Monday, July 09, 2018
The Damage Is Already Starting From Trump's Trade War
In spite of opposition from both parties on Capitol Hill, Donald Trump has started his trade war with China, Canada, Mexico, and the European Union. He thinks he can bully these entities into doing what he wants -- give the United States an undeserved advantage in trade.
But he's wrong, and the economic hurt is already happening. The first to be hurt are the American soybean farmers. They sold a significant portion of their crop to China, but the Chinese are now looking to other countries to replace what they bought from the United States.
The chart above (from Bloomberg News) shows what is happening to the soybean market in the United States. The price of a bushel of soybeans has dropped from about $2.20 to slightly over $0.60. That's devastating for soybean farmers. Meanwhile, the price of soybeans in Brazil (who China is now looking to for the soybeans they need) has done just the opposite -- gone from about $0.60 a bushel to $2.21 a bushel.
Pork producers may well be the next to take a huge hit. Both China and Mexico bought large amounts of U.S. pork -- and both are looking to South America to buy in the future. And this is just the beginning. As the trade war cranks up, many other agricultural producers and industries are going to feel the pain. Harley Davidson motorcycles has already announced they are opening a plant overseas to avoid the European Union's tariffs on motorcycles.
And its not just the producers that are going to feel the pain. American consumers will as prices rise for the goods they want. Trump started the trade war with tariffs on foreign steel and aluminum, and that has already caused the price of those items to rise in the U.S. -- and any companies using steel or aluminum will have to raise the price of their goods to cover that new higher cost.
This trade war is a very dumb idea, and it will hurt the U.S. economy. But then, Trump has already shown he's not a very bright person -- and doesn't really care about ordinary Americans.