Don’t Forget We’re at War – And We’re Losing

Written by Jason Simpkins
Posted October 4, 2019

Someone once said “trade wars are good and easy to win.”

Well, they aren’t going so well for America these days.

Concurrent trade wars with China and Europe have had a devastating impact on U.S. farming and manufacturing — with little to show in return.

The effects have been felt most acutely in America’s heartland.

Prior to the trade war, China consumed roughly a third of all the soybeans grown in the U.S. But since it started exchanging tariffs with the Trump administration, China has all but stopped buying them.

In 2015, China purchased more than 5 million metric tons of DDG, a high-protein animal feed, valued at $1.4 billion, according to the U.S. Grains Council. And in 2016, the country was the No. 3 export market for American ethanol, purchasing more than 200 million gallons, worth almost $350 million.

Now, DDG sales have plunged a staggering 98% and ethanol orders are virtually nonexistent.

China’s retaliatory tariffs last year cost farmers $670 million in oilseed and grain shipments to China, obliterating 78% of their total export market.

U.S. dairy exports to China fell by 43% in the 11 months after July 2018 — the point at which China enacted its first round of retaliatory tariffs on U.S. dairy products, according to the U.S. Dairy Export Council.

About 3.7 billion pounds of U.S. farmers’ milk had to find other markets during that span, the analysis found.

The result?

From July 2018 to June 2019, the number of farms that filed for Chapter 12 bankruptcies (a type of bankruptcy designed to allow family farmers and family fishermen to restructure their finances) rose by 13% year-over-year, according to the American Farm Bureau Federation.

Loan delinquency rates are at a six-year high.

The U.S. Department of Agriculture says nearly 13,000 farms outright disappeared last year.

And suicide rates among farmers are spiking.

Wisconsin, alone, has lost 551 dairy farms already this year after losing 638 in 2018 and 465 in 2017, according to data from the state Department of Agriculture, Trade and Consumer Protection.

The Trump administration has tried to cushion the blow by dispersing a whopping $28 billion in bailout money —  more than double the $12 billion bailout the American auto industry got during the Great Recession.

But it hasn’t been enough.

Manufacturing is hurting, too.

The Institute for Supply Management’s factory index slipped to 47.8 in September. That was the second straight reading below 50 (which signals contraction) and the lowest since June 2009.

And the University of Michigan’s Surveys of Consumers showed in September that a near-record number of consumers cited trade policies as a negative factor weighing on the economy.

It’s not going to get better any time soon, either.

On Wednesday, the World Trade Organization cleared the U.S. to impose $7.5 billion of tariffs on European products, after finding the EU had illegally propped up Airbus.

The decision was the largest-ever arbitration award granted by the organization, nearly doubling the previous record of $4.04 billion set in 2002.

The Trump administration says it will now impose 25% tariffs on certain European agricultural exports, including French wine and cheese, and 10% tariffs on European-brand aircraft starting on Oct. 18 — three days after a scheduled Oct. 15 tariff increase on $250 billion worth of Chinese goods, to 30% from 25%. 

The French government reacted on Thursday by saying it will respond with “retaliatory measures” to the new tariffs, but did not specify what those measures would include.

Negotiators from the U.S. and China will meet for their 13th round of trade negotiations next Thursday, but a breakthrough isn’t especially likely. That’s because while both countries are hurting, neither seems to feel any profound sense of urgency to strike a deal. 

That means these wars are likely to drag out and even escalate, further hampering economic growth. 

Simply put, the economy will worsen. That will mean more rate cuts, more stock market drops, and higher gold prices

So investors should respond accordingly by increasing their gold positions. 

And if you want to know the best way to do that, you should check out Nick Hodge’s latest gold pick, which is set to deliver serious gains.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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