Craig Baumann, whose family runs a 500-acre ginseng farm in Wausau, WI, didn’t have to wait long to feel the effects of the trade war. The day Chinese retaliatory tariffs went into effect he lost a new customer.
“They walked away,” he told the Milwaukee Journal Sentinel. They had a “signed contract and everything.”
Baumann is one of a number of business owners across the state, suffering from the early blows of the proliferating tariffs. Businesses all over Wisconsin are feeling the stress, with more than $1.2 billion in the state’s exports vulnerable due to the emerging trade war. Many of the 800,000 residents whose jobs depend on international trade could be impacted. They are the collateral damage. And the harm is about to get much worse.
The news of retaliatory tariffs has already begun to take effect. From manufacturing to agriculture, business owners are coping with the changes to come. For small businesses, there are no winners. Here are three industries already hurting in Wisconsin.
1. Ginseng producers
Wisconsin is the country’sleading exporter of ginseng. Wisconsin ginseng farmers have been reeling from a 15% tariff levied on their production by China three months ago.
That’s significant, given that Wisconsin exported $14 million of ginseng to China alone last year, almost $7.5 million more than the second largest exporter. China is the largest purchaser of the state’s ginseng, followed by Hong Kong, Taiwan, and Canada. And by far its largest potential market.
“Tariffs don’t do anybody any good,” said Baumann. Farmers are having to offer steep discounts to keep their customers – discounts that cost farmers the revenue needed to purchased new equipment and hire new staff. Before tariffs, business was strong and growing, he told the Journal Sentinel. “It’s frustrating,” Baumann said.
2. Cranberry growers
A trade war is the last thing Wisconsin cranberry growers need right now. The U.S. exports about 95 million pounds of cranberries to the EU each year, according to Wisconsin's State Cranberry Growers Association. That’s more than any other destination and accounts for 12% of domestic production.
But the country’s cranberry growers have produced a surplus of the fruit, and they’ve been counting on foreign markets to help sell their produce. Add to that increasing competition from other countries, such as Canada, and the industry has several dark clouds in their future.
Now, imports of the red fruit were on the list of goods targeted by the EU for a 20% levy in retaliation for American tariffs on steel and aluminum.
“The tariff would significantly hinder our ability to compete in these markets,” Tom Lochner, executive director of the Wisconsin State Cranberry Growers told Bloomberg News.
3. Dairy farmers
Dairy farmers across the country have been hammered in the marketplace,and the trade disputes are putting the industry at even greater risk. About 90% of Wisconsin milk is turned into cheese, and nearly all of that cheese is sold outside of the state’s borders.
Mexico is the top export market for U.S. dairy products, and Mexicans bought nearly $400 million of US dairy products last year. In fact, Mexico accounts for about one-quarter of U.S. dairy exports, but our southern neighbor last week placed tariffs as high as 25% on U.S. dairy products in retaliation for U.S. steel and aluminum tariffs. Jeff Schwager, president of Sartori Cheese in Plymouth, WI is already feeling the impact he told the Journal Sentinel.
“The customers we have down there are saying ‘let’s put things on hold for a little while until we sort out the tariff,” he said. Sartori, which buys milk from 130 Wisconsin dairy farms, exports products to 49 countries. And exports have become one of the fastest growing parts of his business. “It’s really unchartered territory for us,” he said.
That goes for him, and the hundreds of dairy workers in the state. Milk prices that were at a record-high in 2014 have plunged since, souring the fortunes of many of the nation’s dairy farms.
Dairy farmers have increasingly found themselves on the front lines of geopolitical strife, global markets and cultural shifts. The industry is weathering the simultaneous storms of shifting Chinese demand, increased competition from Europe, and other political shifts around the globe.
“Tariffs are sometimes the difference between showing a profit or a loss on products.”
About the authors
Cordell Eddings
Cordell was a senior editor and content strategist for the U.S. Chamber of Commerce's strategic communications team. He previously covered corporate finance, economics, foreign exchange and fixed income markets for Bloomberg News in New York during the heart of the financial crisis. Before that, he was a crime and politics reporter (as well as covering many, many country fairs) at the Indianapolis Star.
