John Phipps: "Winning" the Trade War Won’t be Quick or Easy

December 17, 2018 08:27 AM

It been a while since my Tariff 101 series and the debate is dominating both ag and general news coverage, so I think this might be a good time to look at what we have learned from trade data gathered from tariff actions.

First, it is really starting to sink in how important exports of commodities are to US agriculture. Starting with walnuts, where 80 percent are sold to foreign buyers, you can see from this chart how dependent American producers are on vigorous trade. Simply put, our constant cheer of “feed the world” was sincere but also could have been “sell our overproduction”.

Farmers here began encouraging foreign buyers when global economic growth meant formerly poor countries had reached a point where their consumers could afford more and better food. In other words, our export plans have been based on continuing global economic growth.

Where will economic growth come from in? This chart can help add perspective to answer that question. Clearly, it is impossible to overstate how important growth in China is to global economic progress. Over a third of global expansion will occur in China. Since we already are supplying the US market, subtracting our growth out, along with advanced economies relatively self-sufficient in commodities, China becomes even more crucial to our export projections.

As the trade war gathers steam, how do we can tell who, if anyone, is winning? One objective appears to be hurting the Chinese economy more than they hurt ours. While we have been focusing on US pain – like soy exports – the goal of dragging the Chinese economy down to extract concessions may work, but it could be a costly victory. The bathtub theory of soybeans is not looking too accurate, for example – other countries have increased buying but have not made up the loss. This US strategy may not have as much leverage as we imagine. China has been shifting from trade to internal consumption the driver for their economic growth. The U.S. accounts for 18% of their trade, but trade is increasingly less important to the Chinese economy.

I’ll keep checking in on economic indicators as this battle unfolds. Many of the consequences of trade wars take months and even years to manifest. But there is currently no indication winning this trade war will be quick or easy.

Related Articles: 

John Phipps' Tariffs 101
John Phipps' Tariffs 102
John Phipps' Tariffs 103

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Spell Check

Montfort, WI
12/20/2018 07:40 AM

  I remember when John first started with his articles about the tariffs and how it was gonna be difficult to win and that it was gonna be a long, drawn out affair. All of u moron neo-cons were saying how full of it and wrong John was about everything. Guess what, he was spot on! Now u idiots are so quiet I could hear a mouse fart. Easy to win? I think all u republi-cants went to the Charlie Sheen school of winning. 7 months and no end in sight. As I have been hammering for months, history has proved that trade wars are long and difficult to win. Perhaps u right wings should have paid attention in history class. Remember Smoot- Hawley? Probably not. That was the tariff plan enacted in 1930 that created an isolationism effect on the USA and accelerated the great depression. It was later proven to be a train wreck policy. This trade war will as well.

Dan B
12/21/2018 09:21 AM

  Is anyone really surprised? There is an actual GoFundMe page to donate to The Wall. If everyone who voted for Tr#!p would give just $80 it would make him happy = $5 bil. I think it goes directly to the Tr#!p Charitable Foundation. How much more of a democracy and freedom do you want?


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