The Trump Era: Fasten Your Seatbelts

February 14, 2017 02:12 PM
 
Donald Trump

 


Jim Wiesemeyer of Informa Economics has been watching Washington politics for more than 40 years. Below are some of his thoughts on what’s in store the next four years of the Trump administration.


— Expect the unexpected from this unexpected president. Uncertainty means market volatility and business skittishness until the timing of President Trump and GOP plans are clearer.

— Farmers and exporters are concerned about trade policy. Farmers and Exporters fret they will be used as collateral to gain market access elsewhere. While I fully understand their concerns, I believe agriculture will actually BUILD on market access gained via NAFTA and the proposed-but-now-withdrawn TPP.  But farmers want proof. Trump’s people tell me they fully know that agriculture is one of the few industries maintaining a trade surplus and they do not want to change that. They want to use the existing market access gains in NAFTA and the proposed TPP as a starting point, building on that to make sure they can tell farmers and ranchers they have gains from a new approach to trade policy.

Bilateral agreements take a lot less time to finalize than multilateral agreements - a recent study showed the last 20 bilateral agreements took an average of 1.5 years to complete. TPP discussions began in 2008, and NAFTA took more than two years to complete. Remember that NAFTA will revise from a trade platform already in existence, and TPP that will serve as a starting point for bilateral talks in Asia. But again, a lot of the lengthy and complex issues have already been dealt with, with revisions ahead.

— Agribusiness industry calls coming into Informa clearly point to trade policy uncertainties, foreign policy flare-up potential and tax relief policies ahead. The border tax proposal pushed by House Republicans is at the top of the list for many agribusiness executives. The main reason is that higher taxes on imported inputs or ingredients will alter their pricing structure. I think they will eventually adjust prices higher, but there is concern nonetheless. Also important to stress that many Asian and European countries already have in place a border tax similar to what is being proposed in the US.

— Tax relief/reform. This is as significant as three or more farm bills. It’s not a question of whether tax relief is coming, but how and when. Trump and GOP leaders want a finished product by end of this year, which would mean changes for the 2017 tax year. While lower individual and corporate rates are obviously better for both, we need to see what changes to deductions and other tax policies are made to help pay for the very expensive revenue needed to lower and simplify corporate and individual tax rates.

One example could be the border tax, or repatriation of funds held outside the U.S. As for agriculture - will cash accounting still be allowed? If the estate/death tax is eliminated, the key question affecting far more farmer is what may be done regarding stepped-up basis.

The bottom line on tax relief is that it’s a clear net-plus for the country, business, and yes, the business of agriculture. More investments. More opportunities.  

— New farm bill. Cotton and dairy industries look to gain the most from a new farm bill. They currently have ineffective safety nets. Corn and soybeans will have to modify their ARC program to better protect those growers if their crop prices drop and stay below breakeven. Crop insurance is clearly the program to watch in the farm sector. Insurance will be largely protected during the new farm bill round.

— Trump. There is no in-between for Trump. He will either be very successful or the opposite. Of concern is his habit of overreacting if something doesn’t go his way. One key issue will be China. In the fall of 2017, China will have a very important Party Congress, and their President, Xi Jinping, will not want to be seen as weak, should there be a confrontation with the Trump administration. If there is a US-China summit ahead, that will, at least initially, be a positive development. When people and nations talk, there can be some solutions. So watch for a summit ahead.

Bottom line: There will be short-term pain amid uncertainty, but long-term potential gains if Trump and his team can change Washington to instill better fiscal policy as we move away from a Federal Reserve-dominated monetary policy. I would bet on growth ahead. It will take a non-politician to get this country growing behind anemic 1.5% to 2% growth rates toward 3% and rising. That, in turn, will help boost investments and demand as incomes rise not only here, but around the world. That will mean a return to demand-pull markets in agriculture, which are the best.

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Comments

 
Spell Check

Ray T. Bohacz
Hackettstown, NJ
2/14/2017 05:26 PM
 

  I too am very excited about our new president and the reform he will bring. He has the right ideas for ALL of America and respects and honors farmers and rural communities. It takes a very rare and special man to have grown up wealthy in NYC and connect with us, the forgotten people. Please do not forget that he still does not have his cabinet in place due to the obstructionist Democrats and RINOs. Once Trump has his team in place,the engine draining the swamp and putting America first will pull like a diesel coming on the turbo. I pray each day that our Lord will give President Trump the wisdom of Solomon; the heart of Neamiah, and the courage of Joshua. As a patriot, conservative and a farmer, I am proud to call Donald Trump my president! AMERICA IS BACK!!!

 
 
Robie Houser
Vale, NC
2/14/2017 05:01 PM
 

  After many years of seeing the expenses increase for raising of beef, it has hardly been worth the effort for us small farmers. I am ready for someone who will fix the problem or bust the system as the one we have now is not working for the forgotten man. We may suffer slightly but should benefit greatly in less than a year. Why is everyone so afraid as I am very excited!

 
 
C.K
bad axe, MI
2/14/2017 06:27 PM
 

  Will if the American farmer is optimistic about these trade deals Trump may or may not produce. Look at this, Russian business man bought 600,000 acres for $306.00 per acre of black bottom ground that was producing sugarbeets and potatos in Russia . The American farmer is paying $12,000.00 per acre and he going to compete with a better trade agreement. The only way the American farmer is going to compete is another bank loan to add to the 68 trillion in U.S. debt already.

 
 

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