President Trump’s recent tweets threatening to escalate his trade war with China sent soybean and corn futures plummeting Monday, in the latest hardship for U.S. farmers.
Already reeling from reduced demand for their crops after China imposed a 25 percent retaliatory tariff on soybeans, farmers struggling to deal with flooding rains faced the prospect that Trump might fail to reach a deal with Beijing to end a costly trade war.
The president’s tweets threatening higher tariffs on Chinese goods drove soybean futures to their lowest level in seven months. A Bloomberg index of speculative returns on grain prices plunged to the lowest level since 1977.
The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!— Donald J. Trump (@realDonaldTrump) May 6, 2019
Economists routinely point out that Trump is misinformed when it comes to trade deficits and tariffs. That America imports more than it exports is not the same thing as “losing” money, and a tariff on foreign goods is a tax paid for by U.S. consumers. Trump has based his trade policies on the opposite assumptions.
The ongoing dispute threatens to affect more than just farmers. The trade war between the two largest economies in the world has clouded the economic outlook for the U.S. as well as China, and threatens to curb global growth in an increasingly interdependent financial system.
“You can’t do something between the United States and China in a big way without affecting all the major markets,” Berkshire Hathaway CEO Warren Buffett told CNBC on Monday.
Belying his own assertions that his trade war has helped the U.S. economy, Trump and his representatives have been working to secure a trade deal with China that would end what the president describes as the lucrative tariffs he put in place. On Sunday, however, the president tweeted his frustration with the pace of negotiations.
For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars....— Donald J. Trump (@realDonaldTrump) May 5, 2019
....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!— Donald J. Trump (@realDonaldTrump) May 5, 2019
But as Trump’s trade war with China has dragged on, U.S. farmers have paid the price.
China has been the biggest customer for U.S. soybeans, and the tariffs imposed by Beijing have made a severe impact on the market, causing prices to fall by $2 a bushel.
Trump’s latest threat to raise tariffs on Chinese goods on Friday may simply be just a negotiating ploy. The president previously set a deadline of March 1 for the increase. Given that farm debt is on the rise, with Trump’s tariffs on steel pushing the cost of equipment higher, and tariffs from China sending farm income lower, American farmers may be wondering where is the art in this deal.
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