Prominent economist calls for changes to tariff policy

ST. LOUIS — President Donald Trump’s approach to tariffs is fracturing trading relationships that should be leveraged for mutual benefit, said Virginia Tech University Professor Emeritus David Kohl..Speaking Nov. 14 on the final day of the American Bankers Association Agricultural Bankers Conference, Kohl compared Trump-era tariffs to subscriptions as they are both usually short-term and can be changed instantly. While Kohl sees the trade imbalances Trump cited in instituting tariffs as needing to be addressed, he sees the president’s approach has been the wrong way. Instead, Kohl said North American trade partners need to form an alliance to leverage their power on the global trading stage. Kohl, an ag and economics professor at Virginia Tech from 1978 until 2003, compared the current tariff environment to the 1930 Smoot-Hawley Tariff Act, which raised tariffs on thousands of imported goods. The act caused other countries to implement retaliatory tariffs and is believed to have worsened the Great Depression. “We don’t read our history enough,” Kohl added. .His comments come as Trump pursues a much more aggressive tariff policy than his first term. Trump has enacted tariffs impacting nearly all goods imported into the United States, with the average applied U.S. tariff rate increased to 27 percent in April from 2.5 percent in January, before falling to 17.9 percent in September. Trump has also criticized Canada’s trade policy against the United States and raised the potential of Canada becoming the 51st state during trade disputes between the two countries. Tariff revenue under the Trump administration reportedly exceeded $30 billion in September, up from $10 billion per month last year.Kohl also described trade in the Global South, which he said is a much larger partner than 15 years ago and will drive down domestic commodity prices. China is also shifting its trade focus to South America, Kohl added. The percentage of global trade made in U.S. dollars has fallen to 58 percent from 75 percent in 2000. Three words accurately describe the ag economy, Kohl said: “Bifurcation and unsettled.” Though the stock market has been strong, Kohl said many Americans are struggling. He predicted “mass consolidation” in the banking industry as older farmers retire and fewer younger people want to continue.Running a successful agriculture operation now includes breaking even without government checks or ad-hoc payments, Kohl said, along with having marketing and risk management plans that capitalize on profit windows. Farmers will need several sources of revenue to continue, Kohl said, potentially off the farm.He sees expected corrections to the stock and housing markets as economic risks. Employees making between $100,000 and $500,000 are vulnerable to layoffs and replacement by artificial intelligence, Kohl said. Other weaknesses he sees in the economy include the growing concentration of wealth in the top 10 percent of earners, along with aging infrastructure and supply chain issues. Other issues he sees are a lack of trust in institutions and an aging population with a reactive health care system.Showing his passion for sports, Kohl intertwined his hourlong speech with sports references. At one point, he asked several bankers in the audience what year they attended their first Ag Bankers Conference. He then connected the last two digits of their answers to a famous sports figure with the same number.