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Farmer uncertainty becomes new normal in Upper Midwest as trade war enters second year

President Trump listens during a meeting on the opioid epidemic at the White House on June 25, 2019. Washington Post photo by Jabin Botsford.

WASHINGTON — Last week, Ryan McFarland flew from Rapid City, S.D., to Washington, D.C., to tell federal trade officials new tariffs will “kill” his business, which makes balance bicycles for children.

“Those testimony hearings are sort of a somber room,” said McFarland, founder of Strider Bikes, who manufacturers balance bikes in China. McFarland testified before the International Trade Commission held a weeklong hearing regarding more Section 301 tariffs — retaliatory tariffs of another $300 billion against China — set to take effect soon.

“People will just shift manufacturing to another country outside China or bring back to the U.S., but what they don’t understand is time frames involved,” said McFarland.

It’s a similar uncertainty felt around the region. As the rain clouds of trade wars hover across the Upper Midwest, fatigue and frustration has set in for farmers, manufacturers and bankers. Economists say it could all change next week. President Donald Trump and Chinese President Xi Jinping meet this weekend at the G-20 Summit in Osaka, Japan. Mexico just ratified the New NAFTA (United States-Mexico-Canada Agreement) last week.

But the nervousness could morph into something closer to the desperation felt in the farm crisis of the 1980s, as summer turns to fall.

“That was a really, really tough time,” said Scott Wakefield, a commercial lender at First Minnesota Bank in Mayer. Wakefield said he was the “repo guy” on tractors in the farm crisis of the 1980s, when two bankers were shot in Ruthton, Minn. “When I hear people make that comparison (between the 80s and today), I think, ‘you weren’t really there.’ It’s like a canoe vs. the Titanic.”

Farmers today, he says, are better situated for economic hardship. Spouses take jobs in town for healthcare and extra income. Operations are bigger. But a farmer’s suicide west of town two weeks ago raised old memories.

“He’d spray-painted ‘You can stop calling now, I’m dead’ on some plywood,” said Wakefield. “It’s just terrible.”

An hour west of Fargo in Valley City, N.D., farmer Greg Svenningsen said they’re tightening belts as prices from wheat fall due to uncertainty with one of farmers’ biggest customers, Mexico. At a recent political forum in Valley City, they heard from U.S. Rep. Kelly Armstrong.

“After rattling about this immigration stuff for 20 minutes,” Svenningsen said, “(Armstrong) asked, ‘Are there any concerns?’” Svenningsen said his wife stood up to ask about agriculture, and the congressman asked how many people had similar worries.

“The whole room lit up with their hands,” he said. “It was an eye opener.”

Anxiety over a household’s financial stress as the U.S. and trading partners reinvent their relationship has long-ago moved from the fields to the halls of Congress now over a year into the trade wars. But it’s becoming louder. And the numbers bigger.

Earlier this month, U.S. Sen. Mike Rounds, R-S.D., told Axios the trade wars, particularly the plummeting cost of soybeans, have cost South Dakota half-a-billion dollars. U.S. Wheat, a trade association based in D.C., says the impact of tariffs are the equivalent of U.S. producers writing $500 million checks every year to Australian and Canadian farmers. The Minnesota Farmers Union blasted Trump’s threatened additional tariffs on Mexican goods as “brash” that will only make negotiations harder as Congress looks to pick up the NAFTA replacement.

“The single best thing is to pass USMCA,” Armstrong said. He cited the trade agreement’s modernization of wheat grading and reclassification of dairy exports into Canada. “China is going to take awhile.”

Rep. Dusty Johnson, South Dakota’s at-large congressman, acknowledged his constituents have exercised a “fair amount of patience for the president’s tactics.”

“By and large, what I’m hearing from South Dakotans really reinforces my own views on the subject: tariffs for tariffs’ sake are a bad idea,” said Johnson, a Republican. “The goal is market access and free trade.”

But the president’s tactics aren’t universally unwelcome, said economist Tony Barrett, professor emeritus at College of St. Scholastica in Duluth. In that region, the mining industry has enjoyed increased hiring and stabilized iron ore prices as a result of Trump’s protectionist tariffs on foreign steel. In 2018, Minnesota exported a record-high $23 billion in goods, a number the trade association linked to improved conditions in ports throughout northeastern Minnesota.

“A lot of my liberal friends don’t want to hear it, but the president’s trade policies have benefited my economy,” said Barrett. “But if you stay in Minnesota, you just have to drive south and the cost-benefit changes.”

Judging the impact of the trade wars by state, by industry and even by trade agreement offers separate visions of financial stress in the region. In Nebraska, stock growers lament stepping away from the Trans-Pacific Partnership, given their biggest beef customer was Japan. While China’s retaliatory tariffs may hurt Strider, who manufactures children’s bicycles in a Chinese factory and ships them back home to sell, the uncertainty with Mexico and Canada is scarier to Scott VanderWal, president of the South Dakota Farm Bureau.

“There’s about three or four things that have piled up on us,” said VanderWal, who is hoping Congress will agree to USMCA. “The trade disputes cost us we figure $1 on soybeans, and that continues, and consequently, we’ve seen a lot of mental health issues going on, and you hear an awful lot of things.

“Bankers are having some difficult conversations with customers.”

Tim Penny, President with Southern Minnesota Initiative Foundation, served as a Democratic congressman for the region in the 1980s, but he’s hesitant to place too much emphasis on the tariffs.

“To put this in context, you’ve got three or four bad years in terms of farm prices, and this is not caused just by tariffs,” Penny said. “This is just another development that is causing a loss of traditional markets.”

Gabrille Gerbaud, Executive Director of the Minnesota Trade Office, said she sees export markets opening up as new ones closed. Her office has welcomed in trading delegations from South Africa to Kenya to Congo, she said. But building those up will take time.

“The uncertainty is really kind of slowing down the future plans of certain companies,” said Gerbaud, who added she sees a little stoic Midwesternism in the measured talk from the business community as it rides a roller coaster.

“As good Minnesotans, we’re bracing ourselves for what’s coming.”

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