I don’t know if you’ve heard, but Donald Trump’s tariffs are getting “tremendous reviews.”
China’s Ministry of Commerce, for instance, said the United States has “violated WTO rules and launched the largest trade war in economic history to date.”
That’s about like getting a 0% on Rotten Tomatoes (incidentally, Peter Navarro’s magnum orifice, “Death By China“, got a 33%).
Europe, meanwhile, is scared to death. And so is Canada and so is Mexico. Because up until Friday, everyone was still holding out hope that Trump wouldn’t ultimately go through with the first round of tariffs on Chinese goods.
It’s not so much that slapping duties on $34 billion in Chinese imports is itself a huge deal (the mechanical economic impact of this week’s measures and countermeasures isn’t large). Rather, it’s what that decision seems to suggest about this administration’s cavalier attitude towards global trade and commerce that’s unnerving.
If he’s willing to take it this far, what’s to say he won’t take it even further later this year? What does this mean for the future of NAFTA? And how about the WTO (which, according to Trump, is “always f*&cking” America”)? As a reminder, here’s a potential timeline from Barclays:
In the meantime (i.e., in the interim period between now and whenever things get worse), America’s farmers are worried sick.
The day before the tariffs went into effect, we brought you a little something called “‘Man, You Are Messing Up Our Market’: Farmers Furious As ‘Patriotic’ Trade War Threatens Families, Businesses“. There are some choice quotes in there from Ken Maschhoff, chairman of Maschhoff Family Foods and co-owner of the nation’s largest family-owned pork producer, who is afraid that the tit-for-tat trade escalations have the potential to put him clean out of business.
Well speaking of farmers going clean out of business, soybeans were the largest U.S. agricultural export to China in 2017 and when China “went there“, back in April, by threatening to slap duties on them just hours after the USTR published the list of products that would be subject to tariffs as part of the 301 probe, Trump seemed unprepared.
It was a calculated move by Beijing – a gamble that their domestic economy could absorb the higher prices if it meant hitting Trump where it hurt ahead of the midterms.
“China’s response carries both economic and political weight as agricultural states are major supporting regions for Trump,” Monica Tu, an analyst at Shanghai JC Intelligence Co. told Bloomberg at the time.
“We view the inclusion of soybeans in today’s 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 April 4.
Now that what were mere threats have become reality, the soybean issue is back in the limelight and as I mentioned briefly on Thursday, prices have plunged to nine-year lows and farmers are once again sounding the alarm.
In a statement posted on July 6, the American Soybean Association blasted the Trump administration, just like they did in April, when ASA President and Iowa farmer John Heisdorffer issued the following advisory:
It should surprise no one that China immediately retaliated against our most important exports, including soybeans. We have been warning the administration and members of Congress that this would happen since the prospect for tariffs was raised. That unfortunately doesn’t lend any comfort to the hundreds of thousands of soybean farmers who will be affected by these tariffs. This is no longer a hypothetical, and a 25 percent tariff on U.S. soybeans into China will have a devastating effect on every soybean farmer in America.
Fast forward to Friday and, in the new statement alluded to above, Heisdorffer reminds you that this isn’t rocket science.
“Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports, so the math is simple”, he said, before clarifying things as follows:
You tax soybean exports at 25-percent, and you have serious damage to U.S. farmers.
Right. And it’s not just soybeans. Here’s what Jaime Castaneda, senior vice president of the US Dairy Export Council told CNN in an e-mail this week:
You have to put all of this into context. Producers have had 3 years of low prices and this fall was looking promising. We were going to get back to profitable margins for the first time in years. All that is gone now.
Hell, even apple farmers are irritated. Just ask Tracy Grondine, a spokesperson for the US Apple Association:
If momentum is lost it will be difficult to regain. What we will likely see happen in the short-term is apples that were destined for export markets will instead overhang the U.S. market. This will impact growers coast to coast.
Oh, and then there was this from the Juice Products Association:
[The tariffs] will have a detrimental impact on the U.S. juice industry and hurt consumers who enjoy quality American juice products.
Now let’s see if Trump decides to take the same approach with the US Apple Association that he took with Harley-Davidson. Maybe he’ll start maligning the #failing apple farmers on Twitter and threatening to tax them out of business for daring to suggest that “America first” is actually hurting domestic industries from automakers to dairy farmers.
Oh, and when it comes to soybeans, CNN wants you to know that out of the 18 states that grow some 96% of America’s soybeans, 17 went for Trump in 2016.