Hector Flores

hflores@lulac.org

Simon Rosenberg
srosenberg@ndn.org

Dear Hector,

Chris Taylor published a piece this afternoon looking at

the changing political economy of Iowa and its
implications for 2018 and 2020. He argues that
Trump's trade policies are hurting Iowa's economy and
are unpopular in the state, and offers some thoughts on
what this means for Republicans in 2018 and the
Democratic presidential race looking ahead to 2020. It
is here, and below.

We hope you enjoy it and feedback is welcome of

course.

Best, Simon

Iowa, Trump, and the Politics of Globalization

and Tariffs

(This is the seventh article in a series produced by

NDN challenging Trump’s tariffs)

From 2012 to 2016, Iowa shifted a net 15 percentage

points from Obama to Trump, the largest such shift of
any state in the nation. As we look to the upcoming
midterms, however, the politics of the state seem to
have changed significantly. Similar to the other
Midwestern states, the Republican Party seems to be
taking a hit, and the House and Gubernatorial races in
Iowa appear to be strong pick-up opportunities for
Democrats. We don’t know exactly why this shift has
occurred, but part of the reason seems to be trade. And
for good reason. NDN sees three major motivations for
why Iowans would oppose Trump’s protectionist trade
policies.

Globalization has greatly benefited Iowa

The new era of globalization that began in 1989 and saw

the US become more economically integrated with
China, Mexico, Canada, and the EU (among others) has
been very good for Iowans. The state exported $13.2
billion in 2017, or 7% of its GDP, and foreign
trade supported 450,000 jobs, equal to 20% of all jobs
in the state. Rather than experience a decline, trade-
related jobs actually grew 4.5 times faster than total
employment in Iowa in 2004-2014. Furthermore, the
trade deals that the President has slammed the most,
the original NAFTA and agreements with China and the
EU, have provided the most jobs in the state. Canada is
the market for 31% of Iowa’s exports, while Mexico
accounts for 17%, China 4%, and Germany 3%.

The result of this global integration has been a very

strong economy. From 2011 to 2017, Iowa’s GDP per
capita increased by 11.3%, faster than the 8.3%
registered by the country as a whole. Furthermore, the
state’s current unemployment rate is 2nd lowest in the
nation at 2.5%, significantly lower than the 3.7%
national unemployment rate and the 4% rate that
economists consider to be full employment. Finally,
Iowa continues to be a national leader in poverty
reduction, having the 7th lowest poverty rate in the
country at 9.4% in 2017, compared to a national average
of 12.5%. While Trump constantly speaks of trade
creating economic “carnage” across the nation, Iowa
instead has developed a prosperous economy on the
back of foreign integration. In fact, Iowa has a
large trade surplus of $4.2 billion, further illustrating
that foreign competitors haven’t overwhelmed Iowan
industry but rather have complemented it.

Trump’s trade policy has damaged the state’s economy

Trump’s trade wars have caused serious disruption to

Iowa’s economy, and risk causing an outright recession
in the state if continued. Retaliatory tariffs on Iowa’s
major exports, in response to Trump’s imposition of
wide-ranging tariffs, have significantly reduced demand
for those exports, resulting in large declines in the
prices received by farmers and workers throughout the
state. Soybeans, responsible for 24% of Iowa’s exports,
have seen their price decline by 16% in 2018 alone. Pork
and corn, responsible for 15% and 13% of total exports,
have seen their prices decline by 15%. The overall result
has been a large decline in income earned by exporters
throughout the state. A new study from Iowa State
University estimates that the trade wars could cause an
overall income decline of $2.2 billion in Iowa, equal to
1.2% of the state’s GDP. Even the Trump administration
has admitted its policies are harming incomes across
the state, as it has already provided almost $550 million
in bailouts to farmers hurt by the tariffs.

While Trump has touted the new NAFTA agreement as

a breakthrough for Iowa’s farmers, new
market access to the Canadian dairy market totals only
$70 million for all US exporters, an insignificant
amount given losses of up to $40 billion to American
exporters as a whole. Furthermore, the loss of foreign
market access by Iowan workers is not likely to be
short-term in nature, regardless of when the trade war
is ended. Major competitors to Iowan farmers,
predominately Brazil and Canada, are taking advantage
of tariffs on US exports to take market share from
Iowans. Brazilian soybean exports to China have
jumped 22% in 2018 alone, as exports from Iowa dry
up. As a result, even if the tariffs are rescinded, supply
chains will have refocused to exclude American, and
Iowan, exporters for the long run.

Iowans recognize these facts and strongly oppose

Trump’s tariffs

Iowans heavily oppose Trump’s trade policy in state-

wide polling, and have punished Republican
incumbents running in the state. Republican
incumbents in the 1st and 3rd House Districts are
trailing their Democratic opponents while running 22
and 15 points behind their own 2016 performances,
while the incumbent Republican Governor is also losing
while running 26 points behind the GOP’s performance
in the 2014 governor’s race. This follows a clear trend,
previously discussed by my colleague Simon Rosenberg,
of Trump significantly underperforming his 2016
numbers throughout the Midwest.

While we don’t know the exact causal effect of the tariffs

on this shift, it has to be noted that Trump’s trade policy
is significantly underwater in the state. Across Iowa as a
whole in September, 52% of likely voters thought that
Trump’s tariffs would be bad for Iowa’s economy while
only 24% said they would be good. In the key
battleground district of Iowa 1, meanwhile, likely
voters opposed Trump’s tariffs on steel and aluminum
by a 55-36 margin. This follows other polling in the
region that found Trump’s tariffs opposed 41-26 in
Missouri, 46-28 in Pennsylvania, and 57-31 in
Wisconsin. Even though Iowans swung so strongly
towards Trump in 2016, they realize the positive impact
of foreign trade on the state, and are unwilling to
support Trump’s reckless trade policies.

Looking ahead to the 2020 Democratic primary in

Iowa

The economic and political realities described here raise

some interesting questions about how the Democratic
presidential candidates are going to address these
issues in the coming months. The state’s direct ties to
foreign trade, the significant decline in Iowan
agricultural exports as a result of Trump’s tariffs, and
their unpopularity will make it very difficult for
Democrats to embrace Trump’s tariff and trade policies,
something Democrats have done in some states this
year. In fact, it would be appear, based on this analysis,
that it would benefit Democrats to clearly attack the
tariffs as policies hurting everyday Iowans.

How Democrats play the trade issue in the Presidential

race next year will be fascinating to watch. Democratic
voters overwhelmingly support free trade. Trump’s
economic policies, including his tariff policies, are
weakening both the USand global economies. His
protectionist policies are deeply unpopular, and his
party is about to suffer huge losses in the Rustbelt and
Midwest. Given all this, the Democratic presidential
candidates would be smart to study these issues hard,
and make sure they don’t somehow align themselves
with policies which are contributing to the unraveling of
the strong recovery Trump inherited and which are
doing direct harm to American businesses and workers
across the country.

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