John Block: Trade

Pick up a paper or turn on the TV – It’s all about trade.

So that’s the subject I’m going to talk about today. Will there be a trade war? Our agriculture industry that exports 20% of what we produce could get pounded pretty hard. A lot of President Trump’s critics don’t think he has a strategy to reduce our trade deficit with China. He is focusing on China now and giving relief, at least for now, to our allies. China is the target with their $375 billion trade surplus with us. They have been stealing intellectual property from us and other developed countries. China does not have a regular market economy. Their government manages everything. Tesla, a U.S. company, faces a 25% tariff when selling an electric car to China. We impose a tiny 2.5% tariff when China sells a car to us.

President Trump has alerted the world that there are a lot of unfair trade restrictions. The pressure to begin fixing the problems is intense. Now President Trump wants to impose a $60 billion border tax on China. I don’t ever remember a time when there was so much anxiety over trade. The stock market is in a state of shock.

Trade restrictions have been used many times over the years to pressure countries to change what they are doing. Remember President Jimmy Carter’s grain embargo against the Soviet Union? That was in the 1970’s. The Soviet Union was a big customer of U.S. agriculture importing a huge volume of grain. But when they invaded Afghanistan, President Carter closed the trade door to punish them for that invasion. After President Reagan was elected, and took office in 1981, he lifted that embargo.

In those days the Russian agriculture wasn’t anything to write home about. They had to import a very large amount of food to feed their people. But today – 50 years later, Russia is the number one exporter of wheat in the world. Their agriculture has been modernized. A lot of trade relations have changed over the years. We used to be number one in soybean exports; not anymore. Brazil has the lead. We are still well ahead of every other country in corn exports. Also, the United Sates is the world’s largest exporter of agriculture products combined.

Since U.S. agriculture depends so much on trade, we will continue to worry about where we are headed. Let’s hope President Trump can negotiate a deal with China to avoid a trade war and reduce our trade deficit.

John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill.  If you would like to review his radio shows going back more than 20 years, visit johnblockreports.com.

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