Can someone (a Trump supporter maybe) from the US Mid West explain why President Trump’s notion of putting a heavy tariff on goods from China is going to help the sale of US Soybean to China?
The Mid West voters have been traditional supporters of Republicans for several decades and the biggest swing to the Republicans from the Democrats was particularly marked for Donald Trump in Iowa in the recent elections. This would not have been a particular surprise. No doubt the prospects of reduced taxes and a loosening of environmental restrictions offered the prospect of rapid improvement to the business prospects for farming sector. As President Trump’s Agribusiness policies have clarified, the farm sector appears to have a recent unpleasant late awakening as the prospect of Trump’s trade wars begin to take shape. Basically the first part of the problem is this. Trump’s rejecting the TPP has already removed the prospect of the increase of $4.4 billion dollars which had been calculated for Agribusiness as a result of the increased trade markets for US agricultural products under TPP.
The Chinese as a major export destination (particularly for Soy) are currently facing the prospect of trade barriers and will almost certainly respond with their own barriers if the somewhat unpredictable Trump carries through with his threat. If that wasn’t enough, Donald Trump has stated he wants to torpedo the current NAFTA arrangement which is widely agreed to have provided a welcome boost to the agribusiness. A range of key farm sector stakeholders (including the American Soybean Association, the Dry Bean Council and the North American Meat Institute have already sent a letter pleading with the President not to torpedo NAFTA.
So what do we have?
Fact – China has stated they will respond to trade barriers with their own reprisals.
Fact – the US has a huge market for Soybean in China.
Fact – Brazil, like the US, has a surplus of Soybean and is competing with the US as a major exporter.
Why does the Trump Government assume that trade barriers against the China will not mean China will then start to turn to Brazil for its Soybean supply? How would that help the Mid West?
In any case Mexico (a major importer of corn from the US eg $US 2.4 billion in 2015) has already responded to direct threats from Trump with a clear signal it is about to debate a Bill to source its corn from elsewhere.
This morning Graeme Wheeler, Governor of the New Zealand Reserve Bank made a public statement that President Trump’s protectionist economic policies, if enacted, are going to be a disaster for World Trade. Even assuming there will be a short-term advantage to the US in setting up trade barriers, surely long term, US exporters are going to find their trade partners will look elsewhere, and even if they don’t, how will placing taxes on incoming goods not raise the prices of those goods for US consumers? What am I missing?