China

N. Dakota “orphan soybeans” at 236 million bushels

That’s from WaPo. In 2017, the US exported 1.2 billion bushels to China: North Dakota’s orphan soybeans today are nearly 1/5 of total sales to China in 2017… “Lots of guys will be scrambling,” said Joe Ericson, a grower who operates a 5,000-acre farm near Wimbledon. “It’s going to be a struggle. This year might not be as bad because a lot of guys have forward-contracted a lot of this year’s crop already. But if it goes into next year, it could be tough for soybean.” Peterson has about 25 percent of his crop under contract with a buyer and will store the rest. Many farmers in the region have begun dusting off old bins for storage. Others are hoping to build new storage facilities for the overflow, but steel and aluminum tariffs have driven up construction costs. “We’re getting hit by both s...

You Ain’t Seen Nothing Yet

Taxes announced, proposed, on Chinese imported goods. Or, shoot yourself in the foot edition. Source: Hatzius, et al. “The Trade War: Bigger Numbers, Same Conclusion,” GS 5 Oct 2018. With Vice President Pence’s speech, I’m confident that the Trump administration will push forward in implementing fully the programs of imposing tariffs on China sourced imported goods (while still failing to sanction ZTE, …FFS). What are the likely macro impacts. On output, minor, unless stock markets take a dive. On the other hand, consumers will almost certainly face price increases, either relative or general. Source: Hatzius, et al. “The Trade War: Bigger Numbers, Same Conclusion,” GS 5 Oct 2018. On a separate matter, I am compelled to note several inaccuracies and omissions (!) in Mr. Pence’s panegyric: ...

Establishment Republican Laboring Under Delusion That His Opinions Still Matter

Happier times. Shealah Craighead [Public domain], via Wikimedia Commons There’s a certain kind of person who still believes that the Grand Old Republican Party still exists somewhere underneath the overt xenophobia, breathtaking incompetence and shocking disregard for Wall Street currently encrusting the institution. That there’s still a Republican establishment, and that this establishment still has some kind of influence. This kind of person probably still fancies themselves an Establishment Republican, even though President Trump’s reign of terror has demonstrated that there’s no such thing anymore. These sorts of men labor under all sorts of delusions, chiefly that once this whole “Trumpism” thing crashes and burns they’ll be able to wipe the party off and go on their merry way, misgov...

JP Morgan Chase: “U.S.-China endgame involving 25 percent U.S. tariffs on all Chinese goods in 2019”

That’s according to Bloomberg. With little prospect of a restart for U.S.-China trade talks, JPMorgan Chase & Co. now expects an escalation in tensions that will see higher American tariffs on all Chinese imports, sending the yuan sliding to its weakest against the dollar in more than a decade. “JPMorgan has adopted a new baseline that assumes a U.S.-China endgame involving 25 percent U.S. tariffs on all Chinese goods in 2019,” JPMorgan strategists including John Normand wrote in a note…. “Looser Chinese monetary policy ensures that the U.S. dollar will become an ever-higher yielder versus the renminbi for the rest of the cycle.”… Here is a graphical depiction of the implied path of exchange rates: Figure 1: Trade weighted nominal value of Chinese yuan, 2010=1 (blue, left log scale), b...

Learning from History and Modeling: Chinese Trade Retaliation Choices

An interesting symposium in the 2nd Quarter 2018 issue of Choices, published by the Agricultural and Applied Economics Association, deals with the impact of Chinese trade retaliation aimed against US agricultural exports. Some reading to contemplate this graph by: Source: Slok, “Global markets: US overheating and Treasury supply pushing US rates up. Trade wars and Turkey pulling US rates down,” Deutsche Bank, September, 2018. What Have We Learned from China’s Past Trade Retaliation Strategies? (pp. 1-8)Minghao Li, Wendong Zhang and Chad Hart Theme Overview: U.S.–China Trade Dispute and Potential Impacts on Agriculture (pp. 1-3)Mary A. Marchant and H. Holly Wang Predicting Potential Impacts of China’s Retaliatory Tariffs on the U.S. Farm Sector (pp. 1-6)Yuqing Zheng, Dallas Wood, H. Holly W...

Guest Contribution: “Trump Renews Charges of Chinese Currency Manipulation”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared in Project Syndicate. The US Treasury is due in October to submit its biannual report to Congress on what countries, if any, are manipulating their currencies to gain unfair trade advantage. President Trump has recently resumed the accusations he made during the election campaign that China was manipulating its currency. “I think China’s manipulating their currency, absolutely. And I think the euro is being manipulated also,” he told Reuters. He is apparently pressuring the Treasury directly in its deliberations. What has changed since April? What has changed since the last Tr...

From the Front Lines of the (Soybean) Wars

Reuters has an interesting article, entitled “Inside China’s strategy in the soybean trade war”. Mu Yan Kui … ticked off a six-part strategy to slash Chinese consumption and tap alternate supplies with little financial pain. Source: barchart.com. …“Many foreign business people and politicians have underestimated the determination of Chinese people to support the government in a trade war,” said Mu, vice chairman of Yihai Kerry, owned by Singapore-based Wilmar International (WLIL.SI). The comments echo a growing confidence within China’s soybean industry and government that the world’s largest pork-producing nation can wean itself off U.S. soy exports – a prospect that would decimate U.S. farmers, upend a 36-year-old trading relationship worth $12.7 billion last year, and radically remap gl...

Donald Trump’s Failed Art Of Persuasion

The era of Trumpian protectionism has officially begun. On Monday, the president announced a quintupling of the total value of Chinese imports to be taxed, from $50 billion in goods to $250 billion, effective September 24th. And now that the Chinese have struck back with additional trade barriers, it’s likely that President Trump will respond with another round of duties that will result in a 10% to 25% tax on every dollar of the roughly half a trillion in goods Americans import from China each year. There is little reason to expect that these new duties are going anywhere, in part because the demands the Administration has given its Chinese counterparts are impossible to meet in the short run. The White House is reportedly holding out for a promise from China to unilaterally reduce the bi...

(Still) Waiting for Recovery in US Soybean Prices (Levels, Relative)

November soybean futures keep on going down. And the US-Brazil spread has proven durable. Source: barchart.com. For those who argued Chinese tariffs would be immaterial to prices because of arbitrage/relabeling (see this post, and associated comments), the following graph is, I think, dispositive, as the gap in US and Brazilian soybean prices has proven very durable (more so than I had expected). One could argue weather/harvesting yield news could (should) affect the level of soybean prices, but should not affect the tariff-induced spread. Lo and behold: Source: Javier Blas. I ask: Are US soybean farmers tired of “winning” yet.

New Tariffs on Chinese Imports

USTR announcement: As part of the United States’ continuing response to China’s theft of American intellectual property and forced transfer of American technology, the Office of the United States Trade Representative (USTR) today released a list of approximately $200 billion worth of Chinese imports that will be subject to additional tariffs. In accordance with the direction of President Trump, the additional tariffs will be effective starting September 24, 2018, and initially will be in the amount of 10 percent. Starting January 1, 2019, the level of the additional tariffs will increase to 25 percent. The list contains 5,745 full or partial lines of the original 6,031 tariff lines that were on a proposed list of Chinese imports announced on July 10, 2018. … Implied US tariff overall tarif...

Wanna Guess How We Know That The Trade War With China Is On?

Every grifter has a tell, and the minor league con man sitting in the Oval Office has one of the simplest tells of all: Homeboy will do anything to protect the Dow Jones Industrial Average. President Donald Trump said he’ll make an announcement on China trade after U.S. financial markets close Monday. But knowing that with such confidence is a double-edged sword, because if we factor in that he also doesn’t know how tariffs work, we now know that this trade war with China is on like Donkey Kong… “Right after close of business, we’ll be announcing something,” Trump told reporters at the White House. “And it will be a lot of money coming into the coffers of the United States of America. A lot of money coming in.” You tried, Larry Kudlow, we know you tried. Trump Says China Trade Announcement...

“The United States is going to become the warehouse for global soybean supplies”

That’s a quote from Paul Burke, regional director for North Asia at the U.S. Soybean Export Council, in Time. He continues “This is the realization that we’re coming to within the trade within the last couple of weeks.” The Chinese plan is — in addition to relying on Brazil and Argentina — to switch to other sources, like palm mill, rapeseed, sunflower seed, and other countries, such as Russia, Ukraine and Kazakhstan, for soybeans. Obviously, the development of other countries’ ability to grow soybeans will take time. But that was also true for Brazil. There is some discussion that China might not need to rely on US soybeans even in the short term. From SCMP (August 2): Ma Wenfeng, an analyst from Beijing Orient Agribusiness Consultant, said China had been importing far more soybeans than ...

  • 1
  • 2
  • 5