NEWS-SENTINEL EDITORIAL: State has lots at stake in China trade strategy

A trade war with China isn’t good for Northeast Indiana’s economy, at least not in the short-term. Whether President Trump’s strategy can produce the long-term benefits of a fairly negotiated trade deal remains to be seen.

The Chinese Finance Ministry announced Monday that it will raise tariffs on more than 5,000 U.S. products representing $60 billion in goods in retaliation for the Trump’s decision to hike tariffs on Chinese goods from 10 percent to 25 percent. The tariff fight puts the world’s largest economies at odds, and depending on who is to be believed, either will force the Chinese to get serious about negotiating a fair long-term trade agreement, including stopping intellectual property theft, or will roil the U.S. economy with increased consumer prices and downward pressure on manufacturing jobs.

The impacts of the China tariffs are perhaps more pronounced in Northeast Indiana than other areas. First, there is the impact of the tariffs on soybeans, Indiana’s top agriculture export to the world. Soybean prices fell below $8 per bushel Monday, the lowest price in more than a decade, as news of the trade wars escalated. China had been the largest consumer of U.S. soybeans until the trade wars began to escalate last year and the Chinese retaliated by increasing soybean imports from South American markets.

“The tariffs have done enough damage already to agriculture,” Bob White, the Indiana Farm Bureau’s director of national government relations, told the Indianapolis Star this week. “We’ll never get that market back, the soybean market for sure.”

The tariffs also have a significant impact on manufacturing. China is Indiana’s third-largest export market behind Canada and Mexico. The U.S.-China Business Council reported that in 2017 China accounted for $3.1 billion in goods made in Indiana, including $691 million in pharmaceuticals, $184 million in motor vehicle parts, $177 million in medical equipment and $152 million in resins and synthetic fibers.

The council said Indiana exports to China accounted for more than 26,300 jobs in 2016. Many of those jobs are in Indiana Congressional District 2, which stretches across Central Indiana from South Bend and Elkhart to the north to Miami and Wabash counties to the south, and District 3, which covers most of Northeast Indiana including Fort Wayne. They are the two most manufacturing-dependent congressional districts in the country.

Tariffs can be good for manufacturing, said U.S. Rep. Jim Banks, R-3rd, noting the positive impacts that tariffs on steel imports have had on Indiana’s steel manufacturers. But the concern is that over time, retaliatory tariffs from China will reduce Indiana exports to China and result in manufacturing job cuts in the region. Banks applauded the president’s tactics, noting Trump is the first president in Banks’ lifetime willing to stand up to the Chinese on trade.

“We can only hope that by ratcheting up the pressure on China, that will quickly bring China back to the table to sign a deal with the president,” Banks told WIBC radio. “Because (the tariffs) will have an impact on agriculture and will have an impact on manufacturers in different industries in the state of Indiana. But what I hear from my constituents, by and large, is that they understand that short-term pain means long-term gain for the United States of America and for our economy.”

Banks noted that a fair trade agreement needs to come sooner rather than later, not only for the long-term benefit of Indiana residents but also for the president’s own political fortunes.

We would agree. In the last decade, goods exported from Indiana to China have more than doubled while Indiana exports to the rest of the world have grown 37 percent. Bottom line? Hoosiers have a lot riding on the administration’s China strategy.