Why this is important to Wisconsin businesses: China's retaliatory tariffs will affect several important categories of Wisconsin exports.
On March 23, after the Presidential Memorandum on the 301 investigation and the Section 232 Tariff Modifications were approved by President Trump, China’s Commerce Ministry announced a tariff increase on fresh/dried fruits, wine, pork, American ginseng, modified alcohol, seamless steel pipe and aluminum scrap.
For now, the proposed Chinese penalties appear to be a carefully calibrated response to the U.S. steel and aluminum tariffs, which may not substantially affect the overall trade situation between China and the U.S. There is no doubt, however, that they will affect Wisconsin's exports to China.
According to the annual report of the Wisconsin Department of Agriculture, Trade and Consumer Protection, Wisconsin exported over $3.5 billion of agricultural products in 2017, and China ranks third among the state’s agricultural export markets. However, Wisconsin’s best-sellers, including prepared/preserved cranberries, ginseng roots and hogs, are all on the Chinese restriction list, so exports of these agricultural products stand a good chance to decline due to the retaliatory tariffs. Meanwhile, considering the rising anti-Americanism in contemporary Chinese society, Wisconsin’s other top goods exported to China, such as motor vehicles ($50 million), miscellaneous general purpose machinery ($54 million) and navigational and measurement instruments ($335 million), may also be hit.
Given the fact that China is the top global manufactured products exporter, a trade war will have an important influence on the daily lives of Americans, especially for those who are not wealthy. The U.S. is raising tariffs on China, the EU, Japan and Russia at the same time, which may cause these powers to work together to compete with the U.S. The EU has announced that it will impose a 25 percent retaliatory tariff on motorcycles. If China follows the example of the EU, Wisconsin’s motorcycle manufacturing industry (including the Harley-Davidson headquarters) may be greatly impacted.
The Chinese government seems to be quite uncompromising and unyielding on this topic, which may be due to China having just carried out an unprecedented large-scale political reform. The newly elected leadership group may see this trade friction as a chance to consolidate their dominance, making a trade war even more likely.
If the trade war does escalate, Wisconsin has the possibility to experience even greater impact. Some Chinese scholars and analysts have suggested imposing punitive tariffs on automobiles, machinery products and oil crops like soybeans—an important portion of Wisconsin’s exports to China.