Oops! Will Trump's Trade Wars Crash The Economy The First Week In November

Team Trumpanzee could have hardly timed their ill-advised trade war better-- for congressional Democrats. Yesterday, Ben White at Politico reported that Señor T's "trade battles are already triggering economic warnings-- and rising danger for Republicans just ahead of the midterm elections."

As fresh U.S. tariffs on $200 billion in Chinese imports take effect Monday, surveys show consumers growing increasingly worried about higher prices this fall. Giant retailers such as Walmart are warning of price increases for manufactured goods. And smaller businesses in swing states and districts from Washington state, to Iowa, to Tennessee are complaining bitterly about big hits to their exports.

The economic fallout from Trump’s skirmishes with China, Canada, Mexico and the European Union risk making an already tough cycle for Republicans even more brutal, giving Democrats a chance to peel away voters linked to influential industries-- like Washington state cherry farmers and Tennessee whiskey makers-- who have long supported business-friendly Republicans.

“Where you have real-world effects of the trade war, you see people’s opinions sour dramatically,” said Scott Lincicome, a trade lawyer and adjunct scholar at the Cato Institute who is studying the links between public opinion and trade. “You look at places like Washington state where people are dependent on exporting cherries and apples, or Rust Belt states that border Canada, or Tennessee with auto and bourbon makers, and you are going to see close races where this is actually a decisive issue.”

The latest impact will begin to hit Monday as new 10 percent tariffs Trump slapped on over $200 billion in imports from China are scheduled to go into effect. That tariff rate is set to rise to 25 percent on Jan. 1 if the Chinese don’t capitulate to White House demands. Trump has also threatened to bump the total up to more than $500 billion in imports, which would hit nearly every product China exported to the U.S. last year.

Economists expect that to translate into higher prices for consumers across the country and special pain for low- to middle-income voters who make up much of Trump’s base-- and are least able to absorb increased costs for consumer goods such as air conditioners, clothing and furniture. Republicans are counting on getting Trump supporters to the polls in November to hold off projected Democratic gains in the House and potentially the Senate. Forcing consumers to pay higher prices could make that harder.

“If you are kind of in the middle- or lower-income groups, you are buying a lot of what economists call tradable goods and you’ll be hit a lot harder,” said Kyle Handley, assistant professor of business economics and public policy at the University of Michigan’s Ross School of Business. “This is basically the Trump voter who is going to see the biggest hit to their total spending.”

Evidence is piling up that consumers and businesses are growing increasingly nervous about Trump’s trade policy.

Consumer sentiment measured by the University of Michigan dropped last month to its lowest point in nearly a year, with the decline centered in lower-income households most sensitive to higher prices. The sentiment index ticked up again in preliminary results for September. But nearly a third of those surveyed cited concern over tariffs when assessing the economy.

A survey of chief financial officers unveiled last week by Deloitte found that 42 percent said business conditions would improve next year, the lowest in two years, with executives “overwhelmingly worried” about trade policy and tariffs.

Walmart recently warned it will need to raise prices on a huge swath of products imported from China. Other large consumer-product companies including Procter & Gamble, Nestle and Coca-Cola announced price increases over the summer, partly because of tariffs, and warned of more to come.

...While many U.S. consumers may be able to absorb the impact of the 10 percent levies, economists say that if the Chinese tariffs eventually expand beyond $500 billion and rise to 25 percent, the hit to overall consumer spending and sentiment will be significant.

“If you look at the tariffs that they put on washing machines, you’ve seen an increase in prices and a decline in consumer demand, and we should expect to see the same from these latest tariffs,” said Simona Mocuta, senior economist at State Street Global Advisors. “I get the sense that even President Trump is not that keen on going up to 25 percent. This is almost like a plea to get people to come to the table and talk.”

Democrats are seizing on the trade issue in close House and Senate races across the country, such as in Tennessee for the Senate seat being vacated by retiring Republican Bob Corker. Democratic nominee Phil Bredesen, that state's former governor, is locked in a tight race with GOP Rep. Marsha Blackburn in what otherwise might be a safe seat for the party. Bredesen has hammered away at Trump’s tariffs, which are hitting the state’s large automotive, hog farming and bourbon industries.

Blackburn, a strong Trump supporter, has been critical of the president’s trade policies but stopped short of demanding that Congress take away Trump’s tariff authority. A newly formed pro-trade effort called Tariffs Hurt the Heartland held a town hall in Nashville last week to highlight what that campaign says is the negative impact of Trump’s policies on Tennessee businesses.

Democratic incumbent Sen. Heidi Heitkamp in North Dakota recently ran an ad with soybean farmers talking about the “hundreds of millions” of dollars in lost sales to China. Democrats are also pressing the trade issue especially hard in competitive Senate races in Arizona, Florida, Indiana, Missouri, Montana and even Nebraska, generally viewed as a safe GOP seat, according to the Democratic Senatorial Campaign Committee.

The same holds true in House races in competitive districts that rely heavily on exports. In Washington state’s 8th District, which crosses the Cascade mountains, Democratic nominee Dr. Kim Schrier is ripping the tariff impact on the state’s apple and cherry farmers in the race to replace retiring GOP Rep. Dave Reichert. Democrats have never won the seat.

“It’s just a huge issue here, and we are really feeling this heavily; nearly everything that Washington exports faces a 5 [percent] to 25 percent tariff,” said Katie Rodihan, communications director for Schrier. “Kim’s point is we really need comprehensive trade agreements and we should never be in this situation where we get spontaneous trade policy via tweet.”

The GOP nominee in the district, Dino Rossi, has walked a middle ground typical of pro-trade Republicans across the country, criticizing some specific Trump policies on trade but stopping short of strong rebukes that could alienate the president’s fervent supporters. In a statement this summer, Rossi said he has been “very open about my disagreements” with Trump on trade.

Beyond Washington state, the Democratic Congressional Campaign Committee cited competitive House races in California, Illinois, Iowa, Kansas and Kentucky where the party is making Trump’s trade policies a central issue. A spokesman for the National Republican Congressional Committee, which promotes GOP House candidates, did not respond to a request for comment on the impact of the trade issue.

...The Chamber’s latest list of states impacted the most include Alabama, Michigan, Pennsylvania, South Carolina, Texas and Wisconsin, where the state’s GOP Gov. Scott Walker trails Democratic nominee Tony Evers in recent polling. Retaliatory tariffs threaten a range of products exported from Wisconsin including cheese, whey and paper products, according to the Chamber.

“This is going to be like death by a thousand cuts hitting every consumer product once you broaden the tariffs out,” said Matthew Shay, president of the National Retail Federation. “Taxing American consumers as a way of getting the Chinese to the table just doesn’t seem like the right tactic to us. If all of these tariffs on $500 billion-plus from China go into effect, prices will increase on everything that gets imported and that‘s going to be painful and real and unnecessary.”

Progressive Democrat James Thompson, once again being willfully ignored by the DCCC, told us that "the 4th District of Kansas is the hardest hit Congressional district in the United States because agriculture and manufacturing are the two biggest economic drivers here. Our farmers can’t sell their product and the increased cost of steel and alumninum make turning a profit nearly impossible for the makers of commercial planes here in Wichita. The worst hit are the agriculture manufacturers who make farm equipment like combines and tractors. Farmers can’t afford to buy the products because of the tariffs, and the equipment costs too much to make. The farmers here are being devastated. While some continue to maintain a cautious optimism for Trump’s trade war, the majority are sick of taking it on the chin for his misguided policies.  Worst yet is that our current Congressman, Ron Estes, lacks the courage and intestinal fortitude to stand up to Trump. He should be standing on the floor of Congress on a daily basis demanding these horrible trade policies be rescinded.  Instead he simply goes along with whatever he is told to do. Congress must begin reclaiming the power to impose tariffs, which it abdicated over the past 50 years. Tariffs should only be imposed after serious discussion and debate by our Congressional leaders in the House and Senate. We deserve better. We can do better, but only after we ourselves have the political courage to reject and throw off the proverbial yoke placed upon us by President Trumps tyrannical tariffs."

Mike Siegel is running in a very gerrymandered Texas district that meanders from north Houston to the far suburbs west of Houston. The DCCC is ignoring his race but voters there are grad to see a candidate talking sense about Trump's harmful trade wars. "Here in the Texas 10th," Mike told us, "we don't see any benefits from the tariffs, but we are certainly feeling the pain. Our largest exports are negatively impacted-- rice, sorghum, grain. And when you hurt a rice farmer in Colorado County, Texas, you are also hurting an entire ecosystem of interrelated businesses and families. Big picture, the President's action seems entirely arbitrary. At a recent town hall here, Beto O'Rourke said, 'When the United States goes to war, we go with a coalition of allies. Why are we challenging China on our own?' Trump's Twitter diplomacy is unilateral and ineffective, and it is only hurting the people on the ground."

A third progressive Democrat being willfully ignored by the DCCC is J.D. Scholten, who's running against Steve King in Iowa. His constituents are having many of the same problems with Trump's trade wars that Thompson's are. “Right now, we are borrowing money from China to give to our farmers to not sell our products to China. How much sense does that make? And when we lose these markets to South America, who is helping out those farmers? It’s the same multi-national companies that are in Iowa. There’s no loyalty. We need to end this trade war and we need to challenge corporate consolidation.”

Please consider contributing to James', Mike's and J.D.'s campaigns-- and to the other progressives the DCCC is boycotting-- by clicking on the Blue America "Abandoned by the DCCC" thermometer above. These are the kind of candidates who are going to make the difference between a Democratic Congress that basically does nothing at all for two years and one that goes all in on a progressive vision with a platform with fighting for.