Tariff's hiked, more to come
09/03/19 — We start the month of September with more tariffs on both sides, with China hiking tariffs $5 billion in response to the U.S. imposition of 10% tariffs on $300 billion, only to have the U.S. hike it 5% more on all existing tariffs (another $27 billion). Stock markets around the world came under pressure, and the U.S. and China now can’t even agree on when to have the next trade talks. Neither side seems too anxious to get talks underway again.
Weather forecasts seem to be pushing warmer by the National Weather Service (normal temps in the 6-10 day forecast, and above normal for 8-14 days) due to the hurricane Dorian that is pushing warmer air into the central and eastern U.S. However, many of the private forecasts are still calling for cool weather into mid September, including below normal temps the next 7 days in the central and eastern Corn Belt and below normal in the 8-14 day forecast (including a cooler forecast this morning). So we’ll see who is right. Northern Corn Belt producers have seen temps barely hit 70 degrees for much of late August, and temps forecast to barely break 60 for the first few weeks of Sept. But still no sign of freezing temps — it’s just that very few GDD accumulate when you have trouble breaking 60 or even 70 degrees F.
Given that scenario, any combination of cold weather now (which slows crop development, an early frost, or even an average frost with continued cool weather will provide crop loss to this crop. We have a crop that started out horrible (late, wet) and then weather seemed to improve quite a bit. But crops must reach maturity to reach their full potential and that seems unlikely to happen.
President Donald Trump tweeted late Sunday: “Making great progress for our Farmers. Approved E-15, year round. Big additional list to be submitted & approved within two weeks. Will be even better for Ethanol, and we save our small refineries!” The market reacted by going down overnight — a typical reaction in the U.S. to political announcements. Maybe that’s the good news! Thank God private, capitalist markets give almost no power to government officials in the capitalist U.S. In contrast, communist China has all the power in one man — President Xi Jinping. With government power comes government influence, coercion, and eventually domination. That is one reason we never want to be captive to the communist Chinese and the trinkets they sell — it could cost us our freedom.
Tariffs were added on $111 billion of Chinese products Sept. 1 at 15%, with more to follow. Chinese tariffs also were added, with part of the Chinese tariffs on U.S. soybeans — a joke because they already ordered no purchases of U.S. soybeans months ago. A 10% tariff on zero is still zero! The Chinese are going to lose this trade war, with their current remedy of devaluing their currency their only play left. I’m starting to believe the harder we are on China (higher tariffs, less business with them) the faster our trade dispute will be resolved. As the faster we clamp down on them, the faster they will come to the table (even though the Chinese publicly say the opposite in their misinformation campaign). The Chinese are masters at manipulating/distorting the truth during negotiations! While they have been masterful so far in manipulating democratic governments, that script is becoming old.
It’s time to push the Chinese into an agreement. While the Chinese so far are resisting the urge to put their hat in their hand and come back to the negotiating table, everyone knows it is in their best interests to do so. When China sells $3 of goods to us for every $1 of goods we sell to them, it’s plain to see who should be courting whom. Even the simplest minded businessmen can understand the seller needs to court the buyer — not the other way around. If China wants to sell to the U.S., they have to comply with U.S. demands — it’s that simple. But until it does, the market world will indeed be an interesting place.