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$641M in Minnesota-made exports could be impacted by tariffs, report says

ST. PAUL—The state of Minnesota has released a report on the potential impact of President Donald Trump's steel and aluminum tariffs — or rather, foreign reaction to them — on Minnesota's exports, identifying hundreds of millions of dollars in state-produced products that may suffer from tougher markets across the globe.

The data, released Thursday, June 28, by the state Department of Employment and Economic Development's economic analysis unit, tallied $641 million in Minnesota-made exports — from pork to soybeans to steel — that would be impacted by counter-tariffs from Canada, China, Mexico and the European Union. Those tariffs will go into full effect at the beginning of next month.

"This is a fluid document," cautioned Gabrielle Gerbaud, executive director of the Minnesota Trade Office. "We wanted to have something basic to start talking about it and start informing everybody about what is happening."

The report lists the 10 biggest industries each targeted by counter-tariffs from Canada, China, Mexico and the European Union — 40 product categories in all.

The counter-tariffs are taxes, ranging from 10 to 25 percent, on specific industries, some of which are already in effect and others that are slated to go into effect in early July. China, for example, won't apply an additional round of tariffs until July 6, and Canada won't apply its tariffs until July 1.

The affected products include $265 million in products from Canada, $159 million from China, $150 million from the European Union and $67 million from Mexico.

The biggest categories include:

•To China, food products including swine byproducts ($52 million); whey ($40 million); and soybeans ($26 million).

•To Canada, steel, iron or aluminum products or bars ($71 million); motorboats, rowboats and canoes ($40 million); uncoated paper ($29 million); and breads, pastries and cakes ($28 million).

•To the European Union, motorcycles ($40 million); kidney and white pea beans ($38 million); and ceramics ($28 million).

•To Mexico, pork products ($40 million).

How we got here

In March, Trump announced a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. State iron miner groups cheered the decision, though other industries voiced concern, which they reiterated upon the release of the state report.

"Unfortunately, I think what it (the report) has really done is put into numbers and projections things we've been talking about for a few months already," said David Preisler, chief executive officer of Minnesota's Pork Board and Pork Producers Association.

The future cost for raising a pig has already jumped from a projected $10 profit per pig in February, before the tariffs started, to a now-projected loss of $9 per pig through the next 12 months.

China has already placed an additional 25 percent tariff on pork, and Mexico is slated to slap another 10 percent tariff next month.

"The thing that really is most concerning is, yes, it's consequences for farmers, but in the end it's consequences for real communities. Because that's where these things are growing," Preisler said. "Certainly our preference is these things get dealt with over the negotiating table rather than trade disputes that involve tariffs."

Gary Wertish, president of the Minnesota Farmers Union, noted the price of soy has already dropped 20 to 25 percent since the tariffs went into effect.

"It seems like he (the President) has created so much uncertainty. The one thing that's certain is if this isn't corrected, there will be more farmers that will have a hard time surviving," Wertish said.

"We just feel the approach he's taken is not the correct approach. You work it out, you don't try to blow everything up. ... You spend years building up trading partners, and we're losing our reliability in the market. That's going to damage us for some time — that all of a sudden we're not a reliable trading partner."

Trump urges patience

During a rally Wednesday in Fargo, Trump urged those in the crowd to be patient with the tariffs before judging their effect.

Kelsey Johnson, president of the Minnesota Iron Mining Association, said her industry has already seen an increase in demand. But she noted the counter-tariffs have had an impact on industry costs as well.

"We believe it's a small price to pay to secure domestic iron and steel making. We're trying hard to figure it out and see exactly what the ramifications are," Johnson said. "It's been a positive so far, but that can easily change with demand and the way things play out.

"I do believe these estimates are a little premature," Johnson added of the state report. "I do believe there will be negotiations, and an agreement will be reached. I have faith in the administration."

Report's caveat

The data in the report comes with a caveat.

"Due to data availability, Minnesota export values may be overestimated because broader categories of goods for export data may be used," analysts cautioned in the first paragraph of their report.

As an example, some items that Canadians put counter-tariffs on are specific categories, like motorboats. Motorboats are part of a broader category, "yachts and other vessels for pleasure or sport, row boats and canoes." The state looked at the tariff's impact on that broader category.

But Gerbaud said that there weren't many examples of that in the report.

"We're not talking about 6 percent (tariff impact) that is really 3 percent; it's really 6 percent that's really 6.2 percent," Gerbaud said.

Could there be more?

On the other hand, the report does not include other potential tariffs that have yet to be set in stone.

For instance, with China, "Additional tariffs may be imposed at a later date, potentially including crude oil, coal, chemicals and medical devices," the report noted.

In total, the tariffs would affect about 7 percent of all products sent from Minnesota to China, 6 percent of products sent to Canada, 3.5 percent of products to the European Union, and 3 percent of those sent to Mexico, the report said.

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