”
University of Minnesota Prof. Timothy Kehoe, an international economist, said Trump could be taking the U.S. into uncharted territory. “We know how to make models of economies that go from closed to open. We don’t even have the data on how to go from open to closed,” Kehoe said.
But the danger is real. U.S. manufacturing, agriculture and the auto industry all depend on trade and integrated production, Kehoe said. Tearing that apart with tariffs and quotas could wreak havoc. “If everyone starts retaliating, the whole world will be worse off,” he said.
The freer trade model adopted by the U.S. and most Western democracies after World War II has, in the main, been a boon. Not all benefited, and the U.S. did a poor job of helping those who needed to readjust. Those are the corrections that need to be made. But trying to turn back the clock, and turning on this country’s long-standing allies and partners, is not the answer.
Congress should be prepared to step in — and soon — before Trump’s bluster and actions do even more damage.