Oh, What a Lovely Trade War

Tighten those belts, folks. The trade war officially began yesterday.Martin Longman calls July 6, 2018 “a day that will live in infamy.” Catchy. Martin Longman continues,

Of course, the retaliatory tariffs are designed to do the most damage to Trump’s base thereby dividing the Republicans and eroding Trump’s position. Europe went after Kentucky bourbon and Harley-Davidson in a clear message to Mitch McConnell and Paul Ryan. China is going after pork and soybeans as well as the automotive industry that is as important these days in Alabama, Tennessee and Indiana as it is in Michigan. In any case, those are all state that voted for Trump.

It’s hard to say how people will react. Will they really treat a trade war like a shooting war and rally around the president and the flag? That might happen. On the other hand, maybe a lot of people will turn on the president and his party when they feel a very direct sting from his policies.

Today, many eyes are on Iowa. Ed Kilgore writes,

Now maybe something will soon happen to mitigate the damage. But it’s also entirely possible that [Iowa Gov.] Terry Branstad has about as much control over collateral damage to Iowa from Trump’s trade policies as you or I have, and that all those confident assurances Iowans were receiving from Washington were just Trumpian hype associated with the belief that Beijing would fold its hand, leaving POTUS as the undisputed master of global commerce. The grim reality is otherwise. China buys at least 60 percent of the Iowa soybean crop. The pain will only get worse if harvest time comes along with the trade war still raging, and there’s no particular reason to think it will be quickly resolved.

Tom Philpott writes at Mother Jones that prices for the two biggest crops in the U.S., corn and soybeans, began falling in May.

After putting its trade beef with China on hold for a few weeks, the administration suddenly reiterated its tariff threats, and added Mexico, Canada, and the European Union to the mix. China is by far the biggest buyer of exported US soybeans; Mexico holds that position for corn.

The current slide comes at a precipitous time for US farmers. They have about 179 million acres of the two crops growing in their fields–a combined land mass equal to nearly two Californias, and just 1 percent less than last year’s plantings. To make a profit on these crops, farmers will have to make at least $4 per bushel on corn and $10.05 on soybeans for the 2018 harvest, a University of Illinois analysis found. Currently, the two commodities fetch $3.43 and $8.40, respectively.

Lots of stories note that farmers in South America are planting lots of soybeans in hopes of selling them to China. North American farmers could permanently lose major markets.

There is talk of a big bailout for agriculture if the damage is as bad as it looks.

But Trump, who has attacked Harley-Davidson for plans to move some production to its overseas plants to avoid retaliatory European tariffs, is looking to save “my farmers” from the trade war he launched. Rural support was critical to his presidential victory. Unhappy farmers could spell trouble for midterm elections.

Agriculture Secretary Sonny Perdue said last month at a Chicago convention that the Commodity Credit Corporation is a “tool” he’s considering to comply with Trump’s instructions to “craft a strategy to support our farmers against retaliatory tariffs. The program, which was started to help farmers during the Great Depression, allows the Agriculture Department to borrow as much as $30 billion from the U.S. Treasury that could be used to buy crops from farmers that would go unsold in a trade war.

However, politicians on both sides of the aisle express unhappiness at a bailout. And they doubt even $50 billion would be enough.

Salt Lake Tribune