Inside D.C.

Trump basks in trade victories’ glow

If it wasn’t for that pesky impeachment thing, President Trump was on a roll last week, at least as far as U.S. farmers and ranchers are concerned.

Heck, if you were sitting in the audience at the president’s third annual address to the American Farm Bureau Federation’s (AFBF) last weekend, you’d swear there was no trouble in paradise.

First came a Reuters survey of rural voters, echoed by Farm Journal’s monthly producer poll as reported by the Wall Street Journal, trumpeting Trump’s approval rating among farmers and their families increased in December.  The upticks came right about the time rural voters began to see light at the end of the U.S. trade war tunnel.  The drumbeat was that the U.S. and China would soon hug it out over “phase one” of their tariff détente. Almost simultaneously, House Speaker Nancy Pelosi (D, CA) and her team finally found their way to “yes” on the U.S.-Mexico-Canada Agreement (USCMA).

Then last week the Senate, as expected, overwhelmingly approved the House-blessed USMCA, creating a set of trade treaty bookends with the formal signing ceremony at the White House between Trump and China’s Vice Premier Liu He on their first baby step toward, it’s hoped, “normal” trade relations between the world’s two largest economies.

The cherry on this two-tier producer cupcake was supplied by Agriculture Secretary Sonny Perdue, using an interview with Bloomberg News to tell the world last week he expects the third and likely final tranche of Market Facilitation Program (MFP) direct payment checks to be mailed to eligible producers “imminently,” despite the announced China deal.  Perdue said, “I’m counting on it, but we’ve got to get that allocated through the Office of Management & Budget (OMB).  I see no reason we can’t that done.”  OMB approval shouldn’t be tough given OMB is part of the office of the president.

Trump strode to the AFBF podium in Austin, Texas, to a standing ovation and wasted no time in declaring, “We did it.  We did it!” and eliciting a second standing “O.”  Calling the China deal a “bonanza” for producers, Trump effused, “I don’t think the farmers and ranchers have been in this position, maybe ever.”

“You stayed in the fight. You protected our economy and our security,” Trump said, thanking the assembled farmers and ranchers for their support.  “You were always with me.  You never even thought of giving up and we got it done!” 

The president also proudly announced net farm income is up 50% on his watch, though he did not explain $22 billion of the $92.5 billion the Economic Research Service (ERS) is pegging for 2019 – up from $66 billion in 2016 – is due to more than $22 billion in federal payments, including MFP checks.

The more cynical and careful among those who parse the language and crunch the numbers point out the U.S.-China deal right now is at best a starting point for deeper, more complex and no doubt, uglier trade negotiations between the two industrial giants during phase two. 

At the same time, Trump himself confirms the original U.S. tariffs on Chinese exports – and China’s retaliatory tariffs – don’t evaporate until phase two is complete and successful.  Both dairy and soybean producers know well the hoped-for bounty of a U.S.-China deal comes only with the disappearance of Chinese import levies.

One analyst also pointed to a soybean futures market tumble last week when during his remarks made in the Oval Office, while standing next to Trump, China’s Liu said the $80 billion in new U.S. ag purchases committed to by China over the next few years will be “based on market conditions.”

Details to follow, I’m sure.