As trade war rhetoric grows, Appalachia and the Heartland fear backlash

Escalating trade rhetoric has businesses and lawmakers in the country's most vulnerable regions worried.

Talk of a trade war has left businesses in the Heartland and Appalachia worried. (CREDIT: Education Images/UIG via Getty Images)
Talk of a trade war has left businesses in the Heartland and Appalachia worried. (CREDIT: Education Images/UIG via Getty Images)

The European Union last week released a list of U.S. goods and products it intended to target in retaliation for President Trump’s aggressive international trade announcement. The list focused on items from the U.S. Heartland, as well as the South and Appalachia, areas the president had promised to revitalize through industrial job growth. A week later, the tense back-and-forth culminated in a U.S. reprieve for EU member states, just as China released its own list of retaliatory targets.

That instability has proven problematic for vulnerable regions with struggling economies. While they’ve been spared EU tariffs for the time being, more are inevitably in the pipeline, as Trump’s tough talk on trade escalates.

Two weeks ago, the White House announced an intention to impose high tariffs on U.S. steel and aluminum imports — 25 percent and 10 percent, respectively — a move that sparked outrage and international concerns of a “trade war.” Some critics expressed fears that the plan could harm North American Free Trade Agreement (NAFTA) negotiations, which are already going poorly (and hurting U.S. farmers in the process).

Mexico and Canada were initially said to be exempt from the tariff roll-out, but others were considered fair game. That wasn’t acceptable to the EU, according to Trade Commissioner Cecilia Malmström, who warned in a statement that “if the EU is not to be excluded from the measures then there would have to be a firm and resolute, but proportionate, response.”


A preview of that response came last Friday, when the European Commission released a long list targeting various U.S. products that could total “€6.4 billion all added together” per one senior official — or around $7.9 billion USD. The ten-page list singled out items like Kentucky bourbon, Florida orange juice, and North Carolina tobacco.

Republican lawmakers from areas vulnerable to the tariffs have openly criticized Trump, calling for caution and a commitment to current trade deals. Business leaders have also expressed criticism. Paul Varga, CEO of Kentucky-based Brown-Forman, one of the largest U.S.-owned spirits and wine companies, noted on a company earnings call that the industry giant is concerned about retaliatory tariffs.

“The overwhelming majority of our products are made here in America. And over the last few years we’ve been investing heavily in our American manufacturing expansion. And when we complete the production, we sell our American whiskey brands in something like 165 countries worldwide,” Varga said. “If all of this were to come to fruition, the irony, I feel, is that a company like Brown-Forman could be an unfortunate and unintended victim of a policy which, in part, is aimed at promoting something which Brown-Forman is a stellar example of — a committed long-term American manufacturing company.”

Varga noted that Brown-Forman — which manufactures a number of well-known names, including Jack Daniels whiskey — has fallen victim to international trade tensions before. Still, the CEO noted, “if this [the tariffs] were to come to fruition it would be obviously kind of negative thing for our particular company.”

Republicans traditionally favor free trade, but Trump’s populist campaign message, which spoke to the downside of such deals, has still managed to resonate with many.


Certain industries point to agreements like NAFTA as the reason for U.S. factory closures and declining jobs. Efforts like Trump’s proposed tariffs are meant to counter that, making foreign products less desirable. For some, that’s a welcome change. Michael Bless, CEO of Chicago-based Century Aluminum which once had an active presence in Kentucky, even hailed Trump’s steel and aluminum tariffs announcement as “extraordinary” for business.

“It’s a rising tide. It will be good for the entire industry. It will help support R&D [research and development] in the industry, capital investment and the further competitiveness of this critical sector,” Bess said.

Century Aluminum lobbied the White House for tariffs, saying such a move would bring back hundreds of jobs. But that’s not a widely shared sentiment: the majority of Century Aluminum’s industry competitors oppose the tariffs, and for the Pennsylvania-based American Keg Company — the only U.S. manufacturer of stainless steel beer kegs — the president’s decision has proven especially costly.

According to the Wall Street Journal, American Keg Company has had to lay off a third of its workforce following the tariff announcement. “We’re already seeing that we’re getting priced out of the market with our U.S. kegs,” said CEO Paul Czachor. “We’re very concerned that this could put us out of business.”

Still, the EU list wasn’t really a direct tit-for-tat blow, according to Todd Tucker, a political scientist and fellow with the Roosevelt Institute. Tucker, a Kentucky native, told ThinkProgress earlier this week that the list was clearly crafted to draw the attention of key Republicans.

“The EU is targeting specific U.S. politicians more than workers. So, for instance, they’re proposing tariffs on Kentucky bourbon because it will pressure [Senate Majority Leader] Mitch McConnell, not necessarily because it will do exactly proportional damage to the workforce as the U.S.’ tariffs,” Tucker said.


That means that while companies like Varga’s are worried about tariffs, they don’t necessarily have the same economic importance for states like Kentucky. Internationally, the United States has competitors for industries like steel — but it isn’t as if Kentucky bourbon or Florida orange juice are in danger of outsourcing to China, for example, something that lessens the impact of retaliation.

“Some have suggested tallying up all the workers that will gain with steel tariffs, and then plotting that against all the workers that will lose in other sectors like bourbon from retaliation,” Tucker explained. “There’s no question that the latter effect swamps the former in purely quantitative terms. However, comparing the two is a bit like comparing apples and oranges, or steel and bourbon, if you will. Bourbon and steel are pretty different industries.”

Elsewhere in the country, concerns over a trade war — and what it could do to the economy — remain front and center.

“Trump won the Electoral College with big assists from voters in the industrial heartland, especially Michigan,” wrote Daniel Howes, a business columnist for the Detroit News, in response to the tariffs. “An escalating trade war that embroils more parts of the manufacturing economy, or spreads to the Midwest’s rich agricultural sectors, could undercut economic growth and further slow already plateauing auto sales.”

Farmers in particular have panned all of the tariffs the White House has recently introduced and organizations have indicated that the agriculture sector is actively lobbying the Trump administration to steer clear of such policy measures.

“Ohio exports billions of dollars in farm and food products every year.  Especially in difficult economic times, our foreign markets are crucial to farm families,” Ohio Farm Bureau spokesman Joe Cornely told ThinkProgress over email. “We’re encouraging the administration and Congress to understand the risk to agriculture in the event that current trade disputes can not be resolved.”

Lawmakers representing rural areas have expressed similar sentiments. “Our agricultural exports will very likely be targeted for retaliation and the impact will be squarely felt in Nebraska,” said Rep. Don Bacon (R-NE). Sens. Joni Ernst (R-IA) and Ben Sasse (R-NE) have expressed similar concerns.

Some point to other unforeseen consequences: Ohio Gov. John Kasich (R) said Wednesday that the tariffs could harm efforts to develop a petrochemicals hub in Appalachia. While the health and environmental implications of such efforts have been widely documented, proponents argue the hub will bring jobs and give the region refining capacity.

“Will these tariffs increase the cost of building that plant?” Kasich said. “Hello, of course it will.”

Thursday evening offered a temporary reprieve from the tariffs debate, after the president announced a suspension of the tariffs until May 1, hours before they were set to take effect. But for many in the United States, the news was cold comfort. Earlier on Thursday, Trump slapped tariffs on up to $60 billion in Chinese imports, despite a petition from 45 trade associations pleading with the president to reconsider. China is reportedly planning to target U.S. farmers in retaliation.

“China does not want a trade war with anyone,” a statement from the country’s embassy read. “But [it is] not afraid of and will not recoil from a trade war. China is confident and capable of facing any challenge.”

Hours later, China released its own list of 128 U.S. products selected for retaliation — an import value of $3 billion, per 2017 numbers. Among the products are wine and steel pipes. It is unclear whether soybeans, a source of extreme concern for U.S. farmers, will be targeted.

China’s Commerce Ministry notably linked the retaliation to steel and aluminum tariffs imposed earlier in March, rather than the latest $60 billion bundle. The list also represents a relatively small percent of the overall trade between the countries. But the measures are still an indication of what could be at stake if current White House rhetoric and policy continue.

There’s little evidence to indicate that imposing tariffs on countries like China or those in the European Union will bring back U.S. jobs. Ohio State University professor and agriculture economist Ian Sheldon told WKYUFM that U.S. industries depend on imported — rather than U.S.-made — steel and aluminum for their products.

“The numbers I’ve seen suggest that for every job potentially recreated in the steel industry, we lose five to eight jobs in those industries downstream that use steel as an important input into their production,” he said.

That means regions counting on income from industry and agriculture could suffer disproportionately as the back-and-forth over trade continues — leaving them even worse off than before.