Donald Trump and Soy Wars

Just when you thought it couldn’t get any worse under the Donald Trump administration it now turns out that Trump isn’t just going after Democrats, or Mexican immigrants but also after the very workers that voted for his “America First” agenda. As some of you likely know there is an ongoing trade war between the United States, México, Canada, China and the EU. The result is that Trump’s own voters are paying the price with their jobs.

México and the rest of Trump’s tariff targets are responding strategically to Trump’s war on foreign imports. Each country’s retaliation is specifically designed to target Trump’s voters. The message is clear, you voted for Trump and we’ll make sure you regret it.

Case in point, soy, where American farmers depend on the Chinese market. They may not feel an immediate downturn of their livelihood – although a few are already complaining – because of how global trade is conducted. Export commodities are usually spoken for months in advance. Some soy farmers are betting that the trade war between China and America will end before the Chinese can find other sources for soy.

In the short-term it seems like the American soy farmers have the upper hand. The $14 billion market predominately benefits the Americans because the Chinese cannot ramp up production fast enough. However, the Chinese soy tariffs is already creating problems for the American markets as at least one export ship has been idled in the middle of the ocean until the exporters figure out what to do about the 25% Chinese tariff.

China currently imports about 90% of its soy. It has created a strategic bank to warehouse soy as a national security concern. About thirty-four percent of the Chinese soy imports comes from America. But China, like other countries, is retaliating be targeting Trump country right before the midterms.

The American soy farmers have until October before they need to take steps to protect their farms. After that, the American famers will need to rethink their farming choice.

But here is the problem with trade wars.

China, for example, is now actively encouraging its domestic farmers to switch from corn towards soy to shore up their market. It won’t be enough for various reasons. But China has a history of investing abroad. China has money and likes to use it. It may decide to invest in the infrastructure of other countries and encourage foreign farmers to farm soy, thus replacing the American market with another one.

That would leave American farmers unable to export to China even after the trade war is resolved. Even if the trade war is resolved soon, over the long-term China may seek to further diversify its soy sources to have greater independence. That would kill the American soy farmers.

As soy is grown in Trump country, it will be the Donald Trump workers who will pay the ultimate price.

The best part for me is that México stands to benefit just form sitting on the sidelines. At worst, Trump voters pay the price for their stupidity and at best, Trump is expelled sooner than later, by his own constituency.

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