President Trump's Tariff policy with China having an effect on Minnesota Business

Soybeans and Off-Road Vehicles are feeling some trade-war pain

The WCCO Morning News with Dave Lee
July 11, 2018 - 2:34 pm

© TNS- USA Today Images

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What do soybeans and off-road vehicles have in common?  The answer is that both are now subject to Chinese tariffs.

With depressing prices soybeans and a shift in sales and production for off-road vehicles, the ongoing trade war between China and the U.S. is having an effect on two Minnesotan industries. 

Paul Vaaler is the John and Bruce Mooty Chair in Law & Business, at the U of M's Carlson School of Management.  "Minnesota farmers can't shift the location of production in response to the Chinese tariffs on imports, slapped on farmers in retaliation for the Trump Administration's tariffs on Chinese steel and aluminum levied earlier this summer.  You can't change where you grow soybeans," said Vaaler.

China is Minnesota's main export market for soybeans, the state's major agricultural export.  The tariff list also includes many other Minnesota-based agricultural products such as pork, dairy and poultry.  

In the photo attached to this story is crop farmer Bob Worth of Lake Benton.  He told the Star Tribune that he has farmed for 48 years and plants mostly soy beans on 2,200 acres of tillable land. "I'm wary of a U.S. trade war with China because in the past when trade wars have been waged too often agricultural businesses have suffered", he said. "Is the embargo here now?" Worth asked. "No. Is it on the back of our minds? Oh yeah, oh yeah," he said. 

It's also having an effect on local off-road vahicle producer Polaris. 

Polaris is avoiding the tariffs currently by shifting sales to wholesalers in Shanghai.  According to Vaaler, "In the longer run, Polaris may need to shift production to China in order to avoid the tariff.  That's not good for Minnesota business."  

Farmers have seen an 18% price decline for their commodity since May, and Polaris is getting pushed to move production and employment out of Minnesota to China.  Vaaler told WCCO Radio's Dave Lee, "Earlier this year, I opined that Minnesota farmers supporting Trump back in 2016 likely regret that vote now.  Let me add Minnesota manufacturers to that list of voter regret."

This is on the heels of Harley Davidson shifting manufacturing from the U.S. to international facilities.  The company had already been struggling with falling sales and had begun consolidating facilities.  

The Trump administration imposed a 25 percent tax on $34 billion worth of Chinese imports July 6, mostly on parts imported to manufacture U.S. goods. China retaliated with taxes on an equal amount of U.S. products.  The current tit-for-tat could increase with the president threatening even more tariffs worth hundreds of billions of dollars.  

Vaaler added, "A lot of other Minnesota manufacturers are wondering what their next moves should be.  I'm not sure what this trade war is all about.  It feels like a self-inflicted wound. "