Thanks, Trump: Wisconsin Cheese and Motorcycle Edition


Figure 1: August 2018 cheese futures, accessed 25 June 2018. Source: ino.com.

Back in March, I noted that Wisconsin was particularly vulnerable to the consequences of Mr. Trump’s capricious approach to trade policy formulation (too kind of a description, in my view). This view has been confirmed by recent events, even before the imposition of outright retaliatory tariffs, as in this NYT article.

Oh, and Harley Davidson is moving jobs out of Wisconsin. Why? Because of EU retaliation.

Here is a graph from my March post on Wisconsin and cheese.


Figure 2: Total cheese production in billions of pounds, for California (blue), Wisconsin (red), and rest-of-US (teal). Source: USDA NASS and author’s calculations.

To place in perspective, quoting from Wisconsin’s DATCP:

If Wisconsin were a country, it would rank 4th in the world in cheese production, behind the rest of the U.S., Germany and France

More on the vulnerability of US agriculture to retaliation and/or exit from Nafta, here.

Usually, I don’t think of trade policies measurably affecting the overall macroeconomy sufficiently to induce a recession. But I’m willing to change my mind, if higher import costs impact downstream production, profits, and employment, and we have heightened policy uncertainty associated with the possibility of retaliation. See today’s stock market reaction, here.

Q: Are we winning yet?

Update: See also Theo Francis’s article in WSJ today on tariffs and Wisconsin.

10 thoughts on “Thanks, Trump: Wisconsin Cheese and Motorcycle Edition”

  2. pgl

    “Harley-Davidson, up against spiraling costs from tariffs, will begin to shift the production of motorcycles headed for Europe from the U.S. to factories, to overseas facilities.

    The European Union on Friday began rolling out tariffs on American imports like bourbon, peanut butter and orange juice. The EU tariffs on $3.4 billion worth of U.S. products are retaliation for duties the Trump administration is imposing on European steel and aluminum.

    President Donald Trump has used Harley-Davidson as an example of a U.S. business that is being harmed by trade barriers. Yet Harley has warned consistently against tariffs, saying they would negatively impact sales.

    Harley-Davidson Inc. sold almost 40,000 motorcycles in the Europe Union last year, generating revenue second only to the United States, according to the Milwaukee company.”

    From Menzie’s link. The Usual Suspects here keep telling has Trump knows what he is doing? Really? He realizes that his insane policies will lead to Harley-Davidson employees losing their jobs? What a guy!

  3. 2slugbaits

    I get the sense that Trump and his supporters somehow believe it’s just as easy to remove tariffs and trade barriers as it is to impose them. They’re wrong. If this is Trump’s idea of “winning” a trade war, I’d hate to see his definition of losing one.

  5. pgl

    I’m looking at Harley’s 10-K filing. All sorts of interesting information. In 2015 and 2016, revenues were near $6 billion. Since Trump they have been declining. I was mainly checking out where their manufacturing facilities are currently located but this quite my eye:

    ‘The Company’s principal raw materials that are purchased include steel and aluminum castings, forgings, steel sheet and bar.’

    So Trump’s tariffs have increased their cost of materials while the trade was has lowered their demand. It is no wonder that their stock price has plummeted. If I were a Harley shareholder (I’m not) I’d be asking my lawyer if I could sue these crooks in the White House.

  6. Moses Herzog

    Gee…… and all this time I thought Chinese people hated cheese.
    https://www.youtube.com/watch?v=gpaOy8b8X6A
    (This inappropriate racial stereotype joke brought to you by “White Guy Nauseated By Trump” LLC)

    This actually brings up an important topic. Should we put high tariffs and exorbitant taxes on mayonnaise just to eliminate its existence?? Divide into groups of five students, get one industrious guy in each group to do all the work, and we’ll discuss at the end of class.

    By the way, I already have first dibs on the first “cut the cheese” joke to be used in this thread, so PeakIgnorance STEP OFF!!!!!

  7. Barkley Rosser

    Now now now, you unpatriotic bums. Trump has assured us that all those soybean farmers in Iowa are patriots and will accept economic losses in the short run for the greater gains we shall surely get in the longer run thanks to his great skills in the Art of the Deal. A trade war is easy to win as the Great Depression showed us when we enacted the Smoot-Hawley tariff. Sure taught all those Europeans a lesson when Hitler took over Germany thanks to their high unemployment we got them. Showed them not to dump goods on virtuous us.

    Obvsiously the Harley-Davidson workers and cheese producers and dairy farmers in Wisconsin will also be great patriots and accept their short-run losses. Heck, I saw in the NY Times a dairy farmer there who said so. He was glad that Trump was taking on that no-good Canadian PM for keeping out US dairy products, although so far there is no evidence that Trudeau has folded after being threatened with a place in hell so as to let more Wisconsin dairy products in. But, surely, just as the wall on the Mexican border will be built and paid for by the grateful Mexicans, dairy exports to Canada will soon be soaring, and Harley-Davidson will move production back to Wisconsin from Europe.

  9. Ed Hanson

    Menzie,

    Just a technical note, Harley has not said anything yet.about reducing its US workforce, Only that between 9 and 18 months from now it intends to move some production to its current overseas operations. A lot can happen over that time period. And by the way, why are you not celebrating the new incentive for US companies to own overseas operations and enjoy the profits by finally not being excessively punished for bringing those profits home.

    Ed

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