8/22/18 US & China 25% new tariffs on $16B of each other's goods.

[dado potato]

Effective August 22, the US is imposing 25% tariffs on 279 product categories from China, including semiconductors, plastics, chemicals, railway equipment, etc. Supply chains of American businesses from this day onward will be affected by cost increases due to the new tariff. It remains to be seen to what extent the cost increases will be passed along to consumers. In my opinion, higher prices are inevitable.


China retaliated by applying new 25% tariffs on 333 product categories from the USA, including coal, copper scrap, fuel, steel products, buses, medical equipment, etc.


US Commerce Secretary Wilbur Ross said about China: They're not going to give that up easily. Naturally they'll retaliate a little bit. But at the end of the day, we have many more bullets than they do.

[flowerseverywhere]

It will be interesting o see how this trickles down. I was talking to a quilt shop owner yesterday and she remarked how almost all of their stock comes from China. Amazon and Walmart are full of made in China products. Can American manufacturers fill the void? It seems unlikely to me and we have become accustomed to cheap goods resulting from low wages in China. Manufactured in the us will undoubtedly be much more costly.

Perhaps those that that will feel it hardest are farmers. They can operate on a pretty slim margin, depending as they do on the weather. But the bigger question is what are they going to get us?

[dado potato]

Trek Bicycle Company, of Waterloo, Wisconsin, has predicted that the 25% tariff will increase their cost of goods sold by $30 million.

"Trek will be forced to pass these costs on to the consumer." Trek's Vice President for Marketing and Supply Chain, Roger Gierhart, testified that higher prices will result in fewer sales of the company's products domestically.

https://www.bicycleretailer.com/site...rt_8-10-18.pdf

[dado potato]

Soybean exports are down 97% from a year ago.

China has been the main customer for soybeans exported from the United States. China retaliated against US tariffs on Chinese exports with a 28% tariff on American soybeans. I understand that China is looking elsewhere for sources of soybeans, encouraging investment in farming and terminal facilities in Brazil and Argentina.

The USDA Federal Grain Inspection Service reported that 7 weeks into the 2018/2019 Marketing Year, 7.4 million bushels of US new-crop soybeans have been shipped to China. At this same point last year, the export volume was 239 million bushels to China.

Since July of 2018 the price per bushel has ranged from $8.19 to $8.91

The Trump Administration has promised $3.6 billion in support payments to offset the approximately $2.00 price decline. The support will be based on the 2018 number of bushels each farmer produced. The first payment will be $1.65 x 1/2 of the 2018 production. The second payment will be a dollar amount to be determined by the President at a future date x 1/2 of the 2018 production. Obviously the support program could go a long ways to make American soybean farmers whole, especially if the second payment will be $2.35 or more per bushel. But as far as I am aware, the amount of the second payment remains unknown. It seems it will depend on "What will President Trump want to do?"

The cost to the taxpayer (as if the support payments would be paid out of tax revenues rather than added to the federal deficit) of a $2 per bushel support payment would vary by state. Rough estimates based on production in 2017:

Illinois soybean farmers produced 611,900,000 bushels (x $2) = $1,223,800,000 in support payments
Iowa produced 561,610,000 bu (x $2) = $1,123,220,000
Minnesota produced 380,230,000 bu (x $2) = $760,460,000
Nebraska produced 327,700,000 bu (x $2) = $655,400,000
North Dakota produced 326,025,000 bu (x $2) = $652,050,000
Indiana produced 320,760,000 bu (x $2) = $641,520,000
Etc. These are just the top 6 states. Ummm... $3.6 billion will not make all the soybean farmers whole in the top 6 soybean-producing states.


How long will the trade war with China carry on? (Most wars carry on much longer than their boosters can imagine.) Planting decisions will soon need to be made with the 2019/2020 Marketing Year in view. Will the same 2-stage mystery support policy be contemplated by the Trump Administration next year? Farmers who have become adept at managing their acres of soybeans (and who literally are capable of feeding the world) may find that a trade war continues to shut them out of the Chinese market.

[Yppej]

Auto dealers are running their usual loud ads, only this time screaming, "Buy now before tariffs raise prices by thousands of dollars!"

[Teacher Terry]

My sister bought a car now a year early because of this. She figured she saved about 5k.