Tariffs have a long history in this country, often used in the pursuit of “freer and fairer” trade with adversaries and allies. Some historians say tariffs were the “final straw” that plunged the U.S. into an economic depression in the 1930s. Others say tariffs have proven to be the most effective leverage we have in negotiating trade agreements with protectionist counties committed to keeping imports out.
Take a deep breath — tariffs tend to get trade-watchers, farmers and policymakers worked up. I don’t like tariffs ‒ never have, but my dislike has softened.
There is a time and a place for tariffs, such as when a trading partner behaves so badly that a forced course correction becomes necessary. An excellent example would be China’s technology and copyright theft, coerced labor and undercut production costs in the 2010s while the country also locked out U.S. goods and products with artificial trade barriers. China only wanted to trade its way. Tariffs on steel and aluminum started the U.S. effort, and other Chinese products were soon tariffed. Retaliatory tariffs on U.S. products (soybeans) followed, and a trade war ensued.
The cost of that war to U.S. farmers was measured in tens of billions of dollars. But it also ended in a two-phase agreement that earned the U.S. greater access to the Chinese market and ended, or perhaps offset, many of the bad-actor things that had become routine for China. That is, until the agreement was ignored.
I often wonder if the Trump-era round of tariffs and the trade war with China could have been avoided with a series of trade talks and agreements. I know, talk is cheap and trade agreements take years to reach. The kind of agreement that is enforceable by arbitration panels and trade police that make sure all parties in the agreement abide by the rules.
But that doesn’t work when agreements and arbitration-panel decisions are ignored and the trade police are defunded.
Make a Profit When You Can
Based on U.S. trade history over the past decade, tariffs and retaliatory tariffs will become more common in the next decade. That’s the trend and has become the standard procedure, and that means they will be used more often by more countries, even by and on U.S. allies. Trade tensions will blaze one year and reset the next. Potential trade conflicts have added unpredictability and volatility to the grain markets. Kind of like the weather.
In a world in which tariffs are a threat, lock up profits when there are profits to take. A shift in trade policy by any trade partner could kill profit opportunity. It will take a better-than-average marketing effort to lock in a better-than-average price.
Your Next Read: Do Tariffs Work? The Answer Isn’t As Straightforward As You May Think
