Art Cullen – President Trump is worsening an economic disaster by ratcheting up a trade war with China.
Published Wednesday, May 15, 2019
BY ART CULLEN
President Trump is worsening an economic disaster by ratcheting up a trade war with China. On Friday the US announced new tariffs on a wide range of Chinese imports, to which China retaliated on Monday by hiking tariffs on soy, pork and poultry. Soybean futures markets plunged again, after having set a 10-year low late last week. Soy prices on May 10 were about $2.50 per bushel below where they were when Trump won in November 2016. China is our biggest soy customer.
Trump slapped on new tariffs when negotiations on a new trade deal fell apart. The Administration claimed that the Chinese had moved the goal posts. China always moves the goal posts with the outside world. The question is how you react to it: by more gentle prodding and finding new areas of cooperation, or an all-out trade war that puts Iowa farmers in the crosshairs. We do not recall any successes throughout history of trying to force the Chinese to open up. They have been at this trade game longer than us.
It takes patience to trade. As you trade, perhaps China gets a little better on human rights.
Trump threw a tantrum that will take years to recover from.
And it won’t help free Chinese political prisoners or protect Silicon Valley trade secrets one bit.
Future markets suggest that investors do not expect a trade deal soon. Put that on top of flooding, and chronically low prices before the trade war, and we find a new farm crisis in the offing. The USDA gave farmers a Trump Bump check of $1.65 per bushel of soy for the first trade war fiasco, and plans to pony up another $15 billion to help ease the pain. But the disaster payment doesn’t add up to the $2.50 per bushel the farmer loses every year because of this trade war.
Rural voters feel burned by Trump even as they express patriotic patience. They can’t outwardly admit that they were hoodwinked. But they know why markets are tanking. They know that Brazil has since become a preferred soy provider, after the Iowa and national soybean groups have worked for 50 years trying to groom Asian markets. That business just doesn’t pop back overnight.
In fact, the Chinese now are threatening to boycott American farm products altogether (as best they can). In turn, Trump said that Americans should boycott companies that make their products in partnership with the Chinese. Take that, John Deere and Caterpillar. That sort of talk can’t go over well in Waterloo, Dubuque, Davenport and Des Moines. Or in Storm Lake or Spencer, where old loyalty may be wearing thin.
Trump must win Iowa, Ohio and Wisconsin to carry the general election. He has crippled farming and manufacturing, the backbones of each state’s economy. He claims he is helping farmers win markets. Only true zealots can bank on that.
THE TRADE WAR also should also force us to consider agriculture’s heavy reliance on export markets on which government policy is based. President Nixon’s secretary of agriculture, Earl Butz, urged us to plant fencerow to fencerow to feed the world. Now we borrow money from the Chinese to plant soybeans that we can’t sell to them directly. Rural communities have shriveled up. Surface and groundwater is polluted. Half of Iowa’s babies are born onto the Medicaid rolls, and poverty is worst in the most rural places.
We have sold Iowa to the bottom with our religious devotion to growing more corn and more soybeans damn the cost. If nobody wants them we’ll cut you a spot disaster or crop insurance check, maybe, and hope it might fool you into taking out a loan and planting for the man again next year.
We are growing too much corn and soy and wheat on a depleted soil base that is being whipped by climate change. We make ourselves vulnerable to imbeciles like Trump by putting ourselves at his mercy. Iowa can build a sustainable agriculture that does not need Chinese soy purchases — let the Chinese grow their own, and let that exchange of technology and production be part of our trade with the world’s largest national market. Our goal should be to sustain a diverse network of American food producers who are resilient against climate change, who protect our long-term national security, and who improve our crop productivity through conservation. We are doing just the opposite.