Why US Democrats don’t want to mention Trump’s (trade) war

Dave Walton is puzzled. The Iowan farmer cannot understand why most of the Democratic presidential contenders swarming the state are not talking about his big economic concern: the impact of the US-China trade war.

“I haven’t heard a lot of them speak much at all about trade,” says Mr Walton on his farm near the Mississippi river. “We’re an agriculture state and we depend on exports . . . To not talk about trade in Iowa is a big mistake.”

The tit-for-tat tariffs imposed by both sides over the past year have hit farmers in Iowa, which helped elect Donald Trump in 2016, and other agricultural states in the Midwest. Yet Democratic contenders have been slow to address the issue, partly because farmers tend to vote Republican. They are also concerned about appearing to be soft on China after Mr Trump’s tough stance on Beijing in the 2016 presidential race resonated with voters.

When Mr Walton, 53, first spoke to the Financial Times in late March, he was hopeful that the US was on the verge of signing a deal with Beijing that would eliminate Chinese tariffs on soyabeans — a key crop in Iowa — imposed after Mr Trump opened the trade war by slapping tariffs on Chinese products.

US officials were preparing to meet their Chinese counterparts in Washington this week for more discussions, following talks in Beijing last week. However, Mr Trump said on Sunday he would increase the existing 10 per cent tariff on $200bn of Chinese goods to 25 per cent on Friday, and that $325bn of additional goods that were currently “untaxed” would “shortly” be subject to tariffs of 25 per cent. He said he was taking the move — which could scupper the Chinese mission to Washington — because talks were moving “too slowly”.

As the trade war continues, Mr Walton, whose family has farmed in the area since 1835, says the situation is deteriorating rapidly. He adds that his friends across the Midwest are warning about a potential spike in farm bankruptcies.

Farmer Dave Walton cannot understand why Democratic contenders are not talking about the impact of the US-China trade war © Demetri Sevastopulo

“[They] all know farmers who are bankrupt but just don’t know it yet because the bankers are hoping things will improve and have extended their credit lines,” says Mr Walton, who calls himself an independent. “If that changes, many farm operations will be left without money and few choices. It’s bad, really bad.”

Speaking in Dubuque, a city in eastern Iowa, the week after launching his presidential campaign in March, Beto O’Rourke, the former El Paso lawmaker and one of 21 Democratic White House contenders, said he worried about the long-term impact of tariffs. China has already replaced much of its US soyabean imports by turning to Brazil, and although it has committed to buying at least 20m tonnes of US soyabeans to sweeten the talks, farmers say their big concern is that the longer the trade war continues the higher the odds of losing the market for good.

“Thirty per cent of what is grown in this state is bound for foreign markets. When those markets close down because of the tariffs we’ve levied, and the reciprocal tariffs that our farmers face . . . those buyers will find other sellers from other countries,” Mr O’Rourke told the Financial Times.

Democratic presidential candidate Beto O’Rourke speaks during a campaign rally at the University of Iowa on in April © Getty

At the Red Berry Café in Muscatine, New York senator Kirsten Gillibrand — another of the Democratic hopefuls — took aim at Mr Trump, saying that when he “creates a trade war with China he’s crushing our local farmers and it’s making it impossible for them to make ends meet”.

Yet while the Democratic contenders were willing to discuss the trade war when asked, most have not made it a prominent issue in the campaign in Iowa, which holds the first caucuses in the 2020 primary race next February and is an important swing state in the general election.

One Democratic strategist says this reticence is explained by the conundrum the candidates face: it is “easy to say” that they do not like Mr Trump’s trade war but much more difficult to explain how they would confront China.

“There will be virtual unanimity that tariffs are bad, but there will also be a strong view that we have to get tough on China and that going forward we need better trade deals,” he says. “On both of those propositions, Democrats will be saying things that at least on the face [of it] don’t sound too different from Trump.”

Other US business sectors are nervous about the rise in protectionism and the impact it might have on their industries, but agriculture has the most to lose. With a relatively stagnant domestic market, US farmers have depended heavily on exports to sustain profits and prices — and China has played a critical role over nearly two decades.

When China joined the World Trade Organization in 2001, US agricultural exports to the country were close to zero. By 2012, they were worth $30bn.

While farm exports to China fell to $25bn in the final year of the Obama administration, they collapsed in 2018 after China imposed its retaliatory tariffs, falling to $13bn. The value of soyabean exports — the most important agricultural commodity to China — plunged by 75 per cent to $3bn from $12bn the previous year.

Even before the tariffs were introduced, farmers were struggling with mounting debt levels which in nominal terms is expected to hit a total of $426bn this year. Yet any backlash over the tariffs appears restrained. According to a tracking poll from Morning Consult, Mr Trump’s approval rating in Iowa is 43 per cent, marking the same level of support he had in the state before the trade war.

Donald Trump speaks at a rally on September 28 2016 in Council Bluffs, Iowa © Getty

The Democrats face the same conundrum on agriculture as on industrial products such as steel: how to take issue with Mr Trump without losing the chance to win back Democrats who liked his protectionist stance and pledge to reduce the US trade deficit with China.

“At some point the Democrats who are serious [about winning] in Iowa are going to have to talk about trade, but it’s hard,” says David Salmonsen, head of congressional relations at the American Farm Bureau, the biggest agricultural lobby group. “What they say there could come back and bite them in other parts of the country. You can’t campaign to get rid of the tariffs [in Iowa], and then go to Michigan where they expect them to bring back manufacturing.”

Yet some Democrats argue that the party has a chance to win over Republicans who are frustrated by the tariffs, just as Mr Trump attracted Democrats angry about certain trade deals, such as the North American Free Trade Agreement, that were signed during the Clinton and Obama administrations.

Amy Klobuchar, the Minnesota senator who is also running for president, argues that Democrats have an opportunity to attract disillusioned Republicans. She says her strategy of talking about the impact of the trade war on soyabean farmers has won her the support of Republican farmers in her home state.

Chart showing Trump's net approval rating

A retired worker in Davenport, Kevin O’Brien, agrees. He says that although the chances of Republican farmers voting for a Democrat may be slim, their anger at the trade war might cause them not to vote at all.

Others remain sceptical. Tom Furlong, whose family came to Muscatine in 1856, says few Republican farmers would vote for a Democrat, unless the situation was really catastrophic. For now, that has been avoided at a cost of $12bn in subsidies that the administration promised to farmers last year to help ease their pain.

It remains unclear whether the administration would come to the rescue again. In March, Sonny Perdue, the US agriculture secretary, told the FT that farmers should not expect more subsidies. And after Larry Kudlow, the top White House economic official, said last Monday that the administration was “ready to do more if necessary”, Mr Perdue lowered expectations again by saying there were no active discussions about the issue.

“[The subsidies] kind of made up for what the farmers lost, so they thought he’s looking after us,” says Mr Furlong after attending an event with Joe Biden, the Democrat former vice-president who has also throw his hat into the ring for the 2020 contest. “I haven’t heard Republican farmers say, ‘I’m not going to vote for Trump because he took us for a ride’.”

Mr Trump won Iowa by the largest margin of any Republican candidate since Ronald Reagan in 1984. He also prevailed comfortably in agricultural states such as Kansas, Nebraska, Oklahoma and Missouri, and Wisconsin, a key part of his election victory in a state that Barack Obama won twice.

For many farmers, who broadly support other aspects of the Republican economic agenda, from low taxes to deregulation, switching sides to back a Democrat in 2020, would be a dramatic shift. Heidi Heitkamp, a Democrat who had represented nearby North Dakota in the Senate, lost her seat in the 2018 midterm elections even after campaigning heavily against tariffs, which have also hit soyabean growers in her state.

Yet the longer Mr Trump takes to reach a deal with China, the more pressure he may face from the farm belt. Many are upset that Japan is buying less from the US and more from countries in the Trans-Pacific Partnership trade pact, that Mr Trump withdrew from, and Europe, following an EU-Japan trade deal that recently came into force.

But a deal with Beijing is the one that would have the biggest immediate impact for farmers. According to US officials, China is likely to agree to large purchases of US goods, including agricultural products, as part of any deal. That would not only reopen the Chinese market to US farmers, but could mark improved terms compared to previous arrangements.

Sarah Lande says Republican farmers in Iowa are giving Mr Trump the benefit of the doubt © Demetri Sevastopulo

Mr Perdue told the FT that the US wanted China to double or treble its agricultural purchases from America. “Some farmers are frustrated and want [a deal] done right now. But for the most part, I am proud of our farmers who say, ‘We are in pain, we are in financial stress, but we understand what President Trump is trying to do and we agree with him’,” he says.

Sitting in a Muscatine hotel across from the Mississippi — which along with many Midwestern waterways has seen terrible recent flooding that has also hit farmers — Sarah Lande offers a unique perspective on Republicans and the trade war. She hosted Xi Jinping, then a mid-level Communist party official, for a potluck dinner at her house in 1985 and met the Chinese president again when he returned to Muscatine for a visit in 2012.

She sees the irony that Mr Xi targeted the state that hosted him during his first visit to the US after Mr Trump triggered the trade war. But she says Republican farmers in Iowa are giving the president the benefit of the doubt.

“They sort of believe that Trump is going to make things better with Xi even though in the short term it might be worse,” says Ms Lande. “They haven’t given up on him.”

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