THE TRADE WAR COMES TO MONTANA: Tariffs Hit Farmers, Ranchers and Manufacturing.

• Author: Sonora, Robert

In early 2018, the Trump administration announced its first round of trade tariffs--none of the administrations trade policies have been ratified by Congress. The first round began in January 2018 on consumer appliances, and was quickly followed by tariffs on imported steel and aluminum. In May 2019, an additional $50 billion in tariffs were added on Chinese imports. The repercussions of these restrictive trade policies resulted in predicted retaliatory tariffs on U.S. exports.

The impacts of these tariffs are being passed on and paid for by U.S. consumers--because tariffs lead to higher domestic prices for protected goods. A recent study by the Peterson Institute for International Economics found that tariffs on steel and aluminum imports are costing the U.S. economy an astounding $900,000 per job saved. Similarly, economists from the University of Chicago and the Federal Reserve found the cost per a job saved to be about $815,000. Another study conducted by economists from the New York Federal Reserve, Columbia and Yale found that 100 percent of the tariffs are being passed onto consumers in the form of higher final goods prices.

But U.S. tariffs on imported goods are only half the story. They have sparked a trade war--which are far from easy to win--and other countries have retaliated with tariffs of their own on U.S. exports.

In response to tariffs on Chinese imports, China has severely restricted imports from U.S. sources, primarily in manufactured and agricultural goods. Because tariffs were done unilaterally, other countries have simply substituted U.S. exports for third country exports. For example, China shifted consumption of U.S. soybeans to those produced in third countries like Brazil. In 2016-17, U.S. soybeans accounted for about 60 percent of Chinese imports, while Brazil's share was just over 30 percent. By 2018-19, Brazil's share was roughly three-fourths of Chinese imports and the U.S. export share fell to 10 percent.

This is significant--before the trade war soybeans were the largest agricultural U.S. export to China. Montana's largest export to China is wheat, which through August 2019 has declined 90 percent compared to 2018 to $10.3 million.

None of these measures have improved the U.S. trade deficit, the plausible reason for raising tariff barriers. If anything, the deficit is widening.

According to the most recent data, U.S. exports are falling faster than imports. Figure 1 shows and annual percent change in exports...