From US-China to World Trade War, Farm Edn

♠ Posted by Emmanuel in , at 4/07/2018 03:01:00 PM
Trump may start a chain of events wherein soybeans become the casus belli for world trade war.
The usually-reliable trade commentator Chad Bown, currently of the Petersen Institute of International Economics, has identified the way an American-Chinese tit-for-tat trade spat can become a wider conflict involving the rest of the world. It is no big secret that the PRC is now taking aim at constituencies very loyal to Trump. Namely, agricultural regions of the United States. In my most uncharitable moments, I'd simply say "you get what you deserve" for voting for Trump and leave it at that. However, there are additional nuances here involving the fate of world trade.

Rich-country agricultural subsidies have long been a bugaboo for developing nations in export competition with them. A trade negotiation round has never, ever been completed at the WTO since developing countries have expressed dissatisfaction at these developed countries' reluctance to lessen agricultural subsidies. Why should poor countries bear the brunt of rich countries subsidizing their agricultural sectors, artificially increasing their import competitiveness? As we gather nowadays, developed-world farmers are very important constituencies. This is so much so that Trump is contemplating extending even more subsidies than they currently enjoy to offset possible retaliatory Chinese tariffs on soybeans and other US agricultural exports:
President Donald Trump, wanting to protect U.S. farmers from China's threatened tariffs, may end up pitting his country against many more nations in a trade spat that has hit global markets and worried the international business community, experts said Friday.

If the Trump administration chooses to subsidize American farmers further, that could trigger retaliatory tariffs and subsidies in major exporters of agricultural products such as the European Union and Brazil, the experts added.
Chad Bown lays out how this will play out in a Twitter message, of all things:
How THIS escalates beyond US-China:
• Trump slaps tariffs on China
• China retaliates on US agriculture
• Trump subsidizes US agriculture to pay them off
• Farmers in EU, CAN, AUS, BRA, ARG, etc - now suffering because of Trump subsidies - demand retaliatory tariffs/subsidies
Instead of being a North-South spat as it's played out at the WTO during the Doha Round, what we have here is a potential free-for-all as assorted agricultural exporters pile in regardless of their development status. Just as it is in "real" wars, a localized conflict often can spark wider conflagrations.