Analyst: Trade War with China is Justified

October 8, 2018 07:53 AM

Trade issues with China continue to hang over the market. After a meeting with North Korea over the weekend, U.S. Secretary of State Mike Pompeo called the issues with China a “fundamental disagreement.”

It’s that disagreement not only weighing on U.S. commodities, but also hurting China’s economy. Farm Journal Washington Correspondent Jim Wiesemeyer said China’s central bank cut the amount of cash lenders must hold as reserves for the fourth time this year. It’s that move that Chinese leaders hope will shore up activity in the midst of what Wiesemeyer called a “faltering domestic economy.”

Chinese stocks responded negatively to the news on Monday, with Chinese stocks plunging. The China A50 - which includes major companies from both the Shenzhen and Shanghai indexes- fell 4.8%. 

It’s not just China on the U.S. trade agenda. Leaders just struck a new trade deal with Mexico and Canada – called USMCA, and the Administration is also entering into bilateral talks with Japan.

Andy Shissler of S&W Trading said juggling all these trade deals at once can be viewed as a game of dominos. China will be the last domino to fall, but it will take time.

“If you think they're going to fix 10 years of trade with China in three months, it's never going to happen, but you can start the process and makes changes as it goes,” said Shissler, “Right now, I agree with Trump. It was not free; it's not free trade and it's not really fair. The way the money flow works in and out of China, it's a bunch of crap, really.”

Analysts called the trade war process with China painful for farmers, but the window to fix the issues was overdue.

“It’s definitely painful, there’s no question that this process is painful, but as Andy pointed out, it’s been overdue,” said Mike North, Commodity Risk Management Group. “We needed to cut this off at the head now, otherwise we’re going to live with the issues forever.”

Shissler said trade with China is tricky, as Americans desire to buy cheap goods. That means the U.S. will always be in a trade deficit.

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Spell Check

Old S. W. Mn. Farmer
Worthington, MN
10/9/2018 06:00 AM

  Doyle H.-Einstein said something to the effect that ALL people are ignorant--only in different subjects! Steve from Brodhead Ky. nailed it 100% but when someone figures out how to get a bunch of old sows to stop fighting at the feed trough,then apply the theory to farmers, it will happen about the same time as they get ICE WATER in HELL!! Does no one remember N.F.O.??? Like a steer--they tried--like a steer they failed,but its been said,better to try and fail than never try at all !!

Scottsboro, AL
10/9/2018 07:34 AM

  Grown ups should not believe that everything that is justified is wise. Nor should they confuse punishment with rehabilitation.

IL Grain Farmer
Springfield, IL
10/9/2018 08:29 AM

  Steve from KY. Good message, well said. I too switched parties years ago. Thankful I'm no longer associated with the out of control liberal agenda occurring today even though my operation is in liberal IL. As proven in IL, liberals have no answers, except to criticize and harass and create an environment not suitable for business with regulations and high taxes. Strange that Republican Bill Brady lost the governors election several years ago after he won over 90 counties out of 102. Too bad Chicago can't secede away from the rest of the state. I understand that in parts of the country the weather has been horrendous for agriculture this year, and I'm truly sorry for you guys affected by it. However, you guys whining about crop prices are getting what you deserve for the most part. Trump told the whole world what he was going to do concerning unfair trade. You had ample time to make marketing plans or hire a marketer if you didn't understand the concept. If you couldn't take 100% accurate marketing advice and protect yourself for at least two years out, then what you are suffering is a result of your lack, not Trumps. Thank you Tyne Morgan for finally printing something on this site that is accurate.


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