Wisconsin farmers are already juggling increasing tariffs on goods to and from China. In the meantime, last week, President Trump announced that he'll steadily increase tariffs on all Mexican goods imported to the US—because of what he perceives as Mexico’s failure to stem illegal immigration.
Although officials are in talks on the matter, uncertainty remains. In order to find out how the economic headwinds are affecting Wisconsin agricultural industries, we met farmer Dean Strauss in Sheboygan Falls, at his Majestic Crossing Dairy farm. He keeps some of his 2000 dairy cows at this beige one-story barn, not too far from the main road.
Strauss is concerned about the impact of tariffs on the milk this herd produces. He says farmers try to strike a delicate balance between how much they produce and how much will be bought in the US and abroad. “We need to have consumption or exports or however it needs to grow to keep a stable market," he says. "If that doesn’t ebb and flow and you lose a little bit in trade, all of a sudden that’s a big deal.”
And that’s where the recent tariffs come in. A tariff is a tax—paying extra for American goods sold in another country – or paying extra for items imported to the US. About three weeks ago, the U.S. imposed 25% tariffs on $250 billion dollars of Chinese imports. This past Saturday, China retaliated with tariffs of its own. As a result, the Wisconsin ag department says 10-20 of the state's food and agriculture items are expected to have an additional 15% tariff.
China has already put a 25% percent tariff on Wisconsin cheese. And farmers fear that could go up. All of farmer Dean Strauss’ milk gets made into Cheese, at Sartori -- a cheese company seven miles down the road.
In Sartori’s plant, metal claws whirr through vats of cheese curds. “On the first table that we’re looking at here, there’s about 3500 pounds of cheese, and it’s fresh parmesan,” says Jeff Schwager, president of Sartori Cheese. “We export to 45 countries," he says. "China is our 5th largest [export] market.” Mexico -- is his number 2 export market. Last year, Mexico was the largest importer of Wisconsin cheese.
President Trump announced last week that the U.S. will impose a 5% tariff on all goods imported from Mexico this coming Monday, June 10. The tariff would gradually increase to 25% if Mexico doesn’t help curb illegal immigration into the US. Trump's move could result in retaliatory tariffs from Mexico. Schwager says he's had a strategy on tariffs ever since last summer, when the trade wars first started with China and Mexico. He absorbs or splits with his importer the cost of the tariffs for his Chinese and Mexican customers. He says it’s not a long-term solution, but it’s better than losing customers now...and trying to win them back when prices are lower.
But with this latest round of retaliations, things could change. “We are very concerned that there are rumblings within China that there’s going to be a ban on U.S. dairy, or even higher tariffs," says Schwager. "And they’re concerned that for them to work with us, there might be a disruption if there’s a ban, or even higher tariffs that we would not continue to absorb. So, they’re looking for other sources, mainly European, rather than U.S. dairy.”
Schwager says if the tariffs go up too much in China, Sartori will pull out of the market – and he calls the latest escalations with Mexico “troubling.”
Experts say farmers and producers will be feeling a double whammy from these trade tensions. First, you have China taxing American products, and potentially Mexico doing the same—possibly reducing demand for American goods. Second, farmers will also be paying more for necessities like machinery and electronics -- says UW-Madison professor Ian Coxhead.
“That’s going to come through higher US tariffs on a whole range of equipment that is produced in value chains that span the world, including China.” And value chains that include Mexico, if Trump’s tariffs go into effect.