Parameters: One Parameter Change In The Trade Machine Leads To A 'Re-Adjustment' Of Another

Source: Ottumwa Courier

Over the last few weeks after President Trump announced imposing tariffs on Steel and Aluminum, there has been talk of 'retaliatory measures' on exports leaving the United States.  Yes, our farmers will pay the prices for the decision to impose tariffs on indirect products which are tied together on a commodity level.  I wrote about this in a previous post.  How does this affect the U.S. consumer?  Get ready for quite possibly higher food costs -- agricultural produce to start with.  I recently received the following excerpt in my e-mail box from 'Politico Agriculture' shown below:

HOW A TRADE WAR THREAT COULD SQUEEZE AG: Farmers and ranchers, and their representatives in Washington, have spent much of President Donald Trump's 14 months in office warning that the agricultural industry would be collateral damage in a tit-for-tat trade war. It seems their fears have been confirmed, after China released a lengthy list of $3 billion worth of products it has set up for reciprocal tariffs - including pork, nuts, fresh and dried fruits, and wine, Pro Ag's Catherine Boudreau and Helena Bottemiller Evich report this morning.

China's action was in response to Trump slapping new tariffs on steel and aluminum imports, which took effect on Friday for countries that the president decided not to exempt. Additional retaliatory measures aimed at U.S. farm products could be on their way after Trump unveiled another action last week that could impose tariffs on $50 billion in Chinese goods over intellectual property concerns.

Pork producers - and prices - are already feeling the strain, even without the threatened tariffs in place. The U.S. shipped more than $1 billion of products to China last year, making it the No. 3 destination for exports after Japan and Mexico.

"This is an incredibly risky gamble on the president's part, and quite frankly, I wish he was gambling with someone else's money," said Brian Duncan, who raises 70,000 hogs and grows 4,000 acres of corn in Ogle County, Ill. He noted that the market price of lean hogs dropped $9 in two days last week. "There are real people's lives at stake in this game of brinkmanship."

Dennis Nuxoll, vice president of federal government affairs for Western Growers, told POLITICO that the president could use other avenues - such as the World Trade Organization - to address trade disputes with China without sending ag markets on a rollercoaster.

Talks still going: The Wall Street Journal reported Sunday evening that China and U.S. officials were quietly discussing issues ranging from financial services to manufacturing. That could serve to de-escalate trade tensions.

The talks may not be all that secret, though. Treasury Secretary Steven Mnuchin said on Fox News Sunday that the administration was moving forward with imposing tariffs on Chinese imports and restricting Chinese investment, but said he was "cautiously hopeful" that the two countries could reach an agreement.

"We're simultaneously having negotiations with the Chinese to see if we can reach an agreement," Mnuchin said.

I am not that impressed over the last sentence.  The reason being is that our country got us into this mess.  The concept of 'free trade' has benefits which cannot be understated.  Each country benefits from security of goods (traded goods) by ensuring trust through relationships.  As I mentioned in a previous post, the complex machine will make adjustments (the trade machine) if adjustments are made to any one part of the system at a given time.  The overall adjustments (outcomes) of the small adjustments are not always predictable -- i.e. a trade war.



This is serious business when the administration plays with the lives and well being of the farmers of our nation.  The farmers who supply goods -- food to us - consumers who purchase goods at the market (grocery store).



Conclusion...


The next time that you find yourself in the grocery store wondering why the cost of soybeans or other crops have gone up, remember the decision made by President Trump - tariffs on Steel and Aluminum -- which caused instability in the global trade market.  Where do we go from here?  Who knows?  We will see in the months to come as each nation responds in their respective manner with tariffs on U.S. exports.  Regardless, instability in the trade system (global trade system) is not good for anyone - regardless of what is said in the newspaper or in Washington.




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