Trade War Worries Iowa Republicans in a Close House Race

Source: By Natalie Kitroeff and Ben Casselman, New York Times • Posted: Monday, August 20, 2018

Boyd Trueman grinds down some welds at Curbtender, which makes garbage trucks, in Cedar Falls, Iowa. The unemployment rate in Iowa is one of the lowest in the country.Scott Morgan for The New York Times

CEDAR FALLS, Iowa — The unemployment rate here is one of the lowest in the country. Wages are rising at nearly twice the rate of inflation. Jobs are so plentiful that manufacturers are paying to train unskilled workers.

Yet Iowa is also one of the states most vulnerable to a trade war. And that could be a problem for Representative Rod Blum.

“I’m not on the ledge ready to jump out the window concerning trade, but I do have the window open a little bit,” said Mr. Blum, a two-term Republican incumbent vying for re-election in one of the nation’s most competitive House races.

Iowa has a lot riding on global trade. Its farmers export one of every four rows of soybeans — worth around $2 billion — to China. One in five Iowans has a job tied to agriculture, and not just on farms. John Deere has several plants in the state, making tractors and combines, and hundreds of metal manufacturers churn out fences and grain bins for family farmers and corporate growers.

If the trade dispute between the United States and much of the world isn’t resolved soon, economists say, it will almost certainly lead to layoffs and unyielding financial loss across the state. Republican strategists worry that the simmering unease over that possibility may be enough to keep party faithful at home on Election Day in November.

“We need some wins,” Mr. Blum said in an interview. “We need something to rally around, something good. If we could do a deal with Mexico, that would be great.”

President Trump has urged farmers to “be a little patient” with trade negotiations, and he recently announced a $12 billion aid package for those hurt by the tariffs. In July, Mr. Trump made a stop in the district to campaign for Mr. Blum, promising the Iowans in the crowd that they wouldn’t be “too angry with Trump” once the trade scuffles came to an end.

A cornfield in Booneville, Iowa. One in five Iowans has a job tied to agriculture, and the state is a big exporter.Scott Morgan for The New York Times

Kevin Harberts isn’t angry. He is anxious, though.

Since the president imposed tariffs on steel and aluminum in March, Mr. Harberts’s company, Kryton Engineered Metals, has paid hundreds of thousands of dollars more than expected on the metals.

“It bites,” he said. “For us, that’s huge money.”

And yet Mr. Harberts is standing by Mr. Trump.

He is on track to sell more parts than ever. He can’t hire fast enough to fill the geyser of orders coming in.

“If Hillary would’ve won, I don’t think we would’ve been in this mode,” he said. “In spite of the hassle and frustration, everyone is doing good.”

The question is how long those good times can last. Economists are certain that if the tariffs remain in place, they will lead to layoffs, farm foreclosures and bankruptcies — but not right away. Iowa may feel only a subtle effect by November, economists said, although any damage will almost certainly be felt in full by the time the state’s first-in-the-nation presidential caucuses roll around in early 2020.

“It’s possible that it might look good right up until the midterms,” said David Swenson, an economist at Iowa State University. “Even though everything we know about economics says that can’t be true in the long run.”

Already, there are signs that the tariffs are beginning to filter through the regional economy. Chinese buyers have been canceling hundreds of thousands of tons of soybean orders since April, according to Department of Agriculture data, and soybean prices fell close to a 10-year low in July. Soybean producers in Iowa stand to lose $624 million from the trade war, according to Chad Hart, an economist at Iowa State University.

In Iowa, trouble in the agriculture sector invariably spreads to the rest of the economy. Recent business surveys have found that farmers are becoming more reluctant to buy equipment and that local bankers are becoming gloomier in their outlook.

“Agriculture is always the first casualty of a trade war,” said Ernie Goss, a business professor who studies the Midwestern economy at Creighton University in Omaha.

Mr. Harberts, for example, makes housings for fans that go into massive grain bins made by Sukup Manufacturing, 60 miles northwest of here in Sheffield. Steve Sukup, the chief financial officer, has started grumbling about how metal prices are eating into his profit. Like Mr. Harberts, Mr. Sukup buys his metal from American steel mills. Several months before the tariffs were announced, those mills started to increase prices, he said, in anticipation of the protection they were about to receive. “They raised prices because they could,” he said.

And he heard from clients in California who said that their Chinese buyers recently froze all orders of almonds. Mr. Sukup said that “the realization has sunk in” among Iowa soybean farmers that the tariffs could push foreign buyers away for good.

“Once they go elsewhere, it’s hard to get them back,” he said.

Mr. Sukup, a Trump voter, said Mr. Blum “has got some headwinds” in the midterms, partly because of the tariffs.

Democrats spy an opportunity.

“It seems bizarre to live in a world where the president is actively producing anxiety on his side two months before an election,” said Sue Dvorsky, a former chairwoman of the Iowa Democratic Party. “Generally what that does is depress turnout.”

Mr. Blum is treading delicately. In June, he signed a letter, along with the entire Iowa delegation, urging Mr. Trump to “avoid a trade war.” But Mr. Blum thanked the president during his July visit for “having political courage to renegotiate these trade deals.”

Abby Finkenauer, the 29-year-old Democratic challenger in the race, called those comments “heartbreaking.” Ms. Finkenauer, a state legislator, has built a bigger campaign treasury than Mr. Blum and recently won the endorsement of former Vice President Joseph R. Biden Jr.

“We deserve a lot better than a congressman who sits there and thanks somebody for throwing livelihoods in flux,” Ms. Finkenauer said in an interview.

The fate of the contest in November may hinge on whether Kevin Watje changes his mind.

Mr. Watje, 60, is a Trump supporter and a reliable Republican voter who lives in Waterloo, in the heart of Mr. Blum’s district. He’s giving the president the benefit of the doubt on trade.

As the chief executive of Curbtender, a garbage truck manufacturer, Mr. Watje sees that American companies can be at a disadvantage in global markets.

He says the tariffs have been kneecapping his business. The prices for the American steel he buys have risen up to 40 percent since March. He can’t get metal on time anymore. “It’s thrown a wrench into the gears,” he said.

With the economy still humming, Mr. Watje figures he can absorb the losses for a little while. If the trade aggression keeps ratcheting up, though, he thinks it could end the good times in Iowa and the rest of the country.

“We could go into a deep recession again,” he said. “Then I would make a connection to Congress that they didn’t put a stop to it.”

For now, he plans to vote for Mr. Blum in November. But he’s open to hearing what the Democrats have to offer. And if the pain stretches into the winter, all bets are off.

“I would probably change my mind about voting for Trump,” Mr. Watje said. “When it gets past six months, we probably are all going to start changing our minds about who we are voting for.”

Natalie Kitroeff reported from Cedar Falls, Iowa, and Ben Casselman from New York.