From beans to bikes: Trade war with China heats up fast.
From bicycles to beans, Wisconsin and much of the nation are caught in the crossfires of President Donald Trump’s trade war.
Starting Monday, the Trump administration will begin taxing $200 billion more in Chinese goods. The tariffs will start at 10 percent and rise to 25 percent in 2019.
The product list is huge, and it includes goods from some of Wisconsin’s most well-known companies, such as Waterloo-based Trek Bicycle Corp.
If Trump delivers on the 25 percent tariff, Trek says it would pay an additional $30 million in tariffs each year on bikes imported from China.
“Trek will be forced to pass these costs on to the consumer,” Roger Gierhart, Trek’s vice president of marketing and supply chain, said in recent testimony before the U.S. International Trade Commission.
The bicycle industry depends heavily on Asian manufacturing, with more than 90 percent of bikes coming from China, according to industry figures.
“Trek is no different, and our company manufactures significant portions of its products in China,” Gierhart said.
The company’s most popular bikes,
including Marlins, FX hybrids, Dual Sports and Verves, are made exclusively in China for the American market.
Trek’s children’s bikes are all from China, along with its bicycle helmets.
“At least 40 percent of imported bicycle components are sourced from China,” Gierhart said.
Overall, the U.S. bicycle industry accounts for $81 billion in annual consumer spending.
“In the case of Trek, the likely effect of the proposed tariffs will be higher prices for our goods, and in turn, fewer sales of products. This risks the 2,600 jobs that Trek directly provides, and the thousands of jobs provided by 1,600 independent retailers that sell our products,” Gierhart said.
Huffy Bicycle Corp. has also warned of dire consequences from the trade war with China.
The Dayton, Ohio-based company says it imports more than 4 million bicycles a year from China, at an 11 percent tariff rate.
With an additional 25 percent tariff, the average retail price for a bicycle sold in a bike shop would increase from $500 to $625, according to Huffy.
The average retail price for a bike sold in a department store, like Walmart, would jump from $100 to $125.
“These are extraordinary price increases for middle-class Americans who make up the clear majority of our riders. This proposed tariff will have a devastating impact on bicycle sales as consumer demand will plummet,” Huffy President and CEO Bill Smith said in a recent statement to U.S. trade officials.
Farmers on edge
Trade wars have American farmers on edge, too, especially as the grain harvest begins this fall and hundreds of millions of bushels of soybeans are subject to a 25 percent Chinese tariff.
China has slapped higher import duties on U.S. agricultural products to hurt farmers who backed Trump in the 2016 election and who are represented by powerful members of Congress.
Other foreign markets also are in turmoil, and it has sent U.S. soybean prices plunging to 10-year lows.
As the harvest gets underway, buyers and sellers are waiting to see what happens with the trade war between the U.S. and China.
“News out of Washington is more important than news out of the (fields), namely how big the actual crop is. … We have an agriculture system that is highly dependent on exports,” Ray Grabanski, president of Progressive Ag, a crop insurance firm in Fargo, North Dakota, wrote in a recent column for the Farm Forum.
Millions of bushels of grain could be put into storage until new trade deals are reached with China, Mexico and Canada.
“The lack of appetite for U.S. soybeans, from China, has been significant,” said Brennan Turner, president and CEO of FarmLead, an online grain marketer.
Tariffs and threats of tariffs on dairy products have worsened an already dire marketplace for American dairy farmers.
One in seven days of production of Wisconsin milk is exported in a wide range of products including cheese, whey and dry milk powder. Wisconsin farmers also have come to rely on exports for selling beef, pork, cranberries, cherries, ginseng and other products.
“The uncertainty with tariffs is probably the biggest problem most sectors of agriculture are facing right now,” said Darin Von Ruden, a third-generation dairy farmer from Westby and president of the Wisconsin Farmers Union.
While the Trump administration has struck a trade deal with Mexico, it hasn’t been finalized yet, and nothing has been settled with Canada.
Mexico and Canada are Wisconsin’s two biggest trading partners. Along with worries about exports, an oversupply of milk in the U.S. has left many folks in dairy farming scared.
Wisconsin lost 500 dairy farms in 2017, according to state records, and about 430 have shut down so far this year.
“If the marketplace doesn’t give you what you need, it’s tough to hold on for a long time,” said David Daniel, a thirdgeneration dairy farmer in Union Grove.
“There are a lot of farmers who are hurting,” said Brody Stapel, a dairy farmer from Cedar Grove and president of Edge Dairy Farmer Cooperative.
Trump’s trade policies have created a conundrum in Wisconsin, where some manufacturers have benefited from tariffs while others have lost business that might never be regained.
“Tariffs, as a strategy, are not a good end game for trade or manufacturing,” said Dennis Slater, president of the Association of Equipment Manufacturers, a Milwaukee-based trade group that represents agricultural and construction equipment makers.
“If a company is looking at an expansion, they’re probably going to hold off until they get through some of this. And the time and energy spent dealing with the changing landscape of tariffs is a huge distraction,” Slater said.