Evening Report | February 5, 2024

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Cotton producers: Increase old-crop sales, make initial 2024-crop sales... Cotton futures are heavily overbought and trading at the top of our sales target range. We advise cotton hedgers and cash-only marketers to sell another 10% of 2023-crop in the cash market to get to 70% priced. We also advise selling an initial 10% of expected 2024-crop production for harvest delivery.

Friction among trade policy types in the Biden administration... A recent Politico article discussed the tension surrounding U.S. Trade Representative Katherine Tai and her progressive trade policy agenda, with disagreements within the administration and Congress over the direction of trade policies and their impact on workers and businesses. Highlights:

• Tai is known for her commitment to progressive trade policies that prioritize workers and small businesses over large corporations. This approach aims to reshape global trade rules in favor of workers and small enterprises.
• President Joe Biden’s trade agenda has faced obstacles in recent months, leading to departures from Tai’s team, including the agency’s former chief of staff and two of the three deputy U.S. trade representatives. Some of this discontent is attributed to Tai’s leadership style, with claims she can be tough on her staff. The departures are seen as unusual compared to other government agencies.
• Tai’s supporters argue the real source of dissatisfaction lies in disagreements over her “worker-centered” trade agenda. Critics within the administration and Congress may not be aligned with this approach, which they argue aligns more closely with former President Donald Trump’s protectionist stance on issues like tariffs than with the free trade policies associated with past Democratic presidents.
• Some congressional members and allies of Tai believe complaints about her leadership style are a convenient excuse for those who disagree with her policy direction. They contend that the real issue is the policy itself and not her management style.
• Tai’s trade agenda has encountered setbacks, such as the decision to walk away from trade talks under the Indo-Pacific Economic Framework in San Francisco due to pressure from Senate Democrats. Tai’s allies argue it was the White House, not Tai, that made this decision. They maintain Tai has had to contend with opposition to her policies both within her own agency and the West Wing.
• Despite the challenges, some members of Congress and Tai’s allies are supportive of her efforts and believe that she has had to engage in policy arguments within the administration. They express the need to support her in pursuing her trade agenda.
• The U.S. Trade Representative’s office is currently short-staffed, with two of its three deputy positions vacant. Biden’s nomination to fill one of these positions, Nelson Cunningham, faces resistance from Tai’s progressive allies in the Senate.
• A key point of contention is that, despite advocating for a “worker-centered” trade agenda, the Biden administration has not been able to replicate the labor and environmental rules included in the U.S.-Mexico-Canada Agreement (USMCA), which replaced NAFTA. Some Democrats are concerned that failing to match these provisions under Biden may allow former President Trump to position himself as more progressive on trade, similar to his 2016 campaign strategy.

Bottom line: Some say that with little policy progress expected in an election year, some Democratic members of Congress are looking to assign blame for the challenges facing Tai’s trade agenda.

Trump’s tariffs: Political win, economic loss... A new study examines the impact of the tariffs imposed by former President Donald Trump on China and other American trading partners. It suggests these tariffs were politically successful but economically ineffective.

The study, conducted by nonpartisan researchers, found that the tariffs imposed by Trump on foreign metals, washing machines and various Chinese goods starting in 2018 did not result in a significant increase or decrease in overall jobs in the affected industries. They neither brought back jobs nor caused a substantial loss.

However, the tariffs did lead other countries to impose retaliatory tariffs on American products, making them more expensive to export, which did have a negative effect on American jobs. This was particularly true in agriculture, where farmers exporting products like soybeans, cotton and sorghum to China were hit by Beijing’s tariffs.

The Trump administration attempted to offset these losses by providing financial support to farmers, distributing $23 billion in 2018 and 2019. Nevertheless, these subsidies were unevenly distributed and only partially mitigated the harm caused by the tariffs.

Despite Trump’s claims his tariffs were successful in bringing back jobs and countering China’s competition, the study concludes the overall impact on U.S. jobs, considering the original tariffs, retaliatory tariffs and subsidies, was “at best a wash, and it may have been mildly negative.”

The study suggests the tariffs were politically successful for Trump and the Republican Party. People living in areas affected by the tariffs, particularly in the Midwest, around the Great Lakes, and the South, were more likely to vote for Trump in the 2020 election. They also became less likely to identify as Democrats and more likely to elect Republicans to Congress.

These political beliefs were influenced by the economic effects to some extent, with Republican gains stronger in areas where tariffs and subsidies had a more positive impact on the job market. However, retaliatory tariffs weakened support for Republicans only modestly.

The study speculates that voters in areas hit hard by competition from China in the past may have valued the tariffs as a symbol of political solidarity, regardless of their actual job outcomes.

The U.S. economy was growing strongly during the trade war, which may have influenced voters' perceptions of the tariff effects. It's challenging to isolate whether the economy was doing well because of government policy or despite it.

The findings come as Trump has promised more aggressive trade measures if he wins the White House again, including a proposed 10% “baseline” tariff on all imported goods.

Meanwhile, the debate around tariffs continues, with proponents arguing that they protect American industries and generate government revenue, while critics claim they raise prices for consumers and burden lower-income individuals who spend more on goods. The study authors also highlight that tariffs may not have resulted in more U.S. jobs because firms may have simply imported products from other lower-cost countries instead of China.

Bottom line: It remains uncertain whether tariffs could create more jobs over longer periods, as the study suggests.

Trump floats higher tariffs on Chinese goods if re-elected... Former President Donald Trump hinted at imposing tariffs on Chinese goods exceeding 60% if re-elected, signaling a more aggressive stance towards China, which is the primary supplier of goods to the United States. In response to a Washington report about considering a flat 60% tariff on Chinese imports, Trump stated in an interview on Fox News’ Sunday Morning Futures it might actually be higher than that. He dismissed concerns about sparking a trade war, emphasizing his aim to hold China accountable for what he perceives as an unfair advantage.

During his presidency, Trump initiated tariffs on Chinese imports in 2018, which escalated to include various products. China retaliated with its own tariffs on U.S. imports like soybeans and poultry. The Biden administration largely maintained these tariffs, although they faced criticism from business groups for potentially driving up prices and impacting U.S. competitiveness.

Trump’s proposal to increase tariffs could have significant economic implications, given the substantial trade relationship between the U.S. and China. Some lawmakers, including Reps. Mike Gallagher (R-Wis.) and Raja Krishnamoorthi (D-Ill.), have advocated for measures to restrict economic ties between the two countries.

Trump also clarified a previous comment about being a “dictator for a day” in a second term, explaining it was meant to signal immediate action on border security and fossil fuels, not a literal claim of dictatorial power.

USDA finalizes child nutrition program rule aligning with 2020 Dietary Guidelines... USDA submitted its final rule to the Office of Management and Budget (OMB) regarding the revision of meal patterns under child nutrition programs to align them with the 2020 Dietary Guidelines. This rule has been under consideration since late 2022 when the USDA initially proposed it. The revisions are of particular significance to the dairy industry because there has been a push to reintroduce whole milk into the school lunch program.

Notably, Senate Ag Committee Chair Debbie Stabenow (D-Mich.) halted legislative efforts at the end of 2023 that aimed to mandate the inclusion of whole milk in school lunches. Instead, she encouraged those advocating for this change to engage with USDA as the agency worked on aligning child nutrition programs with the 2020 Dietary Guidelines.

USDA is planning to release the final rule in April, which will provide clarity on how child nutrition programs will be adjusted to meet the dietary recommendations outlined in the 2020 Dietary Guidelines.