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.”
Category Archives: Trade Policy
The Trade Deficit Rises
From Goldman Sachs (Hatzius, et al.) today, interpreting today’s July trade release:
The trade deficit rose to $50.1bn in July, from a revised $45.7bn in June. Total exports fell 1.0%, as the total drop in exports ($2.1bn) was comprised primarily of declines in civilian aircraft ($1.6bn) and soybeans ($0.7bn). The decline in soybeans exports likely reflects payback following a sharp increase in June ahead of Chinese retaliatory tariffs. Total imports (+0.9%) rose, reflecting increases in both petroleum imports (+3.7%) as well as nonpetroleum imports (+0.6%).
The Recovery in Agricultural Futures, Post-Tariff Imposition
Soybean harvesting begins soon, with the new market year (9/1-), and it was thought by some observers that as China would have to eventually access American soybeans, so prices would recover. That event has not occurred.
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The Term Spread and Dollar Diverge
With the election, and anticipation of a large fiscal impulse (tax cut, infrastructure spending), the dollar rose and the term spread increased. As expectations of the latter disippated, both the dollar and spread shrank. But recently, the comovement has broken down.
The CBO on Trade Policy Uncertainty
The CBO’s Budget and Economic Outlook is a must read. In addition to the widening budget deficit (no supply side miracle here), and the downward revision in projected 2018 growth, there is this commentary in the section blandly titled “Some Uncertainties in the Economic Outlook” (page 14 onward):
A sizable uncertainty in the U.S. trade and inflation forecast stems from recent changes to U.S. import tariffs and the retaliation of the country’s key trading partners.
Treatment of Nations Implementing Measures Not Consistent with the WTO
Statement yesterday, as reported by Washington Examiner:
“[That country] really needs to make up its mind” … “Do they want to be in the community of nations, do they want to be part of the WTO and just behave like everybody else, or don’t they?”
…“And if they don’t, then we, the community of nations, are going to have to think about what are we going to do about that?”… “Are we going to let them stay in the WTO?”
Guest Contribution: “Trump’s Trade Policy Uncertainty Deters Investment”
Today, we are fortunate to be able to present a guest contribution written by Steven J. Davis, William H. Abbot Distinguished Service Professor of International Business and Economics at the University of Chicago Booth School of Business and Senior Fellow at the Hoover Institution.
Donald Trump has upended U.S. trade policy. The particulars include a U.S. pullout from the Trans-Pacific Partnership (TPP), threats to jettison the North American Free Trade Agreement, a refusal to affirm new WTO judges, tariff hikes on steel and other goods, frequent rhetorical attacks on major trading partners, and a wrong-headed obsession with bilateral trade deficits.
(I Can’t Believe I Follow this Stuff Now): Peak Pegasus Docks in China
Not quite the Flying Dutchman, Peak Pegasus and its load of US soybeans finally docks at Dalian in China.
等待果陀? – Soybean Farmer Edition
(Translation: “Waiting for Godot”) Many observers have noted that the Chinese must eventually come to the US for some of their soybean needs, as the supply of Argentine and Brazilian soybeans are depleted and American soybeans are harvested. Current futures for November 2018 do not indicate a price recovery to pre-Trump tariff war levels, even if they do come. As of today:
When Storage Does Not Save One from Low Commodity Prices
When prices are low for a storable commodity, agents (farmers or intermediaries) can wait for higher prices to sell. Of course, there is a carrying cost to storage for many commodities, like soybeans (deterioration of stock, direct storage costs, opportunity cost of capital tied up in commodity). Hence, while storage can mitigate losses, it does not necessarily eliminate economic losses that arise from persistent tariffs.