Trade War’s End Game - SeedWorld

Trade War’s End Game

- Christian Burney

2018 promised a lot for soybean producers. In February, the U.S. Department of Agriculture (USDA) predicted annual U.S. soybean exports would break 2.5 billion bushels by 2020. Brazil expected to surpass production of approximately 70 million to 110 million bushels this year.

These predictions boded well for soybean producers and sellers, as well as processing and conditioning equipment manufacturers. However, on March 8, President Donald Trump imposed steel and aluminum import tariffs of 25 and 10 percent, respectively, with temporary exemptions for Canada, Mexico and the European Union.

American steel suppliers took advantage of the situation, and increased steel prices passed from manufacturers to their end-users — some of whom were soybean producers. Following China’s subsequent decision to block all imports of U.S. soybeans, a more promising outcome for the American soybean market billowed away. Five months of quaky trade talks later, and what has formed in the absence of a positive year is an ugly and toxic cloud of uncertainty and insecurity. China and the United States briefly appeared to resolve the trade dispute after the president stated that he planned to bail out Chinese telecommunications company, ZTE. China and the United States rescinded their tariffs, only for President Trump to impose them again and for China to threaten the same. Since then, the two powers have been interlocked in an ambiguous state of contention and comradery.

Much like Schrodinger with his cat, it seems that the very act of observing Trump’s foreign trade policy is enough to change it. The trade war is dead. In a blink, it looms on the horizon, very much alive. (I dread what effect that the very act of writing this article may have on the space-time continuum.)

Trump initiates a trade war against China, states that NAFTA must be renegotiated on a basis of national security, and, in utter tone-deafness, saves ZTE, the Chinese company that pleaded guilty in 2017 to violating U.S. trade sanctions on Iran and North Korea.

It is important to note that ZTE illegally sold American technology to Iran and North Korea; sanctions aside, the theft of American intellectual property is exactly what the president used in addition to a deficit as justification for tariffs against China in the first place. (And there goes the space-time continuum.)

Across the globe, China threatens tariffs one day and then actually offers to increase the import of American sorghum the next. Meanwhile, American soybean producers have no choice but to brace themselves and cross their fingers as the pendulum swings.

What lies next for the United States and China is uncertain. And things were further complicated from America’s perspective on May 29 when Mexican President Peña Nieto declared a 25 percent tariff on imported U.S. goods such as pork, cranberries, bourbon and American steel. Mexico, Canada and the European Union were originally exempted from U.S. tariffs, but that privilege piddled out days before its May 31 deadline when Trump declared that he would prefer to renegotiate NAFTA with each member nation separately.

Canada, France and Japan have also recently drawn their own lines against the Trump administration’s aggressive metals duties.

American steel has thus far benefited from these tumultuous negotiations. But how will such an unpredictable and volatile environment affect manufacturing and agriculture in the near and distant future? Why is the president of the United States helping an adversarial foreign company at the expense of the industries that support the country he leads?

Where exactly do steel, manufacturing and agriculture fit into this administration’s end game? Is there an end game at all in the president’s plan?