Today President Trump outlines an approach to head-off the anticipated retaliation from China over the increase in U.S. tariffs that began today. Whether this is structurally possible, or whether this is Trump’s attempt to diminish the leverage carried by Vice-Chairman Liu He, is an interesting question. However, the strategy is clear.
Overall U.S. inflation remains low relative to the economic gains from MAGAnomic policy. [Current CPI HERE]. GDP and wage growth are both exceeding inflation. As such, now is indeed the best time to confront China. President Trump notes this today in a tweet:
Inflation in the U.S. remains low overall at 1.8%…. now is the perfect time to hit Beijing with expanded tariffs. However, President Trump knows China will retaliate through the multinationals on Wall Street. President Trump knows China will specifically target the U.S. Agriculture sector. China will likely attempt to put pressure on Trump by refusing to buy U.S. farm product. The BIG AG multinationals will go bananas.
The BIG AG multinationals, those who control food/farm production, also control key Senators; they have been purchased through lobbyists. This is part of the Big Club approach/strategy. Wall Street and the U.S. Senate will be aligned to support China; as a consequence President Trump needs to counteract their effort.
President Trump’s approach to counteract China’s strike against the U.S. agricultural community is visible in a series of tweets today. I don’t necessarily agree with the proposal long-term, BUT I do understand the short-term objective…. optimum expediency.
As you can see, President Trump is proposing to counteract the Chinese boycott of U.S. farm product, by using income from the Chinese tariffs to purchase the farm product. It would appear the U.S. Dept. of Agriculture, Secretary Sonny Perdue, would be in charge of the program.
In the short term this would mean the corporate income losses from BIG AG multinationals would be offset by U.S. purchases. The Dept. of Agriculture would purchase harvests that exceed the domestic U.S. supply need. President Trump is proposing we then give that harvest to nations who need food: “poor and starving countries”.
In essence income from the tariffs on China would be used to subsidize U.S. farmers.
Perhaps as a short-term, optimal solution, this is a good plan. However, the downside is the U.S. food prices, what you pay at the grocery store, will remain artificially elevated.
If there was no intervention, domestic farm production would far exceed internal U.S. consumer demand. This would mean prices on U.S. food products would necessarily drop (rather quickly). The supply would far exceed demand.
This over-production dynamic is caused by more than 25 years of BIG AG growth, where multinationals have contracted with U.S. farms to grow and export food product. We’ve talked about this corrupted and “controlled market” system extensively here on these pages. [Go Deep]
The process of multinationals controlling farm output is very similar to how the multinationals controlled manufacturing output and moved the process to the place of lowest production costs; and highest profits. The outputs of U.S. farms are moved around the globe to the location of highest return; it is a controlled market. This process has driven up the domestic price of U.S food rapidly in the past 20 years.
The multinational agriculture lobby is massive. We willingly feed the world as part of the system; but you as a grocery customer pay more per unit at the grocery store because domestic supply no longer determines domestic price.
Within the agriculture community the (feed-the-world) production export factor also drives the need for labor. Labor is a cost. The multinational corps have a vested interest in low labor costs. Ergo, open border policies. (ie. willingly purchased republicans not supporting border wall etc.).
To offset the 20 year increase in U.S. prices, the multinational lobbyists paid DC to expand food subsidies (SNAP, Food stamps, EBT benefits); this helps their bottom line and shifts tax dollars onto their Profit-and-Loss statements. This is the ‘exfiltration’ of American wealth. It is a corrupt system.
The proposal by President Trump to shift tariff proceeds to off-set farm losses is okay,
perhaps likely necessary, in the short term; but once the issues with China are resolved we are still going to have to deal with the underlying cause of this corrupted market process.
Economic security is national security.
We need to start looking at food production as a National Security issue.
♦The Modern Third Dimension in American Economics – HERE
♦The “Fed” Can’t Figure out the New Economics – HERE
♦Proof “America-First” has disconnected Main Street from Wall Street – HERE
♦Treasury Secretary Mnuchin begins creating a Parallel Banking System – HERE
♦How Trump Economic Policy is Interacting With The Stock Market – HERE
♦How Multinationals have Exported U.S. Wealth – HERE