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Trade Will Help Stop Inflation
We need to get international trade flowing.
Tariffs implemented by the previous administration served their purpose.
But, in the majority of cases, we failed to extract anything meaningful from them.
Now, these act as impediments to tamping down inflation.
That’s not to say the tariffs weren’t or aren’t just or fair. Nor that we should lift all of them.
Yet, a recent deal with the EU to lift steel quotas is a big step in the right direction with a similar negotiation underway with Japan.
For all the talk about the good tariffs do for the US, we actually saw domestic steel and aluminum do worse after implementation.
Similarly, manufacturing jobs failed to materialize.
So we have to ask ourselves two questions with respect to each country and each tariff line item:
China To Fall Short of on US Trade Deal
Remember how China agreed to buy a bunch of US goods a couple of years back?
That ain’t happening.
Long Before Covid…
Back in January, 2020, former President Trump signed a trade deal his administration negotiated with China.
Terms dictated China would import more than $200 billion worth of goods over the 2017 baseline through the end of 2022, including agricultural, manufactured, and energy goods.
23 months later, they fell short at 59% of the goal.
US demand from the pandemic drove a surge of exports from China, putting China on track for a record trade surplus with the US of $358 billion as opposed to a deficit.
Where We Go From Here
With delicious irony, Republicans and Democrats enjoy a fresh serving of hypocrisy as members on both sides who supported or condemned the initial deal now back the opposite play.
Although relations with China hover near multi-decade lows, trade representatives continue to talk through the deal and enforcement mechanisms.
However, both sides acknowledge the need for both countries to reduce their dependence on one another.
President Xi’s climate and social policies curtail production.
American politicians on both sides want to expand manufacturing output at home. Corporations agree with many allocating more capital to increase capacity.
The Bottom Line: Don’t expect relations to thaw anytime soon.
However, we might see narrower agreements on agriculture and meat products, both heavy imports for China.
But that can’t happen until the ports clear.
Once they do, expect companies like Bunge (BG) and Archer Daniels Midland (AMD) as well as Tyson (TSN) to see a boost in sales.