Search This Blog

Tuesday, March 13, 2018

Some Things They Just Don't Get

There's a big article in Politico today about how President Trump is planning to impose major tariffs on Chinese products in response to Chinese theft of US intellectual property, among other things.  Politico makes the point that such tariffs could be disastrous for American farmers if China retaliates against American agricultural products like soybeans, corn and wheat.  That's just ignorant.

There is no question that the Chinese will retaliate should the USA put tariffs on Chinese exports to the USA.  The problem won't be for America's farmers, however.  If China puts tariffs on American grains and beans, it will make food more expensive for the average Chinese family.  It might also reduce the amount of American ag products sold in China.  The one thing it won't do is actually hurt American farmers, however.  The price of soybeans and grains are set by the world market.  If China uses taxes to make Australian grains or Brazilian soybeans more appealing in China than American products, it could even attract those products to China at the expense of American products.  The problem for the Chinese, however, would be that as Brazilian soybeans are pulled into China, that will leave a void in other markets which will be filled by US soybeans.  A company that makes margarine in Italy from soy oil will not care if the soybeans used are Brazilian or American.  If the Brazilian company that now supplies this Italian mill pulls out in order to sell into the Chinese market, there will surely be an American supplier waiting to pick up the business.  The production of soybeans does not change quickly with the price; this year's crop will be the same with or without the supposed Chinese tariffs.  That means that unlike with manufactured goods, tariffs on agricultural products will just shift sales around but will not actually reduce sales.  All those American farmers will sell to Europe or Asia outside China.  They will not get hurt.

Articles like this show the ignorance of many who report on economic issues.  Political reports are particularly ignorant when it comes to economics, and it shows (often).   

No comments: