How Trump's "Doom And Gloom" Tariffs Are Crippling American Farmers

The tariffs that President Trump vowed to put in place while campaigning - and followed through on - like many government solutions, are solving one problem while creating others at the same time. In this case, the "unintended consequences" from steel tariffs are hurting agricultural jobs across the Midwest, putting pressure on some of the most vehement supporters of President Trump.

A Reuters expose released this morning reveals how how tariffs - as well-intentioned as they may have been - have led to higher cost of goods for farmers across the country.

The authors tell several personal stories, including that of a farmer who was about to purchase a $71,000 grain mill, but had to hold off on the purchase because the seller raised the price 5% to account for the rising price of steel:

Lucas Strom, who runs a century-old family farm in rural Illinois, canceled an order to buy a new $71,000 grain storage bin last month - after the seller raised the price 5 percent in a day.

The reason: steel prices jumped right after U.S. President Donald Trump announced tariffs.

Throughout U.S. farm country, where Trump has enjoyed strong support, tariffs on steel and aluminum imports are boosting costs for equipment and infrastructure and causing some farmers and agricultural firms to scrap purchases and expansion plans, according to Reuters’ interviews with farmers, manufacturers, construction firms and food shippers.

The impact of rising steel prices on agriculture illustrates the unintended and unpredictable consequences of aggressive protectionism in a global economy. And the blow comes as farmers fear a more direct hit from retaliatory tariffs threatened by China on crops such as sorghum and soybeans, the most valuable U.S. agricultural export.

A&P Grain Systems in Maple Park, Illinois - the seller of the storage bin Strom wanted to buy with a neighboring farmer - raised its price two days after Trump announced aluminum and steel tariffs on March 1 to protect U.S. producers of the metals. Strom and his neighbor backed out.

Illinois grain farmer Lucas Strom checks on his tractor inside his barn in Kane Country, Illinois

Not surprisingly, government intervention to suppress volatility has caused abnormal volatility in the steel industry:

A&P Grain President Dave Altepeter said the steel used in their bins is made in the United States, but domestic steel prices also have soared because of the tariffs.

U.S. steel mills typically adjust their prices once a year, normally in the first quarter, Altepeter said. But this year, those prices have jumped four times, he said.

A second narrative details more purchase delays in the agriculture industry, including a $800,000 sale of a grain storage system because, again, the fresh steel tariffs caused the price to increase by 15%: 

In Riverton, Illinois, farmer Allen Entwistle said he postponed construction of a new $800,000 storage system for grain after AGCO Corp’s  GSI unit increased prices by 15 percent.  Entwistle, who voted for Trump, will instead store corn in bags on the ground.

“President Trump keeps telling us he’s going to get a better deal,” Entwistle said. “When are we gonna make it better?”

In the third story - not surprisingly - also focuses on the adverse impact of tariffs on steel prices to one small US farmer:

In Sheffield, Iowa, Sukup Manufacturing has seen steel prices soar 40 percent since November, said Brent Hansen, the company’s commercial accounts manager. The maker of grain bins and pre-manufactured steel buildings has encouraged customers to buy quickly before prices jump more. But some have already postponed projects, Hansen said.

That’s obviously a big price increase for an industry that’s a little bit doom-and-gloom over tariffs,” Hansen said.

Sukup used to give customers up to two months to consider its bids for projects. Now, it allows just a week in some cases because of volatile steel prices, Hansen said.

Prices have jumped by 25 percent for thermal insulated panels that keep food cold – which can use either steel, aluminum or both, said Glenn Todd, owner of Todd Construction Services. The company has built food processing and storage facilities for Bumble Bee Seafoods and poultry company Foster Farms.

Finally, Richard Adkins, director of sales at Discovery Designs Refrigeration in Mukwonago, Wisconsin, thought his company wouldn’t have to worry about Trump’s tariffs. Most of the metal they use to design industrial refrigeration systems comes from Canada and Mexico, he told Reuters, two countries which have both been exempted from the levies.

It didn’t matter. Price-hike notices from vendors landed in Adkins’ mailbox days after Trump announced the duties.

“There’s this knee-jerk reaction,” Adkins said. “We’re quoting prices for projects that won’t be awarded for another six or eight months, and no one wants to be hung out to dry.”

* * *

The bottom line is that we are once again left with a situation where government micromanaging/intervention is doing more harm than good. As goes the old saying "the road to hell is paved with good intentions". In early March, we showed "The Foolishness Of Trump's Steel Tariffs In One Simple Chart" pointing out that Trump hoped tariffs would bring back steel manufacturing jobs. We said it then and we'll say it again: it won't happen.

Meanwhile, and perhaps ironically, Trump sincerely wants to save steel-related jobs, tweeting in early March:

Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!

Just today, Trump doubled down, tweeting "We are bringing back our factories, we are bringing back our jobs, and we are bringing back those four beautiful words: MADE IN THE USA!"

Alas, those jobs are gone and will never return, and NAFTA had little to do with it; those who want to blame someone, should blame technology, and its relentlessly deflationary impact: the US is now producing 7.7% more steel than in March of 1990 with 48,000 fewer workers.

As the chart above shows, steel employment went on a deep dive nearly four years prior to the passage of Nafta.

Meanwhile, unrenovated, inefficient US plants are aging dinosaurs compared to those in China, which invested massive in modernized plants in recent years, the US didn't. On top of that, the question of whether or not the government realizes that fixing prices can do more harm than good still seems to be answered with a resounding no.

Comments

All Risk No Reward Four Star Fri, 04/13/2018 - 15:05 Permalink

BankstoTrump orchestrated the takeover of family farms by the Supranational Money Power Monopolist Mega-Corporatocracy, all under the guise of "Making America Great."

Come on people, a guy who slobbers all over Banksters in debates, who was given $2 billion in free Mega-Corporate advertising, who protects Banksters from scrutiny while in office, who hires banksters to run his administration...  isn't real opposition.

People, this isn't complex.

BankstoTrump is running game on you people, the EXACT SAME WAY BankstObama ran game on his "true believers."

Tails Banksters win / Heads Ordinary People lose.

People like Trump are there to make sure it happens.

In reply to by Four Star

All Risk No Reward All Risk No Reward Fri, 04/13/2018 - 15:18 Permalink

Did Krugman down vote the comment?

Did a rat run across someone's keyboard?

All we know is someone/something without an argument to post hit the down vote button.

At least post an argument...  if I missed something and you are right, I can learn from it.

If you are running on emotional overload, well, research "calcium shell" and start investigating how to resolve it.

Calcium, copper, and estrogen all tend to run together.

Calcium kicks out magnesium and deadens cells, which ultimately reduces awareness.

Copper is used to in the production of estrogen.

Do you think ruling oligarch Money Power Sith Lords benefit from a less aware, increasingly feminized population?

You bet they do.

BTW, birth control polls are copper based...  and the placebo is iron based.  Both are toxic to the body.

Now you know why the Banksters push them so hard...

In reply to by All Risk No Reward

All Risk No Reward All Risk No Reward Sat, 04/14/2018 - 13:10 Permalink

Agreement is explained in my post.

Disagreement is explained...  nowhere.

I'm actually trying to help those who disagree to compose their thoughts and express them so others can benefit.

They don't want that, apparently, they just want to feel "click empowered" by adding absolutely nothing to the dialogue.

You have to empower yourself...   or down vote those that are encouraging you to empower yourself...

In reply to by All Risk No Reward

AGuy FBaggins Fri, 04/13/2018 - 15:59 Permalink

"THE TARIFFS ARE NECESSARY FOR THE ECONOMIC HEALTH AND RECOVERY OF THE ENTIRE NATION, AND SO THE ENTIRE NATION"

Ha! no recovery with tariffs: only inflation and higher unemployment. Are unions good for the economic health? How about gov't? Is there one thing that gov't enacts that doesn't harm the economy? Why would gov't enacted tariffs be any better that everything else the gov't mettles in?

In reply to by FBaggins

FireBrander whatswhat1@yahoo.com Fri, 04/13/2018 - 15:13 Permalink

OH NO! OH NO!

Farmers can't afford State of the Art grain bins! No more $70,000 pickups! No more $750,000 cotton pickers!

Ya know, there was a time when a farmer BUILT his grain bin himself...and if you drive around the Midwest, many of those century old bins are still standing...they're actually hot items...people love to put them in the backyards of their McMansions as outdoor screened rooms.

My point. Farmers will be fine; they'll just have to get used to the end of the free money and all the super fancy, high tech, farming gizmo's.

In reply to by whatswhat1@yahoo.com

AGuy FireBrander Fri, 04/13/2018 - 16:05 Permalink

"My point. Farmers will be fine;"
Sure, but will you be when the cost of everything at the supermarket is 30% in about 6 months from now?

"high tech, farming gizmo's."

When those grain silos were built about 20% of the population was involved in agraculture. Today about 2% of the population feeds about 330M americans as will as exporting food abroad. You really think a farmer driving a 20HP tractor is going to operate 300-500 acre farm? The high tech tractor are used to maximium production with the least amount of labor since no one wants to be a farmer.

In reply to by FireBrander

AGuy HockeyFool Fri, 04/13/2018 - 15:46 Permalink

"So why the increase in costs?"

They are only raising prices by about 15%, Tariffs are double that at 30%. So companies are spreading the pending increases using the inventory they have on hand so the can delay raising prices to 30% when the new orders for steel arrive. ie reduce the pain over the near term. Ultimately if the tariffs stick they need to raise prices to the full 30%.

In reply to by HockeyFool

Antifaschistische HockeyFool Fri, 04/13/2018 - 16:09 Permalink

Because "middlemen" (no gender offense intended), like me (in a past life) will buy ALL the inventory on the shelf, knowing the tariff is coming.  They raise prices immediately to disincentivize the arbitrage guys.   Small, mid size steel/aluminum supply companies don't have access to cash/credit to gobble up inventory.  Mid to larger size companies that say "send me $4 million worth of steel/aluminum" will and probably already have.   It's a gamble...where fortunes can be both made and lost.  Either way, gamblers always drive prices up. 

In reply to by HockeyFool

1033eruth HockeyFool Fri, 04/13/2018 - 16:46 Permalink

Why haven't interest rates risen at the banks after so many rate hikes by the fed?  Because, the banks or in the above example can use it as an EXCUSE to raise prices with no correlating input price increase - PRESTO, instant profit.  

The above is a GIGANTIC propaganda story to once again slight anything Trump does - anything - it will be spun and misleading.  

The ag industry is being slammed by rising fuel costs.  And of course rising oil is also Trumps fault, as is pretty much anything that's negative ACCORDING TO THE NEWS.

 

In reply to by HockeyFool

Antifaschistische Klassenfeind Fri, 04/13/2018 - 16:12 Permalink

so, you're suggesting that of the tens of thousand of international trade deals that exist in the world....that two months ago, we were perfectly optimized, and that nothing should change?

are you also suggesting that Chinese 'cheating' on prior agreements should be ignored because the cheating resulted in the most efficient and fair allocation of capital, labor and income?

why make such a stupid statement...why not discuss your real position?  Are you a 100% hands off, government should not be involved with trade deals free trader?  No?  you're not?  then please explain what fair is?

In reply to by Klassenfeind

All Risk No Reward FireBrander Fri, 04/13/2018 - 15:54 Permalink

>>Exactly what needs to happen...he's shaking the tree...knocking the ROTTEN fruit to ground where it will fertilize the growth of the tree and it's seedlings.<<

Exactly what needs to happen...he's shaking the tree...knocking the non-Money Power Sith Lord farmers to ground where it will fertilize the growth of Money Power Sith Lord Mega-Corporate "farmers."

TFTFY.

BTW, are you really blind to the real game?

In reply to by FireBrander

Kendle C Stackers Fri, 04/13/2018 - 15:09 Permalink

So it's like premature price jacking. That's not cricket. As honorable captains of industry shouldn't they not jigger the prices in advance grabbing an extra flimsy excuse to contribute to their personal yacht funds? Won't every jiggling dick now use "tariffs" as an excuse to fuck their customers whether or not said increases are mathematically justified? I demand a pay raise retroactive to the day the tariffs were announced.

In reply to by Stackers

AGuy FireBrander Fri, 04/13/2018 - 15:52 Permalink

"Total bullshit to raise the price like that in a day..the cost of the steel in the factory is what it is."

Nope. They are raising half now, so when they get slammed with the full 30% hike they can smooth out the prices. They are trying to avoid customers canceling orders by having to raise prices by 30% when they run out of material.

In reply to by FireBrander