On April 4, frustrated soybean farmers lashed out at the Trump administration.
Early that morning, Chinese authorities hit back after the USTR published a list of products subject to tariffs as part of the 301 probe into purported IP theft. Specifically, Beijing said it would apply 25% reciprocal tariffs on 106 U.S. products including soybeans, cars, planes and chemicals.
Clearly, Beijing knew where to hit Trump ahead of the midterms.
“We view the inclusion of soybeans in [the] announcement as political in nature and reflective of the escalation of the trade dispute with the US. Soybean tariffs impact US Midwest political swing states and come at a cost that China appears willing to pay,” Goldman’s Damien Courvalin and Jeffrey Currie wrote, in a note out following the Chinese response.
Here are some visuals from the USDA and Goldman which help you conceptualize that situation.
Fast forward three months and we’re one day away from the first round of tariffs (and the Chinese reciprocation) taking effect.
With Chinese companies now apparently prepared to cancel remaining soybean orders in light of the tariffs, at least one ship (the Peak Pegasus) is literally racing the clock to get to Dalian in time to unload its cargo ahead of the duties. Here’s Bloomberg:
Peak Pegasus is expected to arrive in Dalian on Friday, the same day that China is scheduled to impose tariffs on imports from the U.S., according to shipping data compiled by Bloomberg and a person familiar with the matter. If it arrives as scheduled, it should be able to clear customs before the tariffs are imposed, according to the person.
Soybean prices are sitting at a nine-year low:
Speaking to the New York Times for an article published on Wednesday, one South Dakota soybean farmer named Kevin Scott (who claims to have voted for Trump, by the way) said the following:
I would like to tell the president, ‘Man, you are messing up our market,’. [Changing Nafta] gives us a lot of heartburn in farm country [and] if we lose those Chinese and Mexican markets, it will be hard to get them back.
Right. And see, it’s the same damn thing seemingly everywhere you turn – the people whose interests Trump has sworn to protect are the people getting screwed the most here.
Just ask Ken Maschhoff, chairman of Maschhoff Family Foods and co-owner of the nation’s largest family-owned pork producer, who spoke to CNBC this week.
Pork producers are now reconsidering expansion plans and really, just reconsidering everything in light of what Rabobank’s Christine McCracken says will be an 81% net tariff. “At [that level], you’re not moving any pork product into China,” she said.
No, you’re probably not, and here’s what the above-mentioned Ken told CNBC about the notion that this is all for the greater good of the country:
We put a halt on all investment, not just because we will be losing money, but because we don’t know if growing in the U.S. is the right move if we won’t be an exporting country.
[The farm industry has been] asked to be good patriots. We have been. But I don’t want to be the patriot who dies at the end of the war. If we go out of business, it’s tough to look at my kids and the 550 farm families that look us into the eye and our 1,400 employees.
There you go.
Ultimately, more and more businesses in the U.S. are going to find themselves confronted with that same reality, and if Trump’s response to Harley-Davidson is any indication, anyone who dares to suggest that what this administration is actually doing is killing American business, will be subjected to an angry Twitter rant or worse, see the President of the United States threaten to put them out of business.
The bottom line is that the burgeoning trade war has presented Trump’s base with something of a paradox. Apparently, reclaiming lost “great”ness entails being “tough” on trade, but due to the very same globalization of supply chains and markets that Trump claims is hurting America, being “tough” on trade necessarily entails some rather nasty outcomes for the very same Americans whose cause he claims to champion.