During remarks in Waco last week, U.S. Sen. Ted Cruz offered an amusing anecdote about President Trump’s ready deployment of tariffs despite its clashing with Republican orthodoxy. The Republican president this summer threatened to levy an increasingly punishing tariff on imported Mexican goods if Mexico didn’t take steps to staunch the flow of Central American migrants traveling through Mexico bound for the United States. Recognizing such tariffs would cripple the Texas economy, Cruz expressed deep reservations.
Trump’s threat worked. Mexican President Andrés Manuel López Obrador blinked and ordered his troops out to discourage migrant traffic.
“Well, Ted, I was right, you were wrong,” the president said in a phone call to Cruz afterward. He asked if Cruz and fellow Republican Sens. Roy Blunt and Cory Gardner (present during the call) really would have fought him on tariffs to pressure Mexico: “Now, c’mon, you guys were not going to vote against Trump on this, were you?”
Blunt leaned close to the phone, then replied: “Mr. President, now that you have a deal, we were with you the whole way!”
That’s a terrific anecdote but a telling one. Several minutes into Cruz’s Tuesday remarks at Texas Farm Bureau headquarters on behalf of the USMCA trade pact Trump has put forward to replace NAFTA, I realized the senator, 48, wasn’t so much offering sober trade analysis or campaign stump speech. Speaking before a sympathetic yet conflicted audience, many with farming and ranching backgrounds, Cruz was playing two ends against the middle on Trump’s escalating trade war with China.
It’s a delicate balancing act. The day Cruz reassured farming, ranching and business interests in Central Texas that he backs the president’s dueling tariffs with China in the short term, yet opposes tariffs as a general rule, The New York Times published its own analysis of what’s unfolding: “Trump Faces Stark Choice: Economic Growth or Doing Battle with China.” Conclusion: He “cannot do both at the same time.”
Add in news reports from the American Midwest about farmers becoming increasingly impatient with Trump’s tit-for-tat, back-and-forth, seemingly impulsive way of deploying tariffs to pressure China to drop admittedly unfair trade practices and one better understands why so many free-trade economists condemn tariffs, at least as a long-term policy. Farmers supportive of the president are being asked to accept his praise as “patriots” and bailouts of billions of taxpayer dollars for suffering fallout on the rural homefront, even as China now seeks more compliant trading partners than the United States.
In pressing the senator from Texas after his talk, it became clear Cruz recognizes he and the Republican Party have ventured into unknown territory, that they’re now party to an all-consuming trade war led by a jittery, unpredictable, tariff-happy president against a global behemoth stoic and solemn in ways Trump is not. And neither this president nor the Chinese dragon can risk losing face. Problem: Trump has an election looming that may be determined by how a trade war of his choosing shakes up the rest of an economy he has vigorously championed.
Hence, last Tuesday we heard much about Sen. Cruz’s support of free-trade initiatives such as the USMCA — but for some adjustments such as in auto-making and dairy exports, relatively similar to NAFTA except this will have Trump’s signature, not Bill Clinton’s. We were assured that in White House meetings, “the most persistent area of disagreement between Senate Republicans and the president is on trade.” We were reminded that Cruz expressed reservations about the president’s threat to slap tariffs on Mexico this summer, especially given they had nothing to do with trade.
“Those tariffs, if implemented, would have hurt the people of Texas,” Cruz told me. “It would be a massive tax increase on Texans. And the president did it, I believe, out of good intentions. He was trying to get Mexico’s cooperation in helping stop illegal immigration. I very much agree with him in that objective. And his strategy may well have produced a good outcome in that it appears that Mexico has agreed to help more in securing the border, to put troops on their southern border to assist in stopping the Central American flow of illegal migrants through Mexico.”
We were also reminded what a “bad actor” China has long been in terms of equitable trade practices. This, Cruz suggested, is a battle worth having, though he never did say if or when it should be abandoned if escalating tariffs between China and the United States further hobble the U.S. economy and harm the very Americans it supposedly would benefit.
“When it comes to trade, what the president is trying to do with China is exert what leverage we have to get China to open up their markets,” Cruz said when I asked a second time how much Senate Republicans will tolerate. “There is short-term pain involved in that. I’ve visited with a lot of farmers and ranchers in Texas who are worried about that. I’ll tell you that a lot of them understand what we’re trying to accomplish, which is opening up that Chinese market.”
Cruz repeatedly likened the situation to two pickup trucks barreling down a country road in a deadly game of chicken: “They’re headed at each other. If the other guy swerves, that works out all right. But sometimes they don’t swerve and, if they crash into each other, that’s a really bad outcome.”
The analogy raises relevant questions about the pickup drivers’ sanity, but otherwise the point is fair. Cruz’s dialogue with farmers and ranchers, which agricultural consultant and rancher Joe Maley, 76, of Valley Mills described to me as “one of the best overall discussions that I’ve seen a senator do in a long time,” at least balances the tone-deaf approach of Trump Secretary of Agriculture Sonny Perdue. During a trip to reassure anxious farmers in Minnesota, Perdue got booed for telling a joke amid farmers’ complaints and worries: “What do you call two farmers in a basement? A whine cellar.”
China’s long game
Unfortunately, an analysis by the pro-business, pro-Trump Wall Street Journal the day of Cruz’s appearance in Waco strongly suggests the Chinese may play the long game to win because Trump, as the Chinese see it, is an unreliable negotiating partner. They may choose to wait him out through 2020. And as Cruz accurately noted, it’s easier for totalitarian governments such as China to settle in for the long run. Their subjects have little say in the matter. Americans, by contrast, can still express discontent, up to and including giving elected leaders the boot.
If one wants to better understand dynamics in play, consider American Farm Bureau Federation figures showing agricultural products to China exceeded $24 billion in 2014, dropped to $9.1 billion in 2018 and, amid retaliatory tariffs, were down in the first half of this year by $1.3 billion. China last month stated it will no longer buy U.S. agricultural products. It’s now patronizing other countries such as Canada and Brazil.
At one point during Cruz’s appearance, Richard Cortese, a 67-year-old farmer from Little River in Bell County who raises corn, wheat, oats and cattle and whose family has farmed since 1950, offered gratitude for Republican efforts to set China straight in abusive trade practices. But he also spoke passionately of the major challenges facing ordinary ranchers and farmers in terms of revenue. He spoke of a 38 percent tariff on beef imports levied by the otherwise friendly trading partner of Japan (possibly to be reduced in coming weeks). He spoke of trade barriers to U.S. genetically modified grain in Europe.
“You can sit here and go through the whole laundry list,” he told the senator. “What we have to talk about in this part of the world is how do we get revenues so we can stay in business and so I can pay the John Deere dealer $150 an hour to come and work on my combine and all of those kinds of things.”
Cortese isn’t alone. Deere & Company is cutting profit projections for the second time in three months because farmers are delaying purchases due to bad weather and dwindling access to foreign markets, including China.
The question now: How long will Trump and the Chinese slap more and more punishing tariffs on each other to the detriment of commerce? This duel really gained traction in summer 2018. And two days after a representative of the U.S. Chamber of Commerce joined Cruz for his Tuesday appearance in Waco, U.S. Chamber of Commerce CEO Thomas J. Donohue called on Trump and Chinese President Xi Jinping to “withdraw the tariffs scheduled to take effect this weekend — and then again in December — and instead restart their negotiations.” Donohue noted that “business confidence is faltering.” Yet even in what seems a farm recession amid falling revenue and rising bankruptcies, some farmers and ranchers remain convinced a positive outcome is imminent.
“If we can believe some of the things we heard [from President Trump] after the G-7, it seems like China blinked,” rancher Maley told me. “This really is a hard thing for each individual. If a person is close to losing their farm because of commodity prices and lack of being able to export, they’re going to have a little more aggressive opinion than I would. It’s just natural if your back is against the wall to say, ‘Hey, I can’t fight this fight anymore. I can’t take it. We’ve got to export.’ And it seems like maybe there’s more agitation in the Midwest than there is here in Texas. That’s a gut feeling. I don’t have any statistics on that, it just comes from reading some of the farm publications and all.”
In a column last month, longtime Texas Farm Bureau director of communications Gene Hall argued that while farmers need no lessons about the Chinese being unfair trade partners, their market remains vast and important: “Texas is the top-producing cotton state, and China was a big part of the market. Cotton is very export-dependent since there are few textile mills remaining in the U.S. Soybeans, grains and dairy products are also hard hit. Relief payments from the Trump administration have been helpful, perhaps even allowing some farmers to plant another year. But it’s hard to find a farmer who wants to do it that way. Signing free and fair trade agreements soon is the answer, elusive as that has been.”
Robert Cervenka, 89, a longtime rancher near Riesel, expresses confidence Trump will soon resolve the crisis squeezing much of the agriculture industry.
“Somebody will have to give, but it don’t look good right now,” he acknowledged. “There’s just so many markets in the world we have to work on, you know, and that will take time. This Amazon fire, most of it is farmers and ranchers burning to grow grass to supply beef to China and places like that. I don’t know. It don’t look good. But I think Trump will do everything he can to make it work. If he don’t, he’s in trouble. I think he’ll make it work before the next election.”
‘Had to do something’
Cortese says many farmers and ranchers are likely to follow President Trump, even as the trade war claims more casualties and leaves more and more agri-business entities skeptical about the future — not good for an industry already vulnerable to the whims of the elements and traditional market forces. Then again, it’s not like Trump hid from farmers and ranchers his penchant for trade wars in the 2016 campaign.
“I’ll tell you, there’s going to be a limit in there, you’re right,” Cortese told me. “I think for the most part, the farmers and ranchers that I’ve talked to know we had to do something. We’ve been penalized for many years. And no one spoke up for agriculture better than Trump. I’m not speaking for him or campaigning for him or anything like that, but whenever there’s been an issue out there, I haven’t heard another president in many years say, ‘We’re going to protect our agricultural people.’ Maybe it won’t work, but at least he’s talking about it. And that’s been refreshing from the viewpoint of many of us.”
If President Trump prevails in his Mexican standoff with the Chinese as well as the 2020 election, farmers and ranchers who loudly supported him may be vindicated. If he fails in this global game of chicken and Americans’ 401(k) plans tank and jobs drop like autumn leaves, farmers and ranchers may find they have only further widened our nation’s great urban/rural divide. For those who bet against the odds when tilling the land, watching the sky and working crops and cattle, it’s another nervous roll of the dice.