The Independent reports US soybean exports to China down 94% because of Trump tariffs.
> President Donald Trump’s ‘America First’ trade policies have led to a 94 per cent cut in US soybean exports to China, forcing farmers in America’s midwest to stockpile crops and hope relief comes before the rot.
> After decades in which American soybean farmers were able to build considerable business by selling a huge share of their crop to China, farmers across the US are seeing the largest market destination for one of the country’s largest crops drying up.
> “We’re sitting on the edge of our seat,” Kevin Karel, the general manager of the Arthur Companies, a soybean seller, told The New York Times. Mr Karel’s company has begun stockpiling soybeans outside, and they plan on laying a tarp over the product to extend its life. He said he hopes a solution can be found before that crop rots.
This Tweet by Brad Setser sums up the current state of affairs in a single Tweet.
Doing a bit of digging into the Chinese trade data.
As @gilliantett noted on Friday, Chinese exports to the US (in the Chinese data) have been doing quite well in the last few months.
Running about $5b a month more than this time last year, and $10b more than this time 2y ago pic.twitter.com/4UdKTyV2FD
— Brad Setser (@Brad_Setser) November 18, 2018
Not to fear. I have it on good authority that trade wars are good and easy to win.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
Mike “Mish” Shedlock
Those farmers need to change up their customers clearly selling your entire crop to export doesn’t hardly break even. Selling farm to table you can down size and profit. Subsidies are going to global agri business who knew?
Cherry picking one commodity is something I would expect from someone far less informed. The fact is China needs us much more than we need them, and while no one should want a trade war, if the other side continues to impose sanctions, tough love is required.
You would say, if China wants to ship us goods for free, we should be happy, but the companies displaced would not be happy. So, why are you now worried about soy bean farmers? There’s always sacrifices, but if the net effect is better, its worth it. One better example is shutting down the govt to stop deficit spending. This is actually a win-win, as you get govt employees out of the way in the short-term, and we stop digging the debt hole.
The only problem with that idea is that, once government starts up again, they always give the employees back pay for the period when the government was closed. Thus, there is no savings. The employees just get extra vacation.
China’s been winning for a long time. We subsidized the soy, and dumped it on China all along, other growers have already been stepping up, as is China itself. They are not dumb, why be over reliant on any one for anything, and if you are, then make a change.
The background is that the tax cut gave Americans more money to spend, and a large portion of consumer goods come from China, so it’s not surprising to see imports up.
It would be interesting to see the whole story on Bean Wars. Are Chinese people going hungry? Is China still buying all the US soy beans it needs through cut-outs like Iran or Dubai (maybe at a premium)? Are global trade patterns shifting, with other countries selling soy beans to China (at a premium) while US suppliers sell to the former customers of those countries?
Let’s recognize that talking about “Trump’s trade war” is about as historically inaccurate as claiming WWII began when General Eisenhower invaded Normandy. China has clearly been waging a trade war against the US for decades with the connivance of the usual suspects in the US, as demonstrated by the unsustainable trade imbalance. Finally, the US has a President who has started to fight back.
How will that unsustainable trade imbalance eventually get corrected? Standard theory says that the US dollar will fall in value, making Chinese imports too expensive for US consumers. This will dramatically reduce the standard of living for everyone in the US, which in turn will wipe out many US investors. Or do free traders see a less traumatic end to China’s trade war against the US?
Interesting point. Most people can refrain from buying another pair of shoes or sunglasses. Food is a different matter; other sources of supply will be needed in order to maintain consumption. Perhaps China is currently using reserves hoping the dispute will end before those reserves run out.
China can buy from anywhere in the world. I believe China replaced lost soybeans by purchasing from Brazil, Canada, Russia (which is expanding air-able land to meet the new market). I think the US farmer should start to plan that they are going to loose the soybean sales forever. The funny thing is soybean prices dropped for everyone. The countries supplying the crop may not be making as much as the US farmer did before the start of the trade war.
It takes about 6 months for soybeans to grow. Commercial-scale production needs time before planting to prepare soil & irrigation systems, and of course the grower has to wait until the right time of year. Commercial scale distribution requires investments in facilities and transportation. Whatever China is buying now is not coming from new production.
Brazil, Canada, Russia already had markets lined up for this year’s crop. Either the Chinese are drawing down stocks to meet their food demands, or there is a re-ordering of supplier/purchaser relationships, or the Chinese people are doing without.
Of course, unless the trade imbalance gets sorted out by China substantially increasing imports from the US, China is going to suffer greatly when the US can no longer afford imports from China — and a lot of Chinese people will be doing without.
“Standard theory says that the US dollar will fall in value, making Chinese imports too expensive for US consumers. This will dramatically reduce the standard of living for everyone in the US, which in turn will wipe out many US investors.”
The standard of living in the US will be reduced by the amount it is currently increased by access to goods from China at prices lower than which they could be made for domestically….. Dude, you can’t have it both ways. The reason people buy stuff from China, is because it improves their living standard. Take that ability away, no matter the mechanism; and living standards will decrease.
Wrt US “Investors,” considering those are the guys who were handed the loot the Fed stole from workers in the first place, the more wiped out the merrier.
“The reason people buy stuff from China, is because it improves their living standard. Take that ability away, no matter the mechanism; and living standards will decrease.”
Will it? I buy stuff from China because it costs the least, so I save money. The problem is that in the US, what is saved in retail, incremental fashion, the protected banking, healthcare, insurance, higher education, and law industries collectively steal it away wholesale. So, if we bring back manufacturing and it costs the US consumer more, then there would just be less from which the protected/leaching industries can steal with the added benefit that more citizens are now working.
Steve Bannon cites the starting point of “economic nationalism” as the financial crisis of 2008 and the subsequent bailout of the banks. His solution is turning the focus to China because they are a “totalitarian mercantile” state which has been in economic war with us for 25 years. Well, perhaps they do deserve our attention, but we could achieve equally if not greater results for middle (and lower) class prosperity by simply getting the government out of the marketplace and forcing banks to eat the losses of their bad loans.
As far as standard of living goes, scientists, engineers, doctors, and inventors are more responsible for our increase in standard of living, compared to the utilization of (Chinese) slave labor.
“Steve Bannon cites the starting point of “economic nationalism” as the financial crisis of 2008 and the subsequent bailout of the banks.”
Anyone who quotes Bannon is already to far gone to help intellectually speaking
“…’to’ far gone to help ‘intellectually speaking’” & “…’No’ what the US finally ‘have’…”
Thanks for the laughs Carlos! Let us “no” when you “is” writing “intellectually”!
Trump’s policies have support among his base because the increases in living standards coming from trade with China are not evenly distributed. Yes, I may be able to buy cheaper underwear, but if I lost my job making that underwear, my standard of living has gone down. Particularly if I now have to compete with more people for fewer low and mid skill jobs.
Like the benefits, the costs of restricting trade will also not be evenly distributed. Thus, Trump’s tariffs may reduce the overall standard of living for Americans (as defined by purchasing power), but some Americans will see an increase in their individual standard of living.
Part of the problem with this debate is that the standard of living for “Americans” is an abstraction. We are a nation of individuals. Almost everybody approaches this issue based on individual circumstances. That is why it often falls on deaf ears when people tout the benefits of free trade. The benefits are real, but we’ve done an astoundingly poor job in distributing those benefits in a manner that garners widespread support for free trade policies.
“The standard of living in the US will be reduced by the amount it is currently increased by access to goods from China at prices lower than which they could be made for domestically.”
The consequence of the drop in the dollar/yuan exchange rate due to the current unsustainable trade imbalance would be worse than that. The factories in the US which made the underwear, the computers, the medical equipment, the steel have gone — the equipment long-ago sold to the Chinese, the trained staffs dispersed. This is the notorious 50-60 thousand factories which have shut down. Consequence is that, in the short run after Chinese imports become too expensive, there will be no substantial domestic production capacity. The US population will have to do without.
Longer term, this would be an opportunity for the US to reinvest in manufacturing to replace the then-unaffordable Chinese imports. But the collapse of the dollar would have led to massive capital flight, and it would be difficult to finance those needed new manufacturing plants.
The scenario would have some similarities to bombed-out Germany after WWII – but without the benefit of a Marshall Plan. Make no mistake about it — losing to China in China’s long-running trade war against the US is going to feel like having lost a shooting war.
” Finally, the US has a President who has started to fight back.”
No what the US finally have is a populist president that knows what buttons to press on people like you… You know like Chaves in Venezuela did… Another great president that was willing to “stand up” against the elites…. LoL
How much of this are importers to the States rushing in products before the major tariffs take effect come the New Year?
What will your excuse for Dear Leader be next? Space aliens smuggling in Chinese goods to benefit the evil liberals?