From havarti to Harleys: How 2 key Wisconsin exports are coping with trade uncertainty

Wisconsin may be famous for its cheeses, but north of the U.S. border, it has a lesser-known claim to fame.

In 2016, Canada was the midwest state's biggest trade customer, and the single largest market for its agricultural goods. More than $14 billion worth of goods travelled between this country and Wisconsin that year.

America's "dairyland" is also where, earlier this year, U.S. President Donald Trump criticized Canada's dairy regulations amidst a growing dispute over trade between the two countries.

On Sunday, Cross Country Checkup will enter the heart of the debate, broadcasting from Madison, Wis., and taking calls from Canadians and Americans alike.

But first, what's going on in Wisconsin?

Dairy capital of the U.S.A.

It's no coincidence that Trump riled up Wisconsinites by talking dairy.

"A lot of the state is rural and agricultural and the stereotype of Wisconsin is Cheeseheads ... there's a reason why that exists," said Mark Copelovitch, a political science professor at University of Wisconsin-Madison.

Wisconsin alone produces nearly as much dairy as all of Canada — and it doesn't know what to do with all of it. Because of Canada's supply management system, only a small amount of Wisconsin dairy comes north — notably yogurt, which was hit with a 10 per cent tariff on July 1.

Mexico and China are both important markets for the industry where the state sells cheeses and other dairy products.

But the threat of tariffs on those regions has some producers on edge.

Down south? Not so fast

Looking to Mexico, "there's going to be some restriction on imports," said Anthony Pahnke, vice-president of Family Farm Defenders and an international relations professor at San Francisco State University.

"That's going to be something that ... further drives down prices."

Meanwhile, dairy prices are already low hovering around $16.30 US per 100 pounds. The break even price is about $18 US per 100 pounds.

So, as farmers are struggling to get their products to market at a reasonable price, some, like those that Pahnke represents, are questioning Trump's motives.

"They're feeling that the president's making these deals — playing hardball — but real people are being affected by this," he said.

"It's not a game."

Raw goods in, finished product out

Where tariffs will be most noticed, however, is in manufacturing.

That industry relies on imports from other countries — Canada, China, Mexico and regions throughout the EU — to build wares that are then shipped to international markets.

In a not-so-subtle move, Milwaukee, Wis.-based Harley Davidson said it would move some manufacturing to Europe in order to avoid tariffs.

Consider glass, steel, aluminum — even rubber — needed to produce their motorcycles. All of these goods from outside the U.S. have been hit with steep tariffs.

"You could imagine that maybe I would benefit by keeping out foreign competition. But on the other hand the cost of my production now went up with the 25 per cent tariffs," Copelovitch told Checkup, acknowledging Trump's "Buy American" approach.

But, that increase could take its toll, he said.

"A 25 per cent spike in one of your key inputs can put you out of business."

The NAFTA appeal

Coincidentally, tariffs are the reason many international companies set up shop in the U.S.

If products are built in American, they're within NAFTA walls, making cross-border trade easy.

Foxconn, best known for building the iPhone, announced last year that they would move into Wisconsin. According to Copelovitch, the promise of freer trade was a driving reason.

"Foxconn is now saying a year ago this seemed like a better deal ... because suddenly the cost of producing in Wisconsin just went up by 15 or 20 or 25 per cent," he said.

Talk it out

With all that in mind, the worry that these trade disputes could go further is a step too far, Copelovitch believes.

"I think a prediction that this is going to become an all-out trade war and the collapse of globalization is overwrought and unlikely to happen," he said.

Over the next decade, the international relations expert expects that many trade deals will endure — and the businesses that rely on them will stay resilient in the face of threats.

Until then, Pahnke hopes that Trump and Trudeau might be able to work out their differences.

"I would tell Trump to stop bashing the Canadian system and maybe send some folks from the Department for Agriculture up to Canada and research [supply management]," he said.

"Maybe they can get together ... to try to figure out how we can make foreign policy fair for farmers on both sides of the border."

Join the conversation. Cross Country Checkup will be broadcasting in partnership with Wisconsin Public Radio from Madison, Wis., Sunday, July 15. We're taking calls on trade and tariffs from both sides of the border.