Trump’s trade war keeps punishing farmers, but they remain optimistic

THE TICKER

Investors who got socked by Monday’s steep stock market sell-off enjoyed a partial recovery Tuesday, as three major stock benchmarks each climbed more than a percent. For American farmers, the constituency most squarely in the crosshairs of the escalating U.S.-China trade war, relief won’t come so easily. 

The Chinese Ministry of Commerce confirmed Monday that Beijing is canceling all purchases of U.S. agricultural goods in retaliation for President Trump’s pledge to slap 10 percent tariffs on $300 billion of Chinese imports. The move piles on to a punishing year for farmers, who’ve been assailed by a combination of bad weather and Chinese counterpunching in the trade war. Zippy Duvall, president of the American Farm Bureau Federation, called the announcement a “body blow to thousands of farmers and ranchers who are already struggling to get by.”

Trump, keen to keep faith with a stalwart portion of his base, signaled Tuesday that the Agriculture Department would hand out more aid next year to farmers suffering from trade-war-related dislocations — on top of the roughly $25 billion the administration disbursed last year or will this year: 

Hu Xijin — editor of the state-controlled Chinese newspaper the Global Times and an aggressive defender of the Chinese regime on Twitter — countered that American farmers have no one to blame but Trump for their economic distress. 

The evidence suggests Trump is more accurately assessing farmers’ outlooks. Farmers’ confidence in the agriculture economy soared in July, according to the latest Purdue/CME Group Ag Economy Barometer, released Tuesday:

The nationwide survey of 400 people in the sector found more than three out of four respondents believe the trade fight will be resolved in a way that benefits U.S. agriculture:

The farmers’ optimism may reflect relatively encouraging circumstances at the time of the survey in mid-July, says Jim Mintert, director of Purdue University’s Center for Commercial Agriculture. “Farmers did finally wrap up planting season, and it was a relief just to get done,” he said. “And the weather did improve: People were able to plant a reasonable portion of their acreage and could get a reasonable amount of their crop in the ground.” Prices for crops including corn and soybeans were looking up then, too. 

Taking a step back, though, the damage that farmers have sustained from the trade war is impossible to miss. Agriculture exports to China, a top buyer of American produce, fell by more than half last year, the Wall Street Journal’s Jacob Bunge, Kirk Maltais and Lucy Craymer report: “In 2017, Chinese buyers imported $19.5 billion in farm goods. That dropped to $9.1 billion last year as China’s tariffs on U.S. soybeans, pork, milk and other products made them more expensive for importers there… Over the first six months of this year, China’s agricultural imports from the U.S. were down 20% from the same period last year.”

Farmers concentrating on certain crops have faired even worse. “From September 2017 to May 2018, soybeans exports to China totaled 27.7 million tons. That number dropped by more than 70% to 7 million tons during the same nine-month period in 2018 and 2019, according to an analysis by University of Missouri,” CNBC’s Kate Rooney reports

And the new pressures from the trade war compounded what had already been a difficult stretch for the industry. “Net farm income has dropped by nearly half in the past five years, from $123 billion to $63 billion,” my colleague Annie Gowen reports. As a result, family farm bankruptcies have been rising at an alarming rate across the map: 

Former Iowa Lt. Gov. Patty Judge (D) told CNBC that Beijing’s announcement creates a “dangerous situation” for farmers. “There are going to be some serious repercussions for farmers,” she said. And Mintert tells me he expects China’s move to weigh on farmer sentiment in Purdue/CME’s August survey. 

But for the trade war storm clouds over farmers to lift, either Trump or President Xi Jinping will have to blink — and neither seem inclined to do so at the moment. The two sides are set for a September meeting in Washington to resume negotiations. Yet Xi, facing mass protests in Hong Kong and a slowing economy at home, appears loathe to be seen as backing down in his staring contest with Trump. 

And Trump — stymied all summer in his attempts to secure Chinese purchases of American ag products — believes his aggressive approach is primed to deliver. “Trump is convinced that the Chinese economy is suffering more than the U.S. economy from the conflict,” The Post’s Damian Paletta reports. “And he has felt validated that his hardball threats in other circumstances, including a recent tangle with Mexico over border security, seemed to get at least some results, even if they scared investors in the short term.” To say nothing of farmers.

MARKET MOVERS

Stocks bounce back. CNN Business: “The Dow and the broader US stock market rebounded Tuesday, driven by optimism that currency tensions between the United States and China would ease. The Dow finished up 312 points, or 1.2%, while the S&P 500 closed 1.3% higher. The tech-heavy Nasdaq Composite, which was hit worst in Monday’s selloff, closed up 1.4%. For the S&P and the Nasdaq it is their first positive performance in seven days. The Dow is in the black for the first time in six days. Markets recovered from a terrible day on Monday, when Chinese government officials said they would take steps to keep its currency from falling too far.”

But some traders expect more pain is coming. Bloomberg’s Lu Wang and Elena Popina: “A look under the market’s hood during Monday’s sell-off prompted a warning from analysts who watch charts to predict moves. Even as U.S. stocks tumbled, the strategists saw indicators that suggested selling never reached levels of panic hit in May and December. The lack of a washout in sentiment bolstered investors who say a deeper pullback looms because almost all the equity gains this year have been driven by valuation expansions, not profit growth.”

Fed’s Bullard: Get used to uncertainty. Bloomberg’s Steve Matthews and Craig Torres: “Federal Reserve Bank of St. Louis President James Bullard said policy makers have already taken steps to account for trade-war uncertainty and he currently only forecasts one more interest rate cut this year. ‘U.S. monetary policy cannot reasonably react to the day-to-day give-and-take of trade negotiations,’ Bullard said Tuesday in a presentation to the National Economists Club in Washington… 

“His reluctance to signal the need for lower rates now suggests hesitation at the central bank on making a second straight reduction when officials next meet in September… Moreover, Bullard said policy makers may need to get used to greater trade uncertainty. ‘I do not expect this uncertainty to dissipate in the quarters and years ahead,’ he said, adding this is likely chilling business investment and feeding into slower global growth.”

TRUMP TRACKER

TRADE FLY-AROUND: 

— China digs in: “The volley-for-volley trade war between China and the U.S. is accelerating at a time when Chinese President Xi Jinping can ill afford to make concessions, raising the likelihood of a protracted struggle between the world’s two biggest economies,” the Wall Street Journal’s Chao Deng and Chun Han Wong report.

“Throughout the trade fight it has waited for the U.S. to impose tariffs before retaliating, and Beijing believes it can wait for the tariffs to damage the U.S. economy and for the declining U.S. stock market to force [Trump] into making concessions, according to officials and policy advisers.”

Xi may be trying to outwait Trump. WSJ’s Nathaniel Taplin: “China’s leaders appear to have concluded that they won’t secure an acceptable trade deal with President Trump. What they can do is try to weather the next 18 months while inflicting maximum political damage—and hope a weakening U.S. economy delivers a new president… Beijing would love both a trade deal and lower U.S. rates. But lower rates alone would be a huge help: China could keep easing its own monetary policy and allow moderate yuan depreciation—both needed to shore up growth—with a smaller risk of big capital outflows.”

Beijing says the yuan won’t keep falling: “Senior People’s Bank of China officials reassured foreign companies that the currency won’t continue to weaken significantly, a day after the yuan fell below 7 per dollar for the first time since 2008,” Bloomberg News reports. “The central bank held a meeting with a number of foreign exporters in Beijing Tuesday, at which officials also said that companies’ ability to buy and sell dollars would remain normal, according to a statement provided to Bloomberg.”

— Here’s what this means for you, per my colleague Jonnelle Marte:

  • Potentially higher prices: “Consumers might have missed the earlier rounds of tariffs on Chinese imports because they affected industrial materials and supplies that don’t show up on most shopping lists. But the 10 percent tariffs announced last week will raise prices on just about everything Americans buy — such as smartphones and toys, even shoes and furniture.”
  • Lower interest rates: “Lower rates are a mixed bag for consumers, [Kathy Bostjancic, chief U.S. financial economist for Oxford Economics] told Jonnelle. On the one hand, mortgages and auto loans become more affordable, she said. But people would also earn less interest on their savings.

— Trump, RNC sue California: “[Trump] and the Republican National Committee filed two lawsuits Tuesday against California officials challenging a new law that would bar Trump from appearing on the state’s primary ballot next year if he declines to disclose his tax returns,” my colleague John Wagner reports. “The federal lawsuits, which were threatened last week when Gov. Gavin Newsom (D) signed the bill into law, argue that the measure requiring presidential and gubernatorial candidates to release five years of tax returns runs afoul of the U.S. Constitution.”

— The plan to save the GM Lordstown plan is in trouble: “Back in early May, [Trump] blasted out a tweet one morning under the banner ‘great news for Ohio.’ The great news? General Motors Co. was in talks with a company called Workhorse Group about forming a new affiliate that would buy — and re-open — the shuttered Chevrolet Cruze car plant in Lordstown. Hundreds of jobs would be saved, in other words,” Bloomberg News’s Kyle LaHucik and David Welch report.

“The plan met immediate skepticism, and Workhorse’s second-quarter earnings report Tuesday further doused the optimism. The electric-truck maker’s sales, never really robust at any point in its 12-year history, totaled all of $6,000 in the quarter … Now more than ever, Workhorse looks more like Lordstown’s lottery ticket than a savior to be taken seriously.”

POCKET CHANGE

— Labor market slows: “U.S. job openings and hiring fell in June, suggesting that demand for labor was cooling in tandem with a slowing economy, which could provide another reason for the Federal Reserve to cut interest rates again next month,” Reuters’s Lucia Mutikani reports.

“Job openings, a measure of labor demand, slipped by 36,000 to a seasonally adjusted 7.3 million in June, the government said in its monthly Job Openings and Labor Turnover Survey, or JOLTS. Since hitting an all-time high of 7.6 million in late 2018, job openings have been flat this year, suggesting some easing in labor market conditions.”

— Efforts to stop firearms parts listings aren’t working: “Google and Amazon, two of the biggest platforms for online shopping, have been offering for sale and profiting from listings of firearm and gun accessories, an apparent violation of their own stated policies that shows the pitfalls of software-driven retail,” my colleague Greg Bensinger reports.

“The companies as recently as Monday, within days of three mass shootings that have shaken the nation, were offering rifle magazines for sale on their sites, including models with a capacity to hold 25 or more bullets.” (Amazon founder and CEO Jeff Bezos owns The Washington Post.)

— Disney shares fall: “Disney missed Wall Street expectations in its fiscal third-quarter earnings report on Tuesday. The stock fell 3.7% in after-hours trading,” CNBC’s Annie Palmer reports. “Disney blamed the earnings miss on the ongoing integration of Fox’s entertainment assets, which it acquired in a $71 billion deal that closed in March.”

— Bezos sells Amazon stock worth $2.8 billion: Amazon CEO Jeff Bezos “offloaded $990 million worth of shares in the company last Thursday and Friday, taking the total value of shares sold last week to $2.8 billion,” Reuters’s Manojna Maddipatla and Jeffrey Dastin report. “The move comes as part of a previously announced 10b5-1 trading plan. Bezos had previously said he plans to sell stock worth about $1 billion each year to fund his rocket company, Blue Origin. Bezos’ former wife, Mackenzie Bezos, who currently owns Amazon stake worth more than $37 billion, is now the online retailer’s second largest individual shareholder.”

MONEY ON THE HILL

— Many small-dollar donors love multiple Democratic candidates: “About one-fifth of Democratic donors have given to multiple candidates, suggesting many haven’t settled on a favorite in a crowded field of presidential contenders,” my colleagues Kate Rabinowitz and Shelly Tan report.

“This is a significant shift from previous presidential primaries, when candidates would vie for maxed-out checks from wealthy donors to help them survive the lengthy and expensive primary fight.”

  • Home base: “The loyalty of donors varied widely across candidates. Sen. Bernie Sanders (I-Vt.) had the most-loyal donors, with over 80 percent giving exclusively to him. Andrew Yang, a former tech entrepreneur, followed close behind.”
  • Testing the waters: “Former housing and urban development secretary Julian Castro and Sen. Cory Booker (D-N.J.) had the least-loyal donors. For each, about 60 percent of their donors also gave to other candidates.”

Trump, meanwhile, is set to raise big bucks in the Hamptons on Friday. The Post’s Michelle Ye Hee Lee: “Trump is slated to appear at a pair of fundraising events in the Hamptons on Friday, including one that charges up to $250,000 for lunch, a photo and a private roundtable with the president. The fundraisers are the latest sign that Trump is embracing the world of wealthy contributors who served as punching bags in his 2016 campaign.

“One event is scheduled to take place at the Southampton home of a New York real estate developer who owns the Miami Dolphins, and another at a 17,000-square-foot Bridgehampton mansion that was once rented out to Beyoncé and Jay-Z.”

— Cuellar refuses to give NRA money back: “The recent mass shootings in California, Texas and Ohio have prompted Democrats to launch fresh broadsides against the National Rifle Association. Yet the NRA, which typically donates to Republicans, has actually donated to a few Democratic politicians,” CNBC’s Brian Schwartz reports. “And at least one of them, Rep. Henry Cuellar of Texas, doesn’t plan on giving the money back, despite his party’s opposition to the gun lobby.”

OPINIONS

Larry Summers: By naming China a currency manipulator, Mnuchin has damaged his credibility. In a Post op-ed, the Obama economic adviser and former Treasury Secretary savages the current officeholder for designating the Chinese currency manipulators. “By labeling as Chinese currency manipulation an exchange-rate move that was obviously a natural response to his boss’s policies, the secretary has damaged his credibility and that of his office,” Summers writes.

“It will be harder now in the next difficult financial moment for Treasury Department pronouncements to be credited by market participants. Having seen the United States label China a manipulator, the world will wonder whether and how the United States will get China to change its exchange-rate policies. If Chinese policies do not change, we will have only demonstrated our impotence to China and the world. Why is that desirable?”

CHART TOPPER

Daniel Clifton, a policy analyst at Strategas Research Partners whom Larry Kudlow considered tapping as a deputy, shares a chart suggesting Trump’s approval rating rises when a U.S.-China deal looks at hand.  

DAYBOOK

Today:

  • Lyft, CVS Health Fox Corp. CenturyLink, Stamps.com, Lumber Liquidators and Rent-A-Center are among the notable companies reporting their earnings, per Kiplinger.

Upcoming:

  • CBS Corp., Kraft Heinz, Yelp Inc., Lions Gate Entertainment and Party City are among the notable companies reporting their earnings on Thursday, per Kiplinger.

THE FUNNIES

BULL SESSION

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