Here's how the U.S.-China trade war affects Indiana
Hoosier farmers were already hard hit when President Donald Trump raised tariffs in 2018. But a new round of tariffs from the U.S. and China amid a trade war also could hit consumers in the wallet, economists say. Indianapolis Star
Within three days of President Donald Trump tweeting his plans to impose additional tariffs on hundreds of billions of dollars of Chinese goods, Indiana farmer Brent Bible saw the value of his unpriced crop drop by $50,000.
"Simply because of the news," said Bible, who co-owns a corn, soybean and popcorn farm near Lafayette, "and the anticipation of what this is going to create in terms of a trade hardship."
The U.S.-China trade war escalated last week when Trump made good on his tweeted threat and hiked tariffs on $200 billion of Chinese goods and commodities. Just Monday, China announced retaliatory tariffs on $60 billion in U.S. imports that will take effect June 1.
Indiana farmers like Bible, who shared his struggle with reporters as part of an effort to help end tariffs, are caught in the middle. The same goes for Indiana's manufacturing sector and, without a calming of tensions, the state's consumers will increasingly feel the impact.
Here are three ways the U.S.-China trade war is affecting Indiana.
Hoosiers farmers are already feeling operating losses from the trade war.
Since it began early last year, Indiana farmers have been in the cross hairs of tit-for-tat tariffs — an additional 25% on commodities like soybeans and corn — placed on a long list of products from both economic powers.
The price of a bushel of soybeans, which are Indiana's No.1 agriculture export to the world, fell to $7.91 as of 5:22 p.m. Monday.
China historically has been the largest consumer of U.S. soybeans. But as the trade war has persisted, China has turned to South American suppliers to feed some of its need for the agricultural product.
"Our competitive advantage is that we are a reliable source of product and this has taken that away, and it has made it such that we are — by changing the price as much as the tariffs have — it's made us so noncompetitive," said Bible, who joined the National Retail Federation and other small business owners from across the U.S. on a conference call last week to oppose the imposition of new tariffs.
Indiana exports to China fell from $3.1 billion in 2017 to $2.2 billion last year, according to the 2019 State Export Report from the U.S.-China Business Council, a private bipartisan nonprofit organization of 200 American companies doing business in China.
The state's exports of oilseeds crops — like soybeans — and grains decreased from $1.1 billionin 2017 to $238 million in 2018, the council said.
"The tariffs have done enough damage already to agriculture," said Bob White, the Indiana Farm Bureau's director of national government relations. "We'll never get that market back, the soybean market for sure."
China is Indiana’s fourth-largest foreign export market behind Canada, Mexico and Japan. In addition to agricultural products, Indiana also exports pharmaceuticals, motor vehicle parts and medical equipment to China. Indiana's exports to the world's second-biggest economy supported 26,500 Hoosier jobs in 2017, the U.S.-China Business Council found.
The new wave of tariffs won't have an immediate impact, said Andrew Berger, senior vice president of government affairs for the Indiana Manufacturers Association.
The tariffs, however, have generated a lot of uncertainty for manufacturers, which can have contracts with dozens of suppliers for machine parts and other products assembled in Indiana.
In that context, Berger noted, one question that arises is whether tariffs will affect a part that is made in China but exported to third country before reaching the U.S.
Without knowing exactly how the tariffs will be enforced, companies have a difficult time anticipating future costs, he said. They're also seeking ways to shift costs in contracts or passed them to American consumers.
"Companies look for predictability as much as they can get it and this is not a predictable area right now, and that hurts the economy," Berger said.
Some U.S. companies could even request government exemptions as hundreds did when the administration imposed a 25% tariff on imported steel and a 10% tariff on aluminum imported from China and several other countries in March of 2018.
The first round of import duties hit farmers and companies. To varying extents, experts in agriculture, industry and economics said consumers in Indiana and across the U.S. would likely feel the impact of the latest tariffs.
"We're paying that tariff. I want there to be no mistake that the consumer is paying for these tariffs," Bible said. "I wish China was paying them. I'd certainly feel better about it that way."
Several economic studies have found that American consumers are paying the bill.
One example involves washing machines. Americans are already paying 12% more for imported washing machines as result of the 2018 import tariffs on all countries that the appliances come from, according to researchers at the University of Chicago and the Federal Reserve Board. The price of clothes dryers also rose by the same percentage despite not being subject to tariffs.
"There's so many different effects," said Kyle Anderson, an economist at Indiana University's Kelley School of Business in Indianapolis. "Consumers pay more. Consumers pay higher prices. Our U.S. companies — producers and exporters — get to export less. And while there are a few winners, the aggregate effect of the loser is much greater."
Call IndyStar reporter Alexandria Burris at 317-617-2690. Follow her on Twitter: @allyburris.