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Wednesday, 28 December 2016 14:56
Trump threatens China's trade imbalance, but tariffs can make US's economy, so-soy
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trump soyRussia has admitted, finally, to rampant sports doping in the face of overwhelming proof. Maybe, in a year, or two, it will admit U.S. election hacking, as well. In the coming year the Senate is set to explore Russian sympathies among Donald Trump’s cabinet nominees as it, simultaneously, investigates Vladimir Putin’s 2016 election intrusions that, even, extended down to individual state levels. 

Lost in the shuffle is China, which may be planning its own intrusions. Unlike Russia’s electronic version they will be of an economic nature. China is capable of affecting the U.S. economy in response to any tariffs imposed by the Trump administration in several ways. 

The U.S. Census Bureau reported that through October 2016 the U.S. has exported 92 billion dollars worth of goods to China. In the same period we imported nearly 380 billion dollars worth. The result is a trade deficit of more than 288 billion dollars worth. Our trade deficit with China has grown, steadily, as America’s preference for cheap foreign imports has grown. In 2012 our top ten exports to China were as follows: 

1.    Soybeans: $15 billion

2.    Civilian aircraft: $8.4 billion

3.    Cotton: $3.4 billion

4.    Copper materials: $3 billion

5.    Passenger vehicles (small engines): $3 billion

6.    Aluminum materials: $2.4 billion

7.    Passenger vehicles (large engines): $2.2 billion

8.    Electronic integrated circuits: $1.7 billion

9.    Corn: $1.3 billion

10.  Coal: $1.2 billion 

Though the spread is greater today, the product ranking of exports, by type, probably hasn’t. If China decides, in 2017, to buy more soybeans from Brazil and Argentina, for example, it would hurt the Midwest disproportionately. In 2016 half of all U.S. soybean production was exported. Brazil and Argentina’s combined production, however, now exceed the total U.S. soybean output and China’s own production of this commodity has grown. The USDA, meanwhile, has forecast problems due to the popularity of bio-engineered soybeans among U.S. farmers that, it warns, may have ramifications for resource use, marketing, and international trade if, say, China were to rejected this crop as unhealthy. 

China has committed to the purchase 5.1 million metric tons (MMT) of U.S. soybeans, valued at $2.1 billion, from farmers in the state of Iowa, alone, and signed a contract in Des Moines to this effect on October 14, 2016. China, obviously, has other contracts for this commodity but, by way of example, this deal represents nearly one third of the total Iowa soybean crop according to the U.S. Soybean Export Council. Scaling back its purchases from this one state would affect its agricultural economy dramatically. 

Shipping is vulnerable, too. The Port of Los Angeles, also called America's Port, is a complex that occupies 7,500 acres of land and water along 43 miles (69 km) of coastline, counting the adjoining Port of Long Beach. The Port of Los Angeles-Long Beach provides 896,000 jobs regionally and 2.6 million jobs nationally. Twenty-five percent of its current traffic comes from the Asia. A cutback in traffic from China would have significant national consequences. 

2007 marked the milestone of $100 billion dollars, a year, in trade that came through the one-time former home of the U.S. Navy’s Pacific Fleet. It’s significance was felt in 2012 when an 8-day strike by the International Longshoremen caused a billion dollar a day in losses to shippers and had negative effects on Christmas shopping across the nation. 

The trade imbalance was set to shift, to a degree, with Boeing’s Sept. 23, 2015 announcement that China had inked a new contract worth nearly $40 billion to build 310 jetliners to upgrade China’s aging airline fleet. If, however, that business shifted to Boeing’s European competitors the consequences would be dramatic. 

Perhaps one reason China has been relatively silent about the election of Donald Trump, except to protest his early telephone call with Taiwan’s leader, is that it holds enough cards to make the life of every American less prosperous should the Trump administration impose some of the economic measures he has promised regarding imports. Protectionism makes for attractive campaign sound bites but their favorable reception will dim if, after enactment, American jobs disappear and our economy bears the brunt of these policies. Hardest hit will be the banking, manufacturing, mining, shipping, and agricultural industries that employ a large proportion of the very people Trump promised to lift up during his presidency.


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