Sunday, December 9, 2018

US-China 90days Deadline …is the time taken by U.S to save US Farm Bailout


Well, 2 years have passed for Mr Trump and now it’s going to be a high priority of closing the trade war or else intensifying the same. He has now a lot of pressure since he has promised several times in the last of a couple of years that he will bring down the deficit with China.  If he wants to continue his term during the next election he has to do something with China. At the same time, he has to manage his rural vote count and cant be dependent solely on US corporate vote banks.

He cannot afford to have a healthy relationship with China since that will impact his position. On the other hand, the US economy is more dependent on Chinese manufacturing. The latest economic data reflects the same story. The gap between US imports and exports grew 1.7 per cent month-over-month to $55.5bn, the most since October 2008 and the fifth straight month of deficit expansion. Data for September was revised to show the deficit rising to $54.6 billion instead of the previously reported $54.0 billion. Consumer goods imports, increased by $2.0 billion to a record high of $57.4 billion, boosted by a $1.5 billion jump in imports of pharmaceutical preparations.

Much of the import happened due to the fear of tariff hike post 1st January 2019. But this fear belongs to what? US economy has turned into a service and banking industry whereas the share of manufacturing is secondary. US economy faces many problems which will not support the manufacturing sector to grow.

The US lacks skilled manpower further in a recent statistical survey by the joint Deloitte-Manufacturing Institute study finds that more than 4.6 million manufacturing jobs need to be filled in the next 10 years. About 2.7 million vacancies will be left by retirees and almost two million other new jobs will come with expected economic growth. Yet only 2.2 million likely will be filled, the study says, leaving more than half open.

In addition, according to the report, an ongoing skills shortage resulting from wider use of advanced technology could also mean that up to $2.5 trillion in manufacturing economic output may be at risk in the next decade.
This what happens when economic growth is being focused on financial industry growth, the mortgage industry and service industry growth. The US will remain dependent on foreign import. The import may come from China or may be formed any third world or developing economy but at the utmost it will take another decade to have its own manufacturing base.

If US 90 days deadline fails then the impact of the failure will be more on the US rather than China. There will be two scenarios where the US-China Trade war might take its shape.

1)      These 90days truces will be taken as a shield by the US economy and trump to rework on the deficit where US inflation is not affected.  Trump will use to place agri and farm products to be the negotiation instrument in exchange for Chinese import.

2)      In order to save his own face from his earlier promise, he will end the 90 days timeline with zero results.

Trump now has to face the challenge of controlling the inflation once that remaining tariff is being hiked. His own country agri and farm sector are under immense threat. Farms that produce corn, soybeans, milk and beef were suffering due to low global demand and low prices.  In September, the government cut $25 million worth of bailout checks to the agriculture industry. Farmers in Illinois, Indiana, Iowa, Kansas and Minnesota have been the biggest recipients of assistance. As per the U.S.D.A. soybeans, wheat, corn, dairy and hogs being the goods most in need of support.  This is the grey area where the US or rather Trump have to work so that it can safeguard.  The farm industry is battling with rising interest rates and hence the topping of a trade war has made it impossible for the sector to maintain its growth.

The biggest threat for Trump is now to manage the rural vote. The question for 2020 is whether rural voters will continue to swallow the continuous stream of lies they’ve been fed by a fast-talking city slicker.

The Wisconsin Farmers Union, representing small- and medium-sized farms, said a 55-cow dairy farm would receive $725 from Trump’s bailout while losing some $36,000 to $48,000 this year. On the high end, a 290-cow dairy farm would get $4,905 but could lose as much as $400,000 this year. In the first round of payments, 11 of the state’s largest corporate farms received between $50,000 and $81,000. But, the average payment for Wisconsin farmers was only $2,145, with 237 of them receiving less than $100 each.

According to the report of Agriculture Department’s economic research service predicts net farm income in the United States this year will fall by $9.8 billion, to $65.7 billion, a 13 per cent drop from 2017. The mostly new list of negotiation of products would come where the US will try to safeguard the farm and agri sector.

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