The Chinese government designed its first concrete response to President Donald Trump’s recent wave of protectionist policies to inflict noticeable political and economic pain upon the United States while remaining within the bounds of global trade rules.
China imposed tariffs starting Monday on a relatively modest $3 billion in American imports. But by hitting numerous products — including pork and ethanol — that affect congressional districts across the country, China demonstrated that it can exert pressure in the American system.
The goal was to demonstrate resolve without escalation and to encourage farmers and workers to complain to their elected representatives.
Indeed, those representatives in some cases were already worried.
On a day when the stock market plunged 459 points, Iowa legislators and Gov. Kim Reynolds expressed nervousness about the affect the tariffs China had imposed on U.S. pork was having.
Reynolds told Statehouse reporters she is an advocate for “free and fair trade” — but she said she and other Midwest governors are worried about a developing trade war and the impact on the heartland.
“Nobody wins in a trade war,” said Reynolds, a Republican who noted “when I disagree with the president, I’m not afraid to step up.”
She said she believed there are ways to resolve trade differences without elevating disputes with trading partners.
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“There are issues with China, especially when it comes to intellectual property and tech transfer. We’ve let that escalate to the place that it shouldn’t. That also has an impact on our economy and on manufacturing, so we need to figure out a way to hold them accountable,” the governor said. “But we need to make sure we don’t have unintended consequences by getting into a trade war.”
State Sen. Liz Mathis, D-Hiawatha, took to the Senate floor to point out there are people in Iowa who are starting to make comparisons between the current economic pattern and the farm crisis of the 1980s. She also worried how negative impacts on Iowa’s farm economy would impact state revenue at a time when majority GOP legislators are considering sizable income tax cuts.
“We have some problems here. History repeats itself,” Mathis said. “We are headed for a problem here. We need to think about this as we pass budgets and a tax reform bill. We have a crystal ball here. We can see that it’s coming.”
Independent state Sen. David Johnson of Ocheyedan said he has talked to constituents from northwest Iowa representing commodity groups who dismiss concerns about Trump’s hard line trade stance.
“I guess it’s the belief that our former governor is just going to save the day in Beijing,” said Johnson, referring to former Gov. Terry Branstad who now serves as the U.S. ambassador to China. “It isn’t going to happen. We’re in a serious world of hurt here.”
Branstad told Bloomberg Television last week he predicts China will negotiate a solution.
“Ultimately, the Chinese will realize we need to work together on these issues and retaliation is not the answer, but instead collaboration and cooperation to address the issues that have been around for a long time,” said Branstad.
Beijing has said it’s prepared to engage in a trade slug match, but its preferred solution remains diplomatic, analysts have said.
“This is a negotiating tactic,” said Jeff Moon, a former U.S. assistant trade representative for China. “They tried negotiating by hinting at concessions. This is hinting at the sharp end of the stick.”
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China also is being careful to act within the rules of the global trading system that were established under U.S. leadership over the past seven decades.
The products it selected for retaliation also are not essential to its role in the global supply chain. Raising the cost of imported dried fruit won’t affect Chinese factories that make cars for General Motors or smartphones for Apple.
The next move in the Sino-U. S. trade fight will be the U.S. trade representative’s publication of the roughly 1,300 separate tariff lines it intends to increase as part of a separate action in response to China’s policy of forced technology transfer.
Expected soon, that list will trigger a 30-day comment period before the tariffs are finalized.
China’s response to that will could be telling of its long-term desires.
But Darci Vetter, a former U.S. trade negotiator, said that American farmers will probably continue to bear the brunt of any additional rounds of Chinese tariffs.
“Within the next week, we’ll see bigger (U.S.) tariffs. We should expect to see retaliation for that as well,” she said. “Ag is in the crosshairs.”
The Washington Post, Reuters and Rod Boshart of The Gazette contributed to this report.