maybe intending it as a compliment—craftily packaged together a number of small concessions and previously agreed upon initiatives which allowed Trump and his allies to hail the agreement as an American win. “This is a real vindication of the President’s trade policy,” Wilbur Ross, the Secretary of Commerce, told reporters as he travelled to the Midwest with Trump on Thursday.
In reality, the Europeans gave up little except their prior refusal to negotiate under threat.
.. Juncker’s pledge that the E.U. would import more U.S.-grown soybeans, for instance, formalized something that was likely to happen anyway. After Trump imposed hefty tariffs on Chinese steel and aluminum products, earlier this year, China responded by imposing equally hefty levies on U.S. agricultural exports, including soybeans. That made American soybeans prohibitively expensive for Chinese buyers
.. Brazil, traditionally the E.U.’s largest supplier, is now shipping more of its produce to China, encouraging the Europeans to shop elsewhere. “While China concentrates its purchases on Brazil, the rest of the world turns to the U.S.,
.. Looking years ahead, Norway’s reserves have plateaued, and the Europeans will eventually need alternative suppliers. U.S. producers could well be among them. But, again, such a result may well have occurred without Wednesday’s agreement.
.. hopefully nobody tells Trump that these concessions were largely illusory.
.. Both sides provide subsidies or tax breaks to politically powerful groups, such as farmers, and to industries they deem strategically important, such as commercial-aircraft manufacturers in the E.U. and military contractors in the U.S. These policies proved sticking points when the Obama Administration and the E.U. engaged in unsuccessful negotiations about a transatlantic free-trade treaty, and they will almost certainly prove to be sticking points again.
.. One way to think of the outcome of Wednesday’s meeting is that Trump is happy to declare a victory whenever he can get away with it. However, a more optimistic reading of this week’s developments is that Trump has finally realized that he needs the E.U.’s support in his campaign against China’s much more overtly mercantilist trade practices, and that, in this area at least, the United States and Europe have common interests.
.. E.U. officials wanted to persuade the Trump Administration to pursue grievances against China through the World Trade Organization (W.T.O.), the global ruling body for trade disputes, rather than by dishing out tariffs unilaterally. The article also noted that Robert Lighthizer, the U.S. Trade Representative, a key player in the Trump orbit, is not necessarily averse to this idea.
.. “Comfortingly, there is mounting evidence that Mr Lighthizer is not out to torpedo the WTO,”
.. If Lighthizer could persuade Trump to go down this route, and his negotiating team could construct a common front with the E.U., there is a possibility that, sometime in the future, China might be persuaded to make some real concessions in areas like opening its markets and respecting intellectual-property rights. If that did occur, the Trump Administration could claim a genuine victory.
China’s Taste for Soybeans Is a Weak Spot in the Trade War With Trump
Beijing’s retaliatory tariffs make American soy pricier. But the country’s huge demand for oil and animal feed makes it tough to stop importing overnight.
.. XIAOWUSILI, China — For all its economic might, China hasn’t been able to solve a crucial problem.Soybeans. It just can’t grow enough of them.
That could blunt the impact of one of the biggest weapons the country wields in a trade fight with the United States.
.. Last year, soy growers in the United States sold nearly one-third of their harvest to China. In dollar terms, only airplanes are a more significant American export to China
.. Over all, she is not producing much more today than she was a decade ago. Her fields are small and not irrigated. The new, supposedly higher-yielding seeds promoted by the government are not much better than the older varieties, she says.
.. Farm goods could be a big weakness for China should the trade conflict with the United States turn into an all-out brawl.
.. China’s increasingly wealthy people want more and better food on their plates. But the country’s farms are generally too small and underdeveloped to keep up.
..Nearly 90 percent of the soybeans China consumed last year came from overseas — more than 100 million tons in total. (Mexico, the world’s No. 2 importer, bought just five million tons.)
.. To increase the availability of other types of animal feed, China’s customs authority removed inspection requirements on a variety of agricultural byproducts, including peanut meal, cottonseed meal and rapeseed meal
.. the provincial government offered generous subsidies to farmers both for growing soybeans and for switching their fields to soy from corn.
.. his farm cooperative requires that members rotate their crops to keep the soil healthy.
.. China would need to dedicate a huge fraction of the entire nation’s farmland — between a quarter and a third, by various estimates — to soy if it wanted to be self-sufficient.
.. Many people from Heilongjiang are already growing soybeans across the Amur River in the Russian Far East, where land is cheap and plentiful... farmers in Heilongjiang acknowledge they are a long way from being as productive as farmers in the United States, where agriculture is more mechanized and genetic modification is embraced.
.. Modern farming is expensive, however. And in Mr. Hou’s case, it involves a secret weapon: American technology.
.. a yard full of bright-green John Deere farm machines, which Mr. Hou buys with the help of government subsidies. Chinese machinery is cheaper but more prone to breakdowns, he says.
Even some of the fertilizer Mr. Hou uses comes from the United States.
.. “We rely first on the heavens,” the saying went. “We rely second on American diammonium phosphate.”
Thinking About a Trade War (Very Wonkish)
With Gary Cohn gone, it’s not clear that big business has any real pipeline into the White House (OK, polluters have an open line to Scott Pruitt, and predatory lenders a line to Mick Mulvaney, but these aren’t the groups who will stand up against trade war.)
.. Congressional Republicans, terrified of the Trump base, have proved unwilling to take a stand on anything, even if big money is at stake.
.. trade decisions are being made at Trump’s whim, without input from anyone who knows anything about trade economics (Peter Navarro thinks he understands the economics, which is even worse.)
.. Trump’s version of diplomacy – not just trade actions, but the systematic praise of brutal dictators and disdain for democratic leaders – has created a very angry world out there. Nobody out there wants to give Trump even the appearance of a win, and elected leaders would be punished by their voters if they did... I think, three main questions:1. How high might tariffs go?
2. How much would this reduce world trade?
3. How costly would the trade war be?
.. an all-out trade war could mean tariffs in the 30-60 percent range; that this would lead to a very large reduction in trade, maybe 70 percent; but that the overall cost to the world economy would be smaller than I think many people imagine, maybe a 2-3% reduction in world GDP... some people would actually gain, but a lot of people, very much including large groups and many communities in the U.S., would take big hits, especially in the short-to-medium run... world’s economies, taking their lead from the U.S., abandon the rules and agreements that currently constrain their tariffs and start setting tariffs unilaterally in their perceived self-interest.
.. The problem is that if everyone does this, you get the costs of reduced trade without the benefit of improved terms of trade, because other countries are doing unto you the same thing you’re trying to do unto them... “optimal tariff warfare”, which is actually more like an arms race than a shooting war, in the sense that there’s (usually) no victor and no resolution, just a lot of wasted resources... Then you have to find an equilibrium (a Nash equilibrium, for readers of “A Beautiful Mind”) in which each country is charging its optimal tariff given what everyone else is doing... If foreigners can easily substitute away from your goods, the optimal tariff is fairly low; if they can’t, it’s high... if that’s right, we’re talking about a really big rollback of world trade... a 70 percent reduction would bring us roughly back to 1950s levels. If Trump is really taking us into a trade war, the global economy is going to get a lot less global... they do say that trade wars are bad, don’t say that they’re catastrophic... the U.S. currently spends 15 percent of GDP on imports... at the bottom of the Great Recession, CBO estimates that we were operating 6 percent below potential GDP. Of course that loss was temporary, while a trade war might be forever... The U.S. currently exports about 12 percent of GDP... if we have the kind of trade war I’ve been envisaging, something like 70 percent of that part of the economy – say, 9 or 10 million workers – will have to start doing something else... the rapid growth of Chinese exports didn’t cost the U.S. jobs on net, it changed the composition and location of employment, producing a lot of losers along the way. And the “Trump shock” that would come from a trade war would be an order of magnitude bigger... the effects don’t seem trivial to soybean farmers already facing sharp price cuts and steel users already facing much higher costs.
Just the Fear of a Trade War Is Straining the Global Economy
The Trump administration portrays its confrontational stance as a means of forcing multinational companies to bring factory production back to American shores. Mr. Trump has described trade wars as “easy to win” while vowing to rebalance the United States’ trade deficits with major economies like China and Germany.
Mr. Trump’s offensive may yet prove to be a negotiating tactic that threatens economic pain to force deals, rather than a move to a full-blown trade war. Americans appear to be better insulated than most from the consequences of trade hostilities. As a large economy in relatively strong shape, the United States can find domestic buyers for its goods and services when export opportunities shrink.
.. Before most trade measures fully take effect, businesses are already grappling with the consequences — threats to their supplies, uncertainty over the terms of trade and gnawing fear about what comes next.
.. Christine Lagarde, warned this past week about trade conflicts. “It would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe and Germany.”.. The Trump administration’s decision to reinstate sanctions on Iran has lifted oil prices, adding pressure to importers worldwide... Europe’s economy is weakening, with Germany — the continent’s largest economy — especially vulnerable... Across Europe, steel makers fret about an indirect consequence of Mr. Trump’s tariffs — cheap Chinese steel previously destined for the United States, now redirected to their continent... Mr. Trump portrays trade hostilities as a necessary corrective to the United States’ trade deficits with other nations. But economists and business leaders note that many imports are components that are used to manufacture goods at American factories... Electrolux, the Swedish manufacturer of household appliances, recently postponed plans to upgrade a stove factory in Tennessee, citing uncertainties created by the tariffs... Under Nafta, Mexico has grown into the world’s largest importer of American apples. But sales are down because the price has gone up by nearly one-fifth in the past week alone... Chinese pork producers have turned their sights to Brazil and Argentina, the only countries that now produce enough soybeans to offer a potential alternative to the American supply.