If a trade war breaks out with China, South Dakota would find itself on the front lines of what could become a costly conflict with one of our country’s biggest trading partners.
Thankfully, it’s all bluster for now. But as Sen. Mike Rounds reminded us in a recent nationally televised interview, the mere talk of retaliatory tariffs on soybeans is hitting close to home. As our state’s second largest crop, South Dakota farmers are watching with trepidation as the price fluctuates with every rhetorical barb.
It’s true that polls show that most Americans believe something has to be done to convince China to curb its intellectual property rights violations and what some would consider unfair trading practices. But the answer is not tariffs or other trade barriers that will only lead to a retaliatory trade war with no winners. It’s working to open markets, not close them – the freer the world trading system, the better America will do.
Consider what’s happened to our own country’s quality of life as the average U.S. tariff on imported goods has fallen from nearly 20 percent, at the height of the Great Depression, to less than 4 percent in 2016. Americans today have access to higher-quality, lower priced goods.
Increased trade also supercharges innovation by pushing businesses and entrepreneurs to make necessary adjustments to remain competitive. As scholars at the Mercatus Center point out, these changes contributed to higher wages, new jobs and more opportunity.
This didn’t occur by happenstance. It was the result of a concerted decades-long effort that combined undoing the damage caused by destructive protectionist policies like the Smoot-Hawley Tariff Act of 1930, which raised U.S. tariffs on over 20,000 imported goods, and enacting trade agreements with neighboring countries.
South Dakotans don’t need to be convinced of this. We know it after seeing what’s happened in our state after opening our markets to China, Mexico, Canada and other countries near and far.
According to the Office of the U.S Trade Representative, in 2016 South Dakota exports totaled $1.2 billion and accounted for 3 percent of our state’s GDP. As for jobs, foreign-controlled companies employed roughly 13,000 South Dakotans in 2014. These are the statistics the trade skeptics never tell you about.
With so many jobs at stake, it’s not surprising Troy Knecht, board president of the South Dakota Corn Growers Association, is describing the possibility of retaliatory tariffs on South Dakotan exports as a “gut punch.” U.S. Rep. Kristi Noem says that Chinese tariffs would “be a devastating thing for our farmers and ranchers” and Sen. John Thune thinks it is simply just a “bad idea to get into an escalating trade war with countries on who we are very dependent.”
They are all absolutely right. President Donald Trump should reconsider imposing tariffs on our trading partners and instead double down on expanding trade with other countries. The result of would be twofold.
First, as our economy grows through increased trade and commerce, we would be in an even stronger position to negotiate more favorable trade agreements. Second, expanding the list of countries that trade with the U.S. would put pressure on others who are not playing by the rules or are engaged in unfair trading practices to change their ways, or risk economic isolation in an increasingly interconnected world.
Our country has come a long way from the isolation, protectionism, and tariffs of the 1930s. We are all the better for embracing trade, commerce, competition, and the free flow of goods and services.
President Trump can spare South Dakotans the economic pain of a costly and completely unnecessary trade war by scrapping the self-destructive tariff policy and opening our trade door even wider.
Don Haggar is South Dakota state director of Americans for Prosperity.