Some Minnesota businesses feel double impact of trade war

Steve Hoffman tended to his dairy cows.
Steve Hoffman tends to his dairy cows at his farm in rural New Ulm, Minn., March 5, 2015.
Jackson Forderer for MPR News 2015

Minnesota businesses are starting to feel the impact of the trade war. And they're feeling pain from two directions. Exports are declining, and the cost of some key imported materials are rising. Some are looking for federal help to offset the tariff impacts.

One group feeling the trade disputes is Minnesota dairy operations.

"Our farm is losing $4,000 a month roughly," said Steve Hoffman.

Hoffman and his wife operate a 140-cow dairy farm near New Ulm in southern Minnesota. He said many factors affect the price farmers get for their milk. But he sees a clear link between a roughly 10 percent drop in the market and the ramp up in tariffs and counter tariffs that began last spring.

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"The future markets for the second half of 2018 here were about a dollar or two higher than what they are right now," said Hoffman. "It would appear as though the downturn in the markets could be pointed at the tariff talks."

The National Milk Producers Federation goes even further. It says there's "no question" that the trade war is reducing milk prices.

Mexico buys more than a quarter of all U.S. cheese exports. But it recently imposed tariffs as high as 25 percent on the product. That's caused commodity traders to lower their bids for milk.

They fear the trade dispute will reduce U.S. dairy exports and the demand for milk. President Trump has said he will help farmers through the trade war. The milk federation is calling on the administration to pay farmers for income lost to tariffs.

The trade war is also causing concern at the dairy processing company where farmers like Steve Hoffman take their milk.

"Rural America is hurting from this," said Sheryl Meshke.

Meshke is co-president of Associated Milk Producers Inc. in New Ulm. It's a $2 billion a year company that makes about 10 percent of the nation's butter and American cheese. Meshke said if the trade war reduces exports of U.S. dairy products, it could make it more difficult to sell AMPI products. She sees daily signs of market turmoil. During an interview she paused to check her smartphone for the latest cheese prices.

"Barrel cheese is down, wow. Six and a half cents, to a $1.31," said Meske. "That's a big hit in one day."

But it's not just cheese prices concerning Meshke. The costs of some key imports AMPI uses to package and ship its products are also rising. She said the impact on the company's New Ulm butter plant has been measureable.

"Already this year they've seen a $750,000 hit," said Meshke. "Due to the tariffs."

The biggest part of that is for the increased cost of corrugated cardboard from Canada. The price rose after the U.S. placed a tariff on many Canadian paper products entering the country.

That tariff also is causing problems for the many newspapers. Justin Lessman is part owner of Livewire Printing in the southwest Minnesota community of Jackson. He said the paper tariff boosted his cost for Canadian newsprint by about 15 percent.

"And from what I've heard in talking to other publisher's across the United States, we got by pretty easy," said Lessman. "Because there are plants dealing with 25 percent, 30, up to 40 percent, increases in newsprint costs."

Lessman said the higher newsprint costs have forced the company to hold off hiring a new editor. That sort of uncertainty about the future is common for Minnesota businesses dealing with tariffs according to Minnesota Trade Office executive director Gabrielle Gerbaud.

"Anything that creates some kind of uncertainty, is always affecting any kind of future business that is being done or the trade that we're having with the world," said Gerbaud.

It leaves businesses uncertain whether they should hire new employees, or expand their operations. An uncertainty that could grow if the trade war expands.