Gene Larsen has spent the last four decades building up his family farm on a stretch of land near the Baraboo River in southeast Wisconsin.
For years the 66-year-old has planned on one day handing his life’s work down to his son and, eventually, his teenage grandson, who is in charge of his own field of barley for the first time this year.
But now, instead of looking forward to retirement, Larsen worries about how much longer his family will be able to keep running the farm at its current capacity. He has yet to plant most of his 2,400 acres of corn and soybeans after spring flooding ravaged the Midwest earlier this year. Meanwhile, U.S. soybean prices sank to a 10-year low last week, and Larsen is more concerned than ever about the escalating trade war between the U.S. and China.
“For the first time in my life, I’m seriously thinking that we’ll need to be liquidating some of that to keep our nose above water,” Larsen said.
As the China-U.S. trade war drags into its second year, with the two countries exchanging another round of tariffs last week, President Donald Trump said Monday he thinks the U.S. is in a “strong position,” and that pursuing tariffs against China is “working out really well.”
But American farmers and producers in other industries like manufacturing bearing the economic brunt of taxed imports are wondering how much longer — and higher — the tariffs might go. Rural areas and small towns are among the hardest hit by retaliatory tariffs from China and other countries, according to a study from the Brookings Institution. In Wisconsin, a state that helped carry Trump to victory in 2016, family farmers like Larsen are being squeezed.
Farmers across the swing state are still reeling from last year’s initial round of tariffs, which came after the Chinese government warned Trump that it would target American agricultural exports to China, the United States’ third largest market, if he initiated a trade war.
China’s warning didn’t deter Trump then, and the two sides remained mired in a long-running dispute that escalated last week, when talks stalled and both countries exchanged a new round of tariffs. Negotiators are still eyeing a June 1 deadline for a deal.
Trump contends that his trade policy with China is working, even as stocks dropped 600 points earlier this week amid concerns about the trade war.
But the economic data tells a different story. Since July 2018, when the initial tariffs went into effect, soybean sales from U.S. farmers to China, the world’s largest buyer of the crop, have dropped more than 90 percent. Sales of dairy products, like whey, have dropped by 43 percent, and cheese export values have fallen about 85 percent. The Department of Agriculture expects the value of U.S. agricultural exports to drop by $2 billion in fiscal year 2019 alone.
The ‘straw that broke the market’s back’
Larsen and other Wisconsin farmers were already facing increasing global competition, skyrocketing farm foreclosures, a three-year-long downturn in the U.S. agricultural industry and low crop yields this year from the flooding. The Trump administration’s tariffs on steel imports from China and other nations also increased the cost of farm machinery and parts.
But the larger trade dispute with China is “probably the straw that broke the market’s back,” Larsen said, adding that it has created a “perfect storm” of economic turmoil for American farmers that could have a lasting impact.
Some economists, including those at the Tax Foundation, have said the current tariffs could raise costs and reduce GDP by $30 billion long-term.
Trump administration officials have largely downplayed the tariff’s impacts on the U.S. economy, while touting the government’s efforts to help farmers weather the storm.
Agriculture Secretary Sonny Perdue has appeared on cable news shows and in events with Trump, saying U.S. farmers are willing to bear the short-term economic burden for the long-term economic health of the country. In one interview last September, Perdue boasted that farmers had been “amazingly supportive [of Trump’s trade policies], even under financial duress.”
Robert Karls, who heads the Wisconsin Soybean Marketing Board, disagreed. “This isn’t short-term pain. This is going more long-term,” Karls said in an interview. “It’s affecting land values, the cost of crops, the trade relationships we spent decades cultivating.”
After the initial round of tariffs last July, the Trump administration provided a $12 billion bailout to affected farmers and agricultural companies last year. Small to medium-sized farms received a $10,000 check, though some soybean farmers said in interviews that they estimate their revenue losses were well over $200,000.
After the latest round of tariffs, Trump spoke Monday of another bailout plan to help American farmers, promising to do “something reciprocal for our farmers” so “they can sell for less and make as much money until it’s straightened out.”
But the Trump administration likely has no idea what trade war’s long-term impact will be on American farmers, and the foreign markets they need to survive, said Darin Von Ruden, the president of the Wisconsin Farmers Union.
“Down the road it might be a benefit, but how many of those farms are going to still be there?” Von Ruden said.
The Republican divide on trade
Republicans voiced concern about the Trump administration’s use of tariffs in trade negotiations with Mexico and Canada last year. Vice President Mike Pence met with Republican lawmakers about the tariffs this week. But so far GOP lawmakers have been less willing to confront the president over the trade dispute with China.
Sen. Chuck Grassley, R-Iowa, told the Washington Post he planned to raise the issue in a letter to Trump this week, adding: “I’m not sure if you talk to him face to face, he hears everything you say.”
In Wisconsin, Republican Sen. Ron Johnson has spoken out against Trump’s trade policies. Johnson hasn’t always singled out the dispute with China, but he has argued repeatedly that trade wars hurt the U.S. economy, including states like Wisconsin with large agriculture sectors.
Johnson told PBS NewsHour in a statement that he was “well aware” of the impact tariffs have had on Wisconsin’s farmers and manufacturers. “But I’m also painfully aware of how China has abused the world trading system – stolen so much intellectual property, both military secrets as well as industrial secrets,” Johnson said.
“I’ve been pretty amazed at how patient farmers and manufacturers have been in terms of supporting the president in trying to accomplish his goal of getting China to stop stealing our stuff, and also start complying with World Trade Organization rules,” he said.
In interviews in recent days, Wisconsin farmers and agricultural leaders — many of whom are Republicans themselves — said they can’t wrap their head around why their party has abandoned its longstanding support for free trade.
“Everyone is trying to soft-shoe around this,” Karls said. “It doesn’t appear that they’re in touch with farmers.”
The trade war is “definitely [taking] an emotional toll and an economic toll,” said Ryan Klussendorf, who runs a dairy farm in central Wisconsin’s Taylor County, which Trump carried by 44 points in 2016. “We’re just like any other business. We want to provide for our families and our employees, but right now it’s difficult to do that.”
Klussendorf, who is also president of the Taylor County Farm Bureau, said his family’s dairy farm in Medford lost about $50,000 in revenue last year, something he said was largely due to tariffs on China, but also because of Trump’s trade dispute with Canada and Mexico. That standoff led to a deal for a new version of the North American Free Trade Agreement, but Congress has yet to ratify the deal.
“I support the president and what he’s doing,” Klussendorf said. “But it has stretched on for a long time and has turned the agriculture economy down with it. We are going to lose a lot of good farmers because of this.”
‘Something has to change’
Trump has promised to place further economic pressure on China if it doesn’t agree to a trade deal. On Monday, he warned that if China doesn’t back down, “there will be nobody left in China to do business with.”
But farmers in Wisconsin showed little appetite for a protracted trade battle. Many said that losing access to China’s markets would cause small farms in Wisconsin to close, helping permanently re-shape a state agriculture industry that’s increasingly dominated by large corporations.
“There is an urgency to get something done. This can’t go on much longer,” Klussendorf said.
“It’s been economically devastating. We’re just scratching by,” said Damon Brandner, who runs a 700-cow dairy operation down the road from Klussendorf’s farm with his brother, wife, parents and 14-year-old son. The farm was down about $400,000 in revenue last year, he said.
“Up until this point, I thought it was reasonable,” he said of the U.S.-China trade standoff. “But I think something has to change.”
Other farmers shared a similar sense of frustration, saying they supported Trump’s tough trade policies from the start but now wanted the dispute to be resolved as soon as possible.
Dennis Knuth, a farmer in Baraboo, said he lost $15,000 on soybeans in 2018 after the tariffs hit. “We may be able to weather this for a bit, but if they don’t get this cleared up by harvest time in the fall, then it’s really going to hurt,” he said.
And the tariffs aren’t just hitting individual farmers, they’re threatening companies across Wisconsin’s agricultural sector as well.
Adam Warthesen of Organic Valley, an organic dairy cooperative in La Farge, called the ongoing tariff war “a kick in the teeth” to producers already dealing with a depressed dairy market.
Warthesen said the company, valued at more than $1 billion, estimated it has lost “millions in trade opportunity to China,” about a 50 percent drop in revenue expectations, since it invested in marketing efforts in China several years ago.
What tariffs could mean for Trump in 2020
If the economic fallout from the trade war continues, it could impact the presidential election in Wisconsin, a key swing state that voted twice for Obama before backing Trump in 2016.
Trump won Wisconsin by just 20,000 votes, and 2020 is expected to be just as tight.
Wisconsin Democrats, who suffered record defeats in rural Wisconsin counties in 2016, argued the tariff issue has given them an opening with rural voters in the state. A poll from Marquette University Law School shows more than half of voters in Wisconsin disapprove of Trump’s job as president.
“He’s got less margin for error now,” said Joe Zepecki, a Wisconsin-based Democratic strategist.
Mark Jefferson, the executive director of the Wisconsin Republican Party, said he’s not worried about retaliation from rural voters over the tariffs just yet. “At this point, it’s not complicating [our 2020 strategy], but I think a lot of people are keeping a very close eye on it,” he said.
“[Trump] told people when he was running what his thoughts were on trade. He told people that he was going to upset the apple cart,” Jefferson added.
But in the heart of Trump country in Taylor, Wisconsin, farmers like Brandner said there’s little chance the economic fallout of Trump’s trade war will be resolved by the next presidential election.
Brandner voted for Trump the last time around. But now, amid the trade war, he said he is considering voting for a moderate Democratic candidate in 2020.
“Even if there is a deal in the next year, that’s not going to turn ag around instantly. I just don’t see anyway this is going to be better by 2020,” he said.