Trade Wars

The trade war has started in earnest and the effects are filtering down through the economy already. Cash price for soybeans has dropped to about $7.70 or even less, the lowest price in over 10 years. Shiploads of soybeans heading for China have been turned away and have to find other destinations. China has canceled planned purchases of tens of thousands of pounds of US soybeans and is now sourcing beans from Brazil and other countries. It has canceled all of it’s purchases of US sorghum from one story I read. It’s canceling planned purchases of cotton… The list goes on and on. The story in the EU, Canada and Mexico is similar. Tariffs of up to 30% on a huge range of US products.

And there are signs it’s going to get a lot worse. There are noises coming out of DC that the administration is considering slapping tariffs on all products coming from China now. A new list of products that could get hit coming from Canada and Mexico, including automotive products is apparently in the works. That would hit the US auto makers hard because there is no such thing as a “made in the USA” motor vehicle any more. All of them have parts made in Canada, Mexico, China and other countries.

The ag sector is going to get hit first, and get hit the hardest because it is one of the few industries where we have a trade surplus. Huge amounts of agricultural products, both raw and processed, are sold to other countries every year. And we are already seeing ag commodities prices in the US plummeting at a time when commodities prices are already at a point where most farmers are just barely breaking even.

The tariffs are being levied on a lot of products that aren’t made in the US at all, or are made in such low quantities that we can’t meet the demand. We have no choice but to buy elsewhere. Some types of steel, aluminum and other metal products, well, we just don’t make the stuff here for a variety of reasons. The paper your newspaper and magazines is made from. Electronics. Clothing…

There are rumors flying around that the Fed is already getting nervous about the prospect of serious inflation as the increased costs filter through the economy.

Load up on aspirin… This is going to hurt…

Author: grouchyfarmer

Yes, I'm a former farmer. Sort of. I'm also an amateur radio operator, amateur astronomer, gardener, maker of furniture, photographer.

4 thoughts on “Trade Wars”

  1. Last year when the Canadian lumber tariffs too effect lumber here in Washington went up 30%—and not just Canadian wood, all wood. How in the hell does this help Americans? To top it off, it was a 20% tariff, but drove prices even worse than we planned. I bought OSB for my house 2 years ago for $9. Paid $20 this year for my daughters house. It’s made of chips and glue, and the cost is a dollar sheet to make it.

    Like

    1. That lumber tariff certainly caused a lot of problems all over. I remember seeing the prices go up at the local lumber yards even on wood that wasn’t under the tariff. I don’t build houses, but I make furniture as a hobby and I’m probably going to be buying about 800 board feet of white oak this summer to finally get around to making another Morris chair and a matching sofa for my wife and a display cabinet and book case, and I’ve been nervous about what the prices are going to be when I go to my supplier.

      These tariffs almost always have a lot of unintended consequences, and these are so wide spread that they’re going to hit almost every sector of the economy. If this nonsense doesn’t get shut down soon it’s going to be nasty.

      Liked by 1 person

  2. It’s mind boggling how the one area he might reasonably be supposed to understand, business economics, is the one he’s making such a ginormous blunder in.

    I’m not sure who benefits from this tariff war he’s started. As far as I can tell, no one?

    Like

    1. There are some who will benefit enormously, but not many. At least not directly. There are a few aluminum and steel producers left in the US who will probably have windfall profits over this and a handful of others. Mostly it’s about trying to force other countries to change policy, though. China requires companies that want to do business there to have a certain percentage of the company owned by Chinese, requires sharing intellectual property and other restrictions that cut into the profits of some US companies. The US dairy industry would dearly love to see Canada’s dairy pricing and quota systems destroyed and force them to push their own dairy industry into the same state of near perpetual bankruptcy US producers are in suffering from so they can increase the profits of the big dairy processors. It’s going to be a mess.

      Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s