Edward Lotterman
How do members of Congress differ from the beef our nation imports? All bones have been removed from most beef, but congressional representatives have only lost their spines.
Until this past week that joke held true.
But last week on Tuesday, five GOP senators — Susan Collins of Maine, Lisa Murkowski of Alaska, Rand Paul of Kentucky, Thom Tillis of North Carolina and Mitch McConnell of Kentucky — bravely split from their party, voting for a winning bill to overturn 50% tariffs on imports from Brazil.
Paul and Virginia Democrat Tim Kaine co-sponsored the bill. Minnesota senators Amy Klobuchar and Tina Smith both voted for it. Klobuchar, long a member of the Senate Agriculture, Nutrition, and Forestry committee, stood prominently at Kaine’s side in announcing the vote.
The next day, Wednesday, four of the GOP renegades, Collins, McConnell, Murkowski and Paul, again defied President Donald Trump, voting with Democrats gave a four-vote majority to a near-identical bill overturning Trump’s tariffs on Canada. And on Thursday, these four mavericks tipped the scale for a 51-47 vote to overturn all of Trump’s “reciprocal tariffs” worldwide.
In the short run, of course, these votes are merely symbolic.
With fewer renegades, the GOP majority in the House is stronger than in the Senate. All these tariffs will stand unless overturned by lawsuits pending in the courts. Yet these Senate votes show that tariffs, increasingly unpopular in the general public, are not a strict party-line issue. They are a beacon to other Republicans uneasy with increasing public dissatisfaction with import taxes.
It was a coincidence that these votes overlapped the Federal Reserve’s slight interest rate cut. However, some Fed board members expressed concern that tariff-induced inflation is not yet slain. Fed Chair Jerome Powell made it clear that further rate cuts, specifically at the Fed’s next meeting in December, are not a given.
Powell’s concerns, shared by the senators, are apparent to anyone at the check-out counter of their local supermarket. Trump rode into the Oval Office lambasting high consumer inflation under President Joe Biden. That pain was real. The Consumer Price Index for “all food eaten at home” was 22% higher on election day 2024 than four years earlier. Trump vowed to reverse that, “on day one!”
That hasn’t happened. Yes, as of September this groceries CPI category was only up 1.6% over last January when Trump was sworn in. But tariffs are starting to bite. If August and September increases persist, the jump in a year would be 5.5%.
Moreover, key foods rose more. Ground beef, the product most affected by imports, is up 14% since Trump put his hand on the Bible. Steaks and roasts are up 12.5%. And the CPI notated “Coffee, 100%, Ground Roast, All Sizes” is up 30% January to September. A necessity to many, coffee had risen an average 12% annually during the “Biden inflation.”
Such higher prices may explain why 50% tariffs on Brazil were the first issue teed up in the Senate. It’s no secret that coffee, much of this beef, and many other grocery store staples we take for granted, are imported.
Brazil is our largest single source of coffee. Some 35% of all we drink comes from there. This might not be as high as some think. But if you look at grocery-store brands bought by lower-income people who don’t frequent tony coffee shops, the percentage of Brazilian coffee is far higher. For people who live from one paycheck or SNAP deposit to another, the 30% coffee price increase from January to September isn’t minor. And 9% of that came in only two months after Trump’s July 29 announcement of 50% tariffs on all imports from Brazil.
Another item, one seldom mentioned, is orange juice. We are the world’s largest consumer of frozen OJ. But plant diseases are devastating U.S. orange production, making us the largest juice importer by far. Brazil is the world’s largest producer, and exporter, supplying 80% of the global total. Some 60% of our total comes from there. In the September CPI report, the price for “Orange Juice, Frozen Concentrate” is up 5.7% since January. However, its price has risen at an annual rate of 12.9% since the president announced the Brazil tariffs.
This is all a lot of data. What general lessons are involved?
The media, and some politicians, have focused on the simplistic but false dichotomy of who actually “pays the tariff” — exporting-nation producers or importing-nation consumers. It is far more complicated than that. In the real world, time needed for the costs — and benefits — to appear in the general economy vary greatly by specific product and the length of time for adjustments to take place. Producer-exporters are affected, as are consumer-importers. So are domestic producers, not only of the product itself, but of substitute ones.
The key question here is how badly we feel we need the product. Could we just do without it? Are there good substitutes? These determine exactly who loses, or gains, by how much, from new tariffs. Moreover, how quickly or slowly domestic production can be ramped up is key, if that is even possible. For imports like coffee, there generally are no U.S.-produced substitutes.
With current very high prices, U.S. beef production is increasing. But it takes time for new beef cows to be able to have calves. And, compared to chickens or hogs, cattle take a long time to reach slaughter weight. So adjustments to tariffs take time.
Similarly, bringing fruit trees to production takes years. But vegetables grow in weeks. Our country does have frost-free irrigated land in the southwest that once produced vegetables. This just was not competitive after production moved to Mexico. At some price, broccoli, green beans and the like could be produced again in relatively short order. But producers would be loath to invest money if the whim of a mercurial proto-dictator, or a Senate vote, or an activist judge, might abolish tariffs on competing cheaper imports overnight.
The same is true for seasonal vegetable production in areas with cold winters. In 1899, my grandfather came from the Netherlands to work in vegetable production on Maryland’s Eastern Shore. Before federally-subsidized irrigation in southern California, Maryland, Pennsylvania, Delaware and New Jersey produced large quantities of vegetables each summer.
Baltimore was the canning capital of the country. H.J. Heinz was in Pennsylvania for a reason. Canned tomatoes and sauce, beans, peas and other vegetables again could be grown and frozen or canned, despite urbanization. Minnesota could produce corn, pears and pickles. At the farm level, production could ramp up quickly. But new processing plants are expensive. They take time to be up and running. Who will sink such millions if flattery from some foreign leader might prompt tariff reductions that would leave new investment here high and dry?
Coffee is an interesting case because it seems a necessity for many. Growing coffee here is near impossible. We can stiff Brazil and buy from Vietnam or Kenya, outbidding their traditional customers. These might then pick up slack that we left in Brazil. That happened when our 2018 tariffs on imports from China sent that nation to Brazil for soybeans, lowering but not destroying our overall exports.
The upshot is that we are going to pay more for goods subjected to tariffs but the degree and timing of that will vary greatly from product to product. And the full results may not be settled for years. The one sure thing is that resources available to meet the needs of our nation and the world as a whole will be wasted. We collectively will be less well off than we need be.
Related Articles
Real World Economics: Argentina bailout is a new level of corruption
Real World Economics: ‘Creative destruction’ and Argentina’s debt crisis
Real World Economics: How farm payouts violate basic principles
Real World Economics: Ignorance of Social Security’s problems is not bliss
Real World Economics: How bad is it going to get?
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
Leave a Reply