Waging War in Commodities Markets

September 25, 2018 9:59 pm Published by Leave your thoughts

The Trump Administration approved $100s of billions of dollars on Chinese goods that went into effect in July. The Chinese government retaliated with billions of dollars in restrictions on specific US commodity industries, such as soy, beef, and bourbon. In response to Trump’s strong-armed approach against NAFTA, the Mexican government has negotiated to buy corn from South America, in some cases abandoning decades-long relationships with Midwestern farmers. The Chinese are buying more beef from South American ranchers, where there is a seemingly unlimited supply of grass-fed cattle. The Chinese are also sourcing pork from other countries, leaving US producers behind.

All these actions and reactions leave us and economists with many questions… Were these hardline tariffs against both our competitors and allies thought through? Did Secretaries Ross and Mnunchin recognize that US farmers never had a monopoly in the markets where they are trying gain a more competitive advantage?

The Chinese elite love a good bourbon. But, guess what? Other countries have been distributing quality whiskeys globally for decades. Perhaps, our economic policy does need to be improved and some of our existing import/export agreements could use a second look. However, many economists agree that our present Administrator in Chief’s bluster will only hurt the US economy in the long run. We have a strong economy and have been on a track of continued growth for 8 years, but the future state of market sustainability has been thrown into question. It is entirely unclear what the end goal of having a stream of new tariff announcements of new tariffs of our allied trading partners goods.

This is the fundamental problem with this Presidency and the instability in the White House political message and, obviously, staff appointments. Industry, trade, and business leaders are in a constant state of flux about what can be done to best prepare for the errant economic policies. And,  Special Counsel Mueller’s investigation alone is having a dragnet affect on many of his closest advisors and personal attorneys. Even today, during his speech at the UN, Trump stated he was against globalization while framing it as an ideology.

They seem to be saying, ‘great job on the tax cuts…but, what the heck else are you doing to do now?! Midterm elections are just around the corner, and I am certain there won’t be of decline in bluster, intimation, and exaggerations of success on his part.

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This post was written by Daniel Jones

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