Trump tariffs

‘Working Big Time’ or a Disaster in Process

President Trump lavishes praise on his trade policies, which he says are “working big time.” Linfield agricultural economist Eric Schuck disagrees and says Trump tariffs will plummet US farmers into economic oblivion.

President Trump lavishes praise on his trade policies, which he says are “working big time.” Linfield agricultural economist Eric Schuck disagrees and says Trump tariffs will plummet US farmers into economic oblivion.

President Trump has tweeted that his tariffs are “working big time.” A Linfield professor who specializes in agricultural economics offers a different verdict.

“American farmers are going to suffer losses. How large those losses will be remains an open question,” writes Eric Schuck in a guest editorial published by the News-Register in McMinnville. “The end result is this: A multitude of growers are either playing without a safety net or facing a long fall to reach that net.”

According to Trump’s tweet posted over the weekend, “Every country on earth wants to take wealth out of the U.S., always to our detriment. I say, as they come, Tax them. If they don’t want to be taxed, let them make or build the product in the U.S. In either event, it means jobs and great wealth.”

Schuck paints a starkly different picture. “The U.S. exported about $12 billion worth of soybeans to China in 2017. That represents about half the total soybean exports from the United States and almost a third of all US farm receipts for soybeans. So US soybean trade with China is a big deal. Unfortunately, China recently canceled about a million tons of orders.”

Domestic soybean producers have avoided disaster by ramping up exports to Brazil, which has picked up the slack in selling soybeans to China, Schuck explains.

“On the surface, that would seem to mean U.S. growers aren’t taking a hit from our nascent trade war with China,” he wrote.” But that couldn’t be further from the truth.  China has been our best customer in part because it pays the best price. While our soybeans are now finding an outlet in Brazil, they are doing it at a price that has tumbled nearly 20 percent in the last 90 days.”

Linfield College agricultural economist Eric Schuck takes issue with President Trump about the impact of tariffs on US commodity producers.

Linfield College agricultural economist Eric Schuck takes issue with President Trump about the impact of tariffs on US commodity producers.

The Trump administration has acknowledged tariffs are hitting US farmers hard. Their solution is a $12 billion one-time financial bailout. Schuck thinks the tonic is as bad or worse than the tariffs. Here is his explanation:

“To add insult to injury, the proposed remedies actually make things worse down on the farm. The US Department of Agriculture has announced its intention to use the Depression-era Commodity Credit Corporation to backstop falling prices. The mechanics are convoluted, but the CCC will basically act as the buyer of last resort for crops that no longer have a market.

“This leads to the federal government holding larger stores of surplus crops, most of which will wind up going into food banks or school lunch programs. While that can be helpful in some respects, the pressure of large domestic surpluses and demand diversion through food aid programs tends to drive crop prices down even further. And that drives up the cost to US taxpayers even more.”

While tariffs may not make economic sense, compensating US growers for their impact may violate international law, according to Schuck. “Any action to aid farmers beyond current levels would most likely expose the United States to lawsuits by both China and Brazil under World Trade Organization rules. And because the trade fiasco was triggered by US actions, we would most likely lose.”

Soybean producers aren’t the only US agricultural commodity to face repercussions from Trump’s tariffs. “Cherry growers witnessed tariffs rise as much as 50 percent while their crop was in transit to China,” Schuck says.” Unable to adjust, the price paid by Chinese consumers has held steady, while the price paid to American growers has fallen through the floor. Other commodities, notably apples, pears, chicken and pork, will soon suffer similar trauma.”

Trump thinks the US Treasury will reap the benefit of his tariffs. Schuck says, “As a result, the Chinese treasury stands to be the primary beneficiary of US tariffs on Chinese goods.”

Schuck claims, “None of this needed to happen. While China can be a frustrating trading partner, especially in terms of intellectual property, there were other ways to manage the problem. The Trans-Pacific Partnership offered to collectively exert leverage over China, in concert with the rest of our trading partners, but has been cast aside by the new administration. Instead, we find ourselves adrift with virtually no international support, because we’ve simultaneously started trade wars with everyone else who might share an interest in confronting China, including Canada, the European Union and Japan.”

Somewhat futilely, US Secretary of State Mike Pompeo promoted a $113 million Indo-Pacific infrastructure initiative last week, even as Asian leaders are forging ahead on a multilateral trade arrangement that reportedly would include China, but not the United States.

That provides interesting context for Schuck’s conclusion: “There’s only one way out of this: Declare victory and try to get back to the status quo. Unfortunately, that may no longer be an option.”

[The impacts from Trump tariffs continue to ripple outward, including a significant delay on a key traffic signal in Clackamas County.]

 

‘America First’ Policies Raise Questions about US Leadership

President Trump’s ‘America First’ policies have played well with his political base, but not so well with global leaders as tensions are growing over the specter of spiraling trade war with consumers at home and abroad likely to pay the price.

President Trump’s ‘America First’ policies have played well with his political base, but not so well with global leaders as tensions are growing over the specter of spiraling trade war with consumers at home and abroad likely to pay the price.

One of the unintended successes of President Trump’s ‘America First’ policies has been to galvanize the European Union, Japan and China to preserve and bolster multilateral trade, regulatory and security arrangements Trump disdains.

“After months of denialangerbargaining and depression, Europe and other parts of the world have accepted that Mr. Trump and his mission of disruption are not going away,” reports The New York Times.

Accounts suggest foreign leaders are stunned by Trump’s continuing attacks on traditional allies, cozy relations with Russian President Vladimir Putin and seeming disavowal of America’s role as the leading advocate of a liberal world order.

EU leaders are especially astonished at being referred to as “foes.” In June, 29 EU ambassadors to the United States sent an open letter to Trump in defense of free trade and investment policies.

“Together, the US and EU have created the largest and wealthiest market in the world. The transatlantic economy accounts for half of the global gross domestic product by value, which directly supports more than 15 million high-quality jobs and $5.5 trillion in commercial sales. And nearly one-third of the world’s trade in goods occurs between the EU and United States alone,” the letter said. The ambassadors added that EU investment in the United States exceeds US investment in Europe.

EU leaders, despite qualms about Chinese trade practices that mirror Trump’s, have met with Chinese leaders without US involvement. According to the Times, the “summit meeting produced an unusual joint declaration and a common commitment to keep the global system strong.”

The EU then signed what has been described as the largest free-trade agreement in history with Japan, again with no US involvement.

Now, the EU is preparing “whopping tariffs” in response to proposed Trump tariffs on items such as German-made cars, noting that 45 out of 50 US states export more goods and services to Europe than China, totaling around $500 billion in 2016.

GOP Senator Ben Sasse from Nebraska may have spoken for the wave of critics who think Trump’s tariffs are undermining US exports that have taken years to cultivate and who believe his proposed $12 billion package of one-time financial aid to farmers won’t come close to co vering the long-term damage done by the tariffs.

GOP Senator Ben Sasse from Nebraska may have spoken for the wave of critics who think Trump’s tariffs are undermining US exports that have taken years to cultivate and who believe his proposed $12 billion package of one-time financial aid to farmers won’t come close to co vering the long-term damage done by the tariffs.

On the regulatory front, the EU fined Google $5.1 billion for antitrust behavior, which drew a sharp rebuke from Trump. Google plans to appeal the EU ruling, but it may be forced to reckon with it in the marketplace in the meantime.

Interestingly, the basis for the fine echoed an unusually American-sounding rationale. “Google has used Android as a vehicle to cement the dominance of its search engine,” Margrethe Vestager, Europe’s antitrust chief, told the Times. “These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere.” 

European Commission President Jean-Claude Juncker travels to DC this week to discuss the deteriorating EU trading relationship with Trump officials.

Meanwhile, the impact of tariffs is beginning to be felt. The Associated Press carried a story last week about the stress felt by US soybean farmers, who are a target of retaliatory Chinese tariffs. One soybean farmer said he already has lost $250,000 in value for his current crop. Soybeans on the Chicago Board of trade have dropped $2 per bushel in value. Farmers interviewed say they still support Trump, but want to know what the end game is.

The Oregonian posted a story last week listing five Oregon exports at risk in a spiraling trade war with China. Noting Oregon exported $3.5 billion worth of goods to China in 2017, the article said the most vulnerable are:

  • Computer and electronic products ($2.1 billion)
  • Machinery ($435 million)
  • Chemicals ($363 million)
  • Transportation equipment ($262 million)
  • Agricultural products ($235 million)

Oregonian reporter Mike Rogoway provided a more comprehensive look at Oregon exports in a piece published in June. Among the interesting statistics Rogoway uncovered: 87,000 Fords produced in the United States were exported through the Port of Portland, 90 percent of which headed to China.

US business interests also remain frustrated at Trump efforts to negotiate changes in the North American Free Trade Agreement, which appear to have stalled and made more difficult by the election of a leftist president in Mexico.

Global tensions are growing over the budding trade war, as reflected by a statement coming out of the G20 meeting held in Argentina over the weekend. US Treasury Secretary Steven Mnuchin attended the meeting and agreed to sign the joint statement.

Mnuchin acknowledged what he called “micro impacts” caused by the Trump tariffs, but defended them as a pathway to freer trade that is fair to the United States. News reports said Mnuchin and Chinese finance officials conversed during the 2-day meeting, but only engaged in “chitchat,” not serious negotiations.

There are harsher judgments of Trump’s policies. WorldPost editor Nathan Gardels. wrote, “The ‘American First’ president who denigrates democratic allies as foes is no longer the leader of the free world….Trump appears to be not even the leader of the United States.”