CARMEL – Back home in Indiana some Hoosiers are dreaming that they may soon see the welcomed light of steel furnaces once again shining through the sycamores. 

But for many in the heartland that light is clouded by uncertainty because President Trump has promised to impose tariffs on steel and aluminum imports.  Concern that those tariffs may trigger retaliatory tariffs on American products by key international trading partners is generating apprehension throughout Indiana’s agricultural community.

The uncertainty faced by agriculture as farmers make their final planting decisions before the 2018 growing season are only exacerbated by the steel tariff proposal. Already bearing on those decisions are issues such as the outcome of the ongoing NAFTA renegotiation which hasn’t really focused on agriculture yet, the upshot of ongoing discussions in Congress regarding the renewable fuel standard (the requirement that gas for cars contain 10 per cent ethanol), the future of the federal farm bill and, as always, long-term weather predictions. What, they ask, will be the demand for American agricultural products if the United States finds itself in trade battles with traditional buyers by the time of this fall’s harvest?

In spite of the pride many Hoosier farmers take in our Indiana brand, it doesn’t mean much in the international market for raw bulk commodities such as soybeans and corn which comprise the majority of the state’s agricultural exports. Consequently the impact of any trade retaliation will impact Indiana about the same as it will other states in the so-called corn belt. With the exception of the traditional blue states of Illinois and Minnesota, these states all cast their electoral votes for Donald Trump in 2016. In addition to agricultural producers, the proposed tariffs have generated opposition from a number of industries that rely on the tariffs’ targets. Given the President’s proclivity to consider his “base” in making policy decisions and the concern which much of his farm-state base has expressed about the proposed tariffs, hope remains that he may revisit the tariff proposal.

Many of America’s major agricultural customers such as China, South Korea and Russia are also major steel exporters to the United States and are most likely to be most affected by proposed tariffs. Politico has reported that the EU has already drafted a list of imports, including a number of agricultural products, on which it would retaliate by imposing a 25% tariff. European Commission President Jean-Claude Juncker, with an obvious eye on our Congressional leadership, recently suggested Mitch McConnell’s Kentucky bourbon and Harley-Davidson motorcycles and dairy products from Paul Ryan’s Wisconsin as probable targets.

In addition to the potential loss of international markets, rural Indiana should also be concerned with the potential loss of foreign investment that could result from a trade war. Over the past 30 years or so, Indiana has benefited from the major investment of foreign capital across the state. This investment has provided a number of well-paying jobs and stimulated additional economic activity in a number of smaller, more rural communities.  In an open global market Indiana can continue its efforts to attract this sort of investment; if a trade war should develop, that might not be the case.

In view of the negative reaction of much of his base to the proposed tariff and the pressure the president has received from Congress to back off his proposal, it remains to be seen if the president will actually impose the tariffs. There is also the possibility that Congress could act to rescind the tariffs or that the World Trade Organization could find them unwarranted.  (Whether the Trump administration would respect a WTO ruling is also an open question.)

Whatever the eventual outcome may be, it is unlikely to happen any time soon. Accordingly, Indiana farmers will be left with uncertainty and apprehension on this as well as other issues as they ponder the upcoming growing season. 

Kraft is formerly with the Indiana Farm Bureau.