In the seven weeks that global markets and U.S. farmers have been living in the uncertain trade world of the Trump administration, prices for most American ag exports have headed south faster than a Canada goose in late October.
In fact, futures prices for most key ag markets — soybeans, corn, cotton, wheat and pork — are 5% to 8% lower than when the president first spun his trade roulette wheel in February. Only cattle futures, still dominated by historically low herd numbers, have regained February’s lost footing.
The U.S. equities market is following the commodity markets. In the four-week period prior to mid-March, the S&P 500’s market value fell 10%, from an estimated $52 trillion on Feb. 19 to $46.8 trillion March 14. That’s a $5.2 trillion punch in the mouth.
That smacking, like the earlier drop in commodity prices, was forewarned. After all, anytime you take a crowbar to some of the key floor joists of today’s integrated global marketplace — like free trade or the value of the U.S. dollar — there will be consequences.
If you choose to look past that reality — or, worse, believe that reality doesn’t apply to you or your policy choices — spend a minute catching up on Brexit, the United Kingdom’s 2016 vote to remove itself from the commercial and trade umbrella supplied by the European Union.
Now, however, eight years after that history-changing blame shifting, Brexit is seen as an indefensible blunder sold to an aging, immigrant-fearing UK by fear-peddling politicians and reality-defying royalists.
The price of the blunder, according to the Financial Times, has been steep. According to a recent academic report, exports from the UK since 2016 are down an average 17% while imports, because of rising protectionism, are down an even bigger 23%.
Moreover, since 2016, the EU economy has grown 24% while the UK GDP has increased an embarrassingly tiny 6%.
A final comparison is even more stark. One year before Brexit, Greece, another EU member nation, faced a UK-like choice: leave the EU and its tough management of the Greek economy or stay in the multinational group, clean out its systemic corruption and rebuild under EU rules and loans.
Unlike the UK in 2016, though, Greece followed its EU leaders. “Greece was rational,” Bloomberg noted bluntly a year ago, “and since then its economy expanded 11%, representing a 1.53% annual rate, easily exceeding the UK’s anemic 0.7% annual growth.”
Moving forward, nations trading with the United States, Politico suggested March 17, face a similarly stark choice. As the White House continues to escalate tariff talk, countries can choose to follow the recent “Mexico model,” a slow approach that favors “laying low and buying time” or the Canadian method that’s “more confrontational, including immediate trade retaliation.”
The latter drew “swift White House retribution,” and the former “doesn’t have much more to show for it.” That’s because trade wars — forget all the chest-beating, social media rants or hockey metaphors — have no winners. Losers, however, are everywhere.
Sooner or later, all aggrieved parties in this fight will learn that lesson. Again.
Right now, however, Politico goes on to report, farmers and “some agriculture groups are growing tired of feeling like their private requests for exemptions or support … are failing to result in any tangible change.”
Go figure.
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