While Republican lawmakers are demanding retribution on China, economists warn that the U.S. economy can’t afford to boycott Beijing. American farmers are hoping that the phase one trade deal, already weakened by the pandemic’s global economic onslaught, can survive the war of words.
“At this point, it hasn't done near what we were hoping would happen with it,” said farmer and Iowa Soybean Association president Tim Bardole. “At this point, we’re kind of running out of time for it to get close to the numbers we might have hoped.”
The ambivalence that soybean farmers feel about a president who promised to go to bat for them — but has continued to attack the very deal he championed — reflects the disruptive impact of the trade war.
When he met with the House Ways and Means Committee on Wednesday, U.S. Trade Representative Robert Lighthizer said he expected China to fulfill their purchase commitments, but most experts say those targets were considered too optimistic even before the global demand shock hit.
The forthcoming book by former national security adviser John Bolton suggests, in one of many explosive claims, that those purchase targets might have been set artificially high by design in order to bolster President Donald Trump’s chances of reelection. Bolton alleged that in a sit-down meeting, Trump specifically asked Chinese leader Xi Jinping to agree to more crop purchases in order to help Trump’s standing in the Midwestern states he carried in 2016, and whose support he seeks for the November election.
A Bloomberg report on Friday cited unnamed sources saying China would increase purchases of farm products such as soybeans, corn and ethanol after a little-publicized meeting in Hawaii between Secretary of State Mike Pompeo and Chinese officials — news that, if true, would boost agricultural commodity markets that have been whipsawed by the on-again, off-again nature of Chinese purchase promises.
The upshot so far has been little more than false hope for farmers. The Peterson Institute for International Economics has a tracker that illustrates China’s purchase progress shows that sales of agricultural products, energy and manufactured goods have as yet fallen far short of expectations.
Bardole blamed rhetoric out of Beijing for driving down soybean prices, and said the industry initially hoped Trump’s tough talk on China would elicit change.
“A lot of farmers are supporting what President Trump has done with China because this has been going on for years,” he said. “I really hoped by now, or by a year ago, everything kind of would have been settled.”
The stress soybean farmers are under — and the ambivalence they feel about a president who promised to go to bat for them, but has continued to attack the very deal he championed — is a microcosm of the disruptive impact of the trade war.
“While there were inequalities in the system, I think the way the current administration has handled the discussion and the conversation has been extremely poor,” said Kenneth Dallmier, president and COO of the Clarkson Grain Company, and a member of the board of directors of the U.S. Soybean Export Council. “To me, it’s been handled so poorly because of the amount of instability it has created.” That instability weighs on prices, cutting into what farmers can earn for their crops.
While American political and commercial interests might be unhappy with Beijing, most acknowledge the reality that the U.S. needs Chinese demand to help it dig out from a deep economic hole. “About 2.4 million Americans work in jobs that are associated with trade or investment with China,” said Craig Allen, president of the U.S.-China Business Council.
China is typically the U.S.’s third-biggest trading partner after Canada and Mexico, but phase one purchase agreements, and the economic disarray wreaked by the COVID-19 pandemic, edged it into the top spot in April. Although all of the world’s other major economies are expected to fall this year, the World Bank said China could hit 1 percent growth.
“The last thing American companies, workers and farmers need right now is the chaos of a politically motivated re-escalation of the Trump-China trade war,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
“I don't even watch the news any more, because everything that’s said really affects us and our market, and we have enough stress,” Bardole said. “There are so many things to worry about,” he said. “Our family’s been farming here since 1901, and I hope we can continue.”