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The Farm Belt is about to feel some more cinching.
The intensifying of trade hostilities between the United States and China spells more bad news for farmers. And though industry advocates say many farmers have been driven out of the business or are teetering on the edge of financial ruin already, they hold out little hope President Trump will temper his approach to the trade war to spare them further damage.
“I don’t think there’s anybody in our community or in Congress who can change the president’s mind on this stuff,” National Farmers Union President Roger Johnson tells me. “Probably nobody in the administration, either. If people haven’t figured out the president is going to do what he wants, they aren’t paying attention.”
The industry has borne a disproportionate share of the pain from the year-old conflict — part of a deliberate effort by Beijing to target Trump’s base. More is on the way: Chinese officials announced Monday they would impose new tariffs on $60 billion of American goods, including higher penalties on farm products, after the Trump administration on Friday more than doubled the duties on $200 billion of Chinese imports. And Trump is moving to go still further, launching an effort Monday effectively to tax all remaining Chinese imports, about $300 billion worth of products.
Trump said Monday he would take $15 billion in revenue collected from tariffs on Chinese goods — taxes paid mostly by American businesses and consumers — and disburse it to farmers to ease the disruption of any Chinese retaliation.
“Out of the billions of dollars that we’re taking in, a small portion of that will be going to our farmers, because China will be retaliating, probably to a certain extent, against our farmers,” Trump told reporters Monday. “We’re going to take the highest year, the biggest purchase that China has ever made with our farmers, which is about 15 billion dollars, and do something reciprocal to our farmers, so our farmers can do well.”
Farm advocates say bailouts don’t solve a fundamental, long-term problem Trump created for farmers with the trade war, effectively locking the door to one of the world’s most important markets for their goods. “The markets [for American agricultural exports] have literally been destroyed in this process,” Johnson says.
China buys two-thirds of international soybean exports, for example, but American growers have seen demand there dry up. “The extension of the trade dispute, from a soybean perspective is more about undercutting a sense of optimism” that the two countries would soon end their standoff, restoring the old status quo for farmers, says Kirk Leeds, CEO of the Iowa Soybean Association. “From the conversations we have with farmers, we’re now seeing a sense that this may not get resolved.”
Soybean futures dropped to their lowest level in a decade before recovering some ground Monday, and other farm commodities saw prices continue to drop.
Nevertheless, there is little sign that Trump will face political pressure from farm country to alter his approach. For now, “it certainly appears farmers are continuing to support this president,” Leeds says. He said that could change, if farm bankruptcies — which climbed by nearly a third in six Midwest states last year — continue to pile up.
In the meantime, key congressional Republicans from agriculture-heavy states are standing behind the president. Sen. Charles E. Grassley (R-Iowa) continues to object to raising tariffs but also endorses Trump’s get-tough approach to China. “We have to applaud Trump being the first president to call out China on bad behavior and bring them to the negotiating tables so that we have freer trade,” he told reporters last week, per the Wall Street Journal. On Monday, he took to Twitter to again bash tariffs while blaming China for the ongoing showdown:
Raising tariffs will hurt both US & China economies more importantly will hurt US farmers/consumers/businesses Enough is enough China needs to negotiate seriously & quit moving the goalpost Enforceable trade deal needed for certainty— ChuckGrassley (@ChuckGrassley) May 13, 2019
Grassley’s junior colleague, Sen. Joni Ernst (R-Iowa), recently said she’s no fan of tariffs, either, but hopes “it’s just the president’s way of negotiating . . . we’ve seen him do this in the past, and it brings people to the table.”
Sen. Tom Cotton (R-Ark.), in an appearance on CBS “This Morning,” said the sacrifices Americans will endure as the trade war escalates pale in comparison to those of troops in combat:
"There will be some sacrifice on the part of Americans, I grant you that. But also that sacrifice is pretty minimal compared to the sacrifices that our soldiers make overseas that are fallen heroes or laid to rest," @SenTomCotton on trade war with China pic.twitter.com/lqlEZtaeBs— CBS This Morning (@CBSThisMorning) May 13, 2019
Sen. Pat Roberts (R-Kan.) called for a quick resolution of the fight, in part to spare farmers greater losses:
But GOP lawmakers are making no attempt to limit Trump’s power to level new tariffs on China. Sen. Rob Portman (R-Ohio), for example, has introduced a bill that would allow Congress to vote down steel and aluminum tariffs Trump imposed widely last year. But he believes the president should have a freer hand to implement duties while he negotiates with Beijing, Portman spokesman Kevin Smith says.
And there is little sign political blowback from farmers over the first rounds of tariffs cost Trump or his party in the midterms. Three Senate Democratic incumbents — Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota, and Claire McCaskill of Missouri — all lost seats in farm country, despite trying to tie their challengers to the local fallout from Trump’s trade offensive.
“Agriculture has become an export-driven market. If we see more disruptions with China, it could take a decade, or a generation, to work through,” Leeds says. “Farmers I work for believe [Trump is] going to be right. But what if he’s wrong?”
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— Stocks continue to suffer. The creeping realization among investors that the U.S.-China trade war likely won't end any time soon prompted another stock market rout Monday. The NYT's Matt Phillips: "The S&P 500 fell 2.4 percent on Monday. It was the American stock benchmark’s worst day since early January. In all, the S&P 500 is down 4.6 percent in May. Companies in trade-sensitive sectors like agriculture and semiconductor manufacturing were particularly hard hit. The tech-heavy Nasdaq composite index fell 3.4 percent, its worst decline in 2019...
"The declines in the financial markets raise the prospect of a negative feedback loop: As worries about the economy send stock prices lower, the weakness could prompt concern among the executives whose decisions drive economic growth."
U.S. futures pointed to a brighter open today as European stocks climbed.
— Stocks of generic drug companies fall after lawsuit. Shares of some of the nation’s largest drug makers fell on Monday after 44 states joined together in a lawsuit against 20 manufacturers, alleging the companies conspired to inflate prices and reduce competition, MarketWatch’s Sarah Toy reports: “Shares of Teva were down 16% on Monday, while Mylan stock fell 10%. Shares of Novartis declined 1.7% and Pfizer shares inched down 0.5%.”
“The complaint, filed Friday, is the second in an ongoing investigation of the generic drug industry. The first complaint, filed in 2016 and involving 18 defendants and 15 generic drugs, is still pending in the U.S. District Court in the Eastern District of Pennsylvania.”
– Fed's Williams: Brace for slower growth. Bloomberg's Matthew Boesler: "Monetary policy makers around the world should review their strategies to prepare for a future of slow economic growth and low interest rates, Federal Reserve Bank of New York President John Williams said. 'Central banks should revisit and reassess their policy frameworks, strategies, and toolkits, to maximize efficacy' in a world where low investment and high savings put a lid on interest rates, Williams said Tuesday in remarks prepared for a panel discussion in Zurich."
— U.S. prepares for more China tariffs: After the United States and China exchanged dueling blows in their ongoing trade war on Monday, Trump moved to begin the process that could jolt the global economy by going after the remaining $325 billion in Chinese imports that are not currently not taxed. “Trump, meanwhile, began the process of expanding U.S. tariffs to cover all $540 billion in Chinese imports — a potentially seismic jolt to the global economy that is expected to raise prices for everyday products such as cellphones, sunglasses, cameras and televisions,” my colleagues David J. Lynch, Taylor Telford, Damian Paletta and Gerry Shih write of the White House’s response after Beijing moved to impose tariffs on $60 billion worth of American products.
- Trump set to meet with Xi. “With hopes fading for an early resolution of the year-long U.S.-China trade dispute, the president said he would meet Chinese President Xi Jinping at the G-20 leaders summit in Osaka, Japan, on June 28-29. Treasury Secretary Steven Mnuchin told CNBC that the two sides remained in “ongoing” negotiations,” my colleagues write.
- The targets of China’s counterpunch: “Everything from tequila to TV cameras,” CNBC’s Amanda Macias writes of the list of more than 5,000 U.S. products that China’s Finance Ministry said will face up to 25 percents after June 1. The sweeping list touches a broad swath of the U.S. export market, including food products, building materials, consumer goods, transportation, electronics and natural resources and chemicals.
- What it means for American workers: “Roughly 11 million U.S. workers who are employed in industries that produce targeted goods,” Axios reports of the impact of Trump’s decision to hike tariffs on Friday. Their estimate does not include China's newly proposed retaliatory tariffs.
- Looking to get personal? Boeing is already struggling amid the 737 Max debacle, but a tweet from an editor in chief of a state-run newspaper left investors wondering whether the aerospace giant will become a target if the trade war escalates.
- But that’s not all: U.S. companies are facing retaliatory tariffs from Canada, Mexico and the European Union. This helpful guide from Reuters breaks down where current tariffs stand on both sides.
- Trump’s not worried: Pressed by reporters amid the massive market sell-off, the president said he is confident in the United States' position: “We are in a great position right now, no matter what we do,” Trump told reporters of a potential trade deal with China and what will happen if talks fail.
— Supreme Court rules against Apple. “Apple suffered a significant defeat at the Supreme Court on Monday, when the justices ruled that consumers could forge ahead with a lawsuit against the tech giant over the way it manages its App Store,” my colleagues Tony Romm and Robert Barnes report.
“The ruling could have serious repercussions for one of Apple’s most lucrative lines of business, while opening the door for similar legal action targeting other tech giants in Silicon Valley. But the court’s opinion — led by conservative Justice Brett M. Kavanaugh, who joined its liberal justices in the majority — did not rule on the merits of the lawsuit itself.”
— The bitcoin bubble? “Bitcoin jumped to almost $8,000 and didn’t look back, as its longest winning streak since 2013 continued to rekindle the global cryptocurrency market,” Bloomberg’s Joanna Ossinger and Eddie van der Walt report. “With fundamental analysts often struggling to explain crypto markets, traders have recently pointed to institutions increasingly embracing digital coins. The likes of Fidelity Investments plans to buy and sell Bitcoin for institutional customers soon, and E*Trade is dipping into the trading space.”
“While Bitcoin has more than doubled from its post-crash low, the crypto space is by no means free of headaches.”
— Democratic senators push to ban stock trading. Democratic Sens. Jeff Merkley (Ore.) and Sherrod Brown (Ohio) want to go beyond the 2012 STOCK act by banning stock trades by members of Congress altogether, Roll Call’s Niels Lesniewski reports: “According to the draft text of the legislation, members and members-elect that do not put individual stocks into blind trusts would have to divest them within six months of enactment or hold them for the duration of their congressional service. Lawmakers would still be allowed to buy and sell broadly-diversified mutual funds, such as index funds.”
“The Merkley-Brown measure also would block members from serving on boards of public companies. Rep. Chris Collins, R-N.Y., is under indictment on charges connected to trades in the stock of Innate Immunotherapeutics, on whose board Collins served.”
— Bernanke, Yellen warn against weakening post-crisis reforms. NYT's Alan Rappeport: "Two former Treasury secretaries joined two former Federal Reserve leaders on Monday to warn that the Trump administration’s efforts to relax oversight of certain financial firms could seriously threaten the stability of America’s financial system. The stark warning came two months after a federal oversight panel said it planned to stop designating large, non-bank financial institutions like insurers and asset managers as 'systemically important' and placing them under stricter federal oversight...
"On Monday, the former Treasury secretaries, Jacob J. Lew and Timothy F. Geithner, and the two former Federal leaders, Ben S. Bernanke and Janet L. Yellen, urged their successors, Steven Mnuchin, the Treasury secretary, and Jerome H. Powell, the Fed chairman, to rethink the plan."
Goldman Sachs charts the impact of tariffs on consumer prices, via Bloomberg's Shawn Donnan:
Goldman Sachs has a simple retort to all those who say Trump’s tariffs aren’t causing consumer prices to go up... pic.twitter.com/PIVmLoUzSx— Shawn Donnan (@sdonnan) May 13, 2019
- The Center for American Progress holds an event on antitrust and health care providers.
- The Senate Judiciary Committee holds a hearing on 5G.
- The Senate Finance Committee holds a hearing on “challenges in the retirement system.”
- The Senate Commerce, Science and Transportation Committee Subcommittee on Aviation and Space holds a hearing on the emerging space environment.
- Tilray and Ralph Lauren are among the key companies reporting earnings, per Kiplinger.
- Treasury Secretary Steve Mnuchin appears before the Senate Appropriations Subcommittee on Financial Services and General Government on Wednesday.
- The Commerce Department releases the round of retail sales data on Wednesday.
- Alibaba, Cisco and Macy’s are among the key companies reporting earnings on Wednesday, per Kiplinger.
- The Senate Banking, Housing and Urban Affairs Committee holds a hearing focused on oversight of financial regulators on Wednesday.
- The House Science, Space and Technology Subcommittee on Energy holds a hearing on the next generation of solar and wind technology on Wednesday.
- The House Transportation and Infrastructure Committee Subcommittee on Aviation holds a hearing on the 737 Max on Wednesday.
- The House Ways and Means Committee holds a hearing on the economic and health consequences of climate change on Wednesday.
- The House Oversight and Reform Committee holds a hearing on the Defense Department Inspector General’s report “on excess profits by TransDigm Group, Inc.” on Wednesday.
- Walmart reports its earnings on Thursday, per Kiplinger.
- The House Judiciary Committee Subcommittee on Antitrust, Commerical and Administrative Law holds a hearing on forced arbitration on Thursday.
- The Oversight and Reform Committee Subcommittee on Economic and Consumer Policy holds a hearing on the Consumer Financial Protection Bureau’s “role in empowering predatory lenders” on Thursday.
- The Oversight and Reform Committee holds a hearing on a HIV prevention drug and “corporate Profits after Millions in Taxpayer Investments” on Thursday.
- The Brookings Institute and the Washington Center for Equitable Growth host a joint event on preparing for the next recession on Thursday.
- The National Economists Club holds an event with Intel’s chief economist on Thursday.
- The Ways and Means Committee’s subpoenas for Treasury Secretary Steve Mnuchin and IRS Commissioner Charles Rettig to produce Trump’s tax returns and audit reports require a response by Friday.
- The University of Michigan releases its latest survey of consumer sentiment on Friday.
- The Wilson Center holds an event on building infrastructure in the Arctic on Friday.
How to win a trade war:
Trump on Hugarian Prime Minister Victor Orban: