With the announcement this afternoon that President Donald Trump wants to charge a 20 percent tax on imports from Mexico to pay for his wall across the country’s southern border, there’s a fair chance of an all-out trade war erupting.
What happens then?
For Minnesota and the rest of the Midwest, it likely means farmers are hurt even more than they have been in recent years by low prices caused by abundant crops.
The U.S. exported $2.3 billion worth of corn in 2015, as well as soybeans ($1.4 billion), dairy products ($1.3 billion), pork & pork products ($1.3 billion), and beef & beef products ($1.1 billion).
The losses in a trade war with Mexico are on top of the losses caused by the decision to pull out of the Trans-Pacific Partnership earlier this week.
“It would be really damaging for us, given that so much of our products go to Mexico now,” Dermot Hayes, an Iowa State University agricultural economist, said earlier this week.
Sixty percent of the U.S. soybean crop is exported.
But manufacturers will be hurt too, if Mexico retaliates, which, of course, it will.
Machinery from the United States is, by far, the biggest export, worth more than $42 billion each year. Electrical machinery is another $41 billion, cars and trucks add $22 billion. (Source: Office of the U.S. Trade Representative to Mexico).
What will a 20 percent tax do to U.S. consumers? Fruits and vegetables will increase in price if you can find them. Mexico is the country’s second-leading supplier of agricultural goods: fresh vegetables ($4.8 billion), other fresh fruit ($4.3 billion), wine and beer ($2.7 billion), snack foods ($1.7 billion), and processed fruit & vegetables ($1.4 billion).
A trade war could also cripple U.S. corporations.
“It is important to understand that more than half of all visible trade between the two countries is due to corporate supply chains, in which goods are manufactured in the US, but assembled in Mexico,” the research firm Pavilion said shortly after November’s election.