How China hit Donald Trump’s supporters where it hurts as tariffs target Republican Party’s heartlands

Beijing’s levies on agricultural products – which will directly affect areas represented by senior Republicans, including House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell – will do little to calm the party’s jitters

PUBLISHED : Thursday, 05 April, 2018, 8:05pm
UPDATED : Friday, 06 April, 2018, 1:47pm

Beijing’s latest tariffs have stepped up the pressure on US President Donald Trump by hitting his political base where it hurts ahead of congressional elections in November.

While Trump previously said a trade war would be “good and easy to win,” top Republicans have already sounded the alarm after many of the latest tariffs took direct aim at their constituents.

Beijing fired its latest salvo on Wednesday when it announced an additional 25 per cent tariff on 106 American products worth US$50 billion – including soybeans, pork and aircraft – in retaliation for Trump’s plan to impose duties on 1,333 Chinese products.

The tariffs on soybeans have grabbed much of the attention because they are America’s biggest single export to China, and will affect a number of rural states that heavily backed Trump in the 2016 presidential election, but many of the other measures will also hit farmers across Red State America.

The impact of a 15 per cent duty on ginseng, which was announced before the latest round of tariffs and came into effect on Monday, will be felt particularly acutely in Wisconsin, which accounts for 85 per cent of US exports of the crop to China.

The state, home to House of Representatives Speaker Paul Ryan, exports most of its ginseng to China. The majority is grown in the state’s Marathon county, where Trump beat his Democratic opponent Hillary Clinton by 47 percentage points in 2016.

Republicans in the state have already felt the force of a political backlash, with the state’s Republican governor warning of a “blue wave” after the surprise victory of Democratic candidate Rebecca Dallet this week for a seat on the state’s supreme court.

Further south, the 25 per cent levies on tobacco and whiskey will hit Kentucky – the heartland of bourbon production and home to Senate Majority Leader Mitch McConnell.

McConnell acknowledged that he was nervous about trade escalations earlier this week, calling the upcoming midterms a “challenging” one for the Republican Party.

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Trump has already been battling a string of controversies, including the investigation by former FBI chief Robert Mueller, and historically low approval ratings.

The impact of China’s latest measures could also drown out the Republicans’ message that their tax cuts are delivering prosperity, which the party is counting on to save their majorities in the House and Senate.

“If tariffs and a trade war erase the positive economic impact we have seen from tax reform, it is a big, big problem,” said Michael Steel, a managing director at Hamilton Place Strategies, who previously worked for John Boehner, Ryan’s predecessor as House speaker.

Michael Pettis, a professor of finance at Peking University’s Guanghua School of Management, said that Beijing was working to put political pressure, rather than economic pressure, on the US by targeting groups believed to be supportive of Trump.

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“Beijing has sort of a difficult path to follow – it needs to do something to try to retaliate or to try to discourage additional tariffs from the Trump administration,” he said.

“If I were them, I would be focusing on putting pressure on those parts of the economy that have typically been supporters of Trump.”

A commentary published on the social media account of the Chinese Communist Party’s mouthpiece People’s Daily said the 160 US products hit by tariffs had been carefully selected.

“China chose to precisely target these states’ exports in the belief that domestic pressure in the US will quickly build on Trump,” the commentary said.

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Other Chinese tariffs will directly needle other states that helped catapult Trump into the presidency. These include corn soybean farmers in Iowa, as well as automobile producers in Michigan – a key swing state that Trump won by a razor-thin margin – tobacco farmers in North Carolina, and sorghum farmers in Texas and Kansas.

“This is troubling, to say the least, in terms of tobacco,” Larry Wooten, president of the North Carolina Farm Bureau, told the local paper The News & Observer. “When you add pork and soybeans, it really hits North Carolina.”

Beijing has been making a “sophisticated play” with the tariffs they are selecting, and is playing hard ball with their US counterparts, Erlend Ek, agriculture and trade research manager at Beijing-based consultancy China Policy, said.

While the Chinese tariffs have yet to be implemented, they have caused widespread concern across the Trump heartland.

The President and his administration remain defiant, however.

Trump took to social media to fire back against his growing chorus of critics – and nervous Republican colleagues – citing a highly inflated figure for China’s US$300 billion trade surplus with the US by tweeting: “When you’re already $500 Billion DOWN, you can’t lose!” he wrote.

Additional reporting by Bloomberg