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Trump, Trade, and China: What To Expect in 2017

With agricultural trade and a Chinese relationship on the line, what will 2017 bring?

President-elect Donald Trump ran away with a majority of rural America’s votes. However, his vision for agricultural trade is unclear.

“Many farmers looked at Trump and saw a president who was business-oriented and was looking to reduce regulation, which is a popular thing in agriculture,” says Chad Hart, agricultural economist at Iowa State University. “If there was an area they were concerned with, it was probably in the aspect of trade, and that’s going to be one of the areas we watch very closely.”

The Future of Trade

Trade is an important economic driver of American agriculture and an issue that industry experts and commodity groups will watch closely as Trump takes office.

“It is well known within agriculture that 25% to 30% of farm income is related to international trade and exports,” says Veronica Nigh, economist at American Farm Bureau Federation. “Our industry is significantly more dependent on international trade than other sectors of the economy.”

On October 4, 2015, the 11 countries within the Trans-Pacific Partnership (TPP) reached a conclusion of negotiations and announced the results.

“The goal of the negotiations was to reach a comprehensive, high-standard agreement that will improve the conditions of trade in the region and boost economic activity in all participating countries,” according to the American Farm Bureau Federation.

The TPP would deepen economic ties, minimize tariffs, and ultimately bolster trade relationships with 11 countries including Canada, Japan, and Mexico.

Due to falling prices for bulk commodities such as grains, feeds, and soybeans, farm income has taken a huge hit. That’s what makes the TPP such a hard loss since many, including Nigh, saw the deal as a way to bolster income for farmers and ranchers.

A dark cloud looms over the TPP agreement, as Trump is likely to slash the deal. He ran on a platform that did not support the TPP. However, he is interested in negotiating what he calls a better deal.

“Loss of competitive advantage for U.S. exports has been one of the biggest concerns about failing to move forward with the TPP, especially as it relates to China and the countries in the TPP,” says Jonathan Coppess, clinical assistant professor of agriculture law and policy at the University of Illinois. “At the very least, it raises difficult questions about the American policy on trade going forward and its reliability in those negotiations.” 

What can farmers and ranchers expect if the U.S. doesn’t back the TPP? In the face of uncertainty, Coppess says it is too early to predict the consequences. However, Nigh points out that other countries will continue to negotiate free trade agreements outside of the U.S. She looks at other trade agreements such as Japan’s and Australia’s agreements.

Australian beef has a lower tariff than U.S. beef imports, which gives Australia’s product a competitive advantage. Nigh tells that, although American products might be superior in quality and taste, cost dictates consumer preference around the globe. Breaking down trade barriers would keep U.S. agriculture products competitive abroad, boost export numbers, and ultimately give farmers a much-needed financial cushion.

Newsstands across the world tout headlines such as “U.S.-led globalism is dying with the TPP” from the London Financial Times and “U.S. Faces Setback in Asia if TPP Trade Deal Doesn’t Pass” from the Wall Street Journal. For many, the headlines accurately depict their feelings if the TPP doesn’t pass. However, Iowa State University’s Hart can see the silver lining.

“While President-elect Trump says he won’t sign TPP, he often follows that statement by saying he is willing to negotiate new deals with the countries in TPP,” says Hart. “He is open to continuing negotiations.”

Hart did note that another deal would take years to renegotiate.

Relationship with China

The TPP could also impact the U.S.’s relationship with China, who is the world’s biggest buyer of soybeans and the biggest soybean market for the U.S.

During his talk at the Agricultural Bankers Conference on November 14, Otto Doering, professor of agricultural economics at Purdue University, talked about the relationship between the TPP and China.

“If we cannot continue to move forward even for very modest trade gains, if we cannot continue to move forward and maintain the trade relationships we have with important countries such as Japan, then, in fact, we will slide backwards and China will become the major trading partner with all the Asian countries,” said Doering during his talk.

Doering worried about diplomatic relationships with countries in the TPP. He also noted that if the U.S. started a trade war with another country, there would be retaliation.

“Both historically and in terms of their best opportunity, where do they retaliate? Agriculture,” Doering said. “It’s the one thing they can go after quickly, easily, and it hurts us.”

There is hope, though. Trump recently chose Iowa Governor Terry Branstad to serve as an ambassador to China. Nigh tells that Branstad has a good relationship with China’s president, Xi Jinping, and he understands the importance of trade. Pair that with an understanding of agricultural interests in the Midwest and the choice is a good sign. 

Nigh notes that if the Trump administration’s policies are detrimental to the U.S.’s relationship with China, Branstad’s influence can only go so far.

“We are very excited about that announcement, and it’s going in the right direction for having a good productive relationship with our number-one customer for U.S. agriculture products internationally,” says Nigh.

As the Trump presidency inches closer, agricultural stakeholders from coast to coast are holding their breath to see if Trump will hold true on his promises to rural America. For now, it’s a waiting game. 

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