Sunday, April 5, 2020

US Farm Deals With South Korea and Japan to Limit China Trade War Retaliation

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News Analysis

The Trump administration’s new farm deal with South Korea and the passage of Japanese agricultural import legislation undermine China’s trade war retaliation strategy.

China’s trade war retaliation strategy, which is aimed at economically targeting President Donald Trump’s rural voting base, took two huge hits this month. South Korea ended its four-year rice ban on Nov. 19 and agreed to allow rice imports of at least 132,304 tons annually. Shortly thereafter, Japanese Prime Minister Shinzo Abe overcame opposition in the Lower House for a potentially huge American beef, pork and corn import deal.

China has employed a sophisticated U.S. voter targeting methodology to maximize the economic pain of its retaliatory trade war tariffs in so-called U.S. “battleground” counties that President Trump will need to win in the 2020 elections, according to a study by the U.S. Bureau of Economic Research.

There has been an uptick in farm bankruptcies, mostly due to weather issues, but the U.S. Department of Agriculture forecasts 2019 farm income will increase by $4 billion, or 4.8 percent, to $88 billion in 2019, after rising in both 2017 and 2018. The USDA report added that 2019 farm income will be in the top 30 percent after inflation.

The Chinese strategy has inflicted substantial economic pain on its own households, with China food inflation rising from 11.2 percent in September to 15.5 percent in October, the highest since January 2008. Bloomberg warned that China’s monthly consumer inflation surged past 3 percent in September and could exceed 4 percent in early 2020 on the back of surging pork and other meat prices.

The ratio of Chinese household debt to gross domestic product rose by 2.1 percentage points in the first six months of 2019 to 55.3 per cent, according to Beijing think tank National Institution for Finance and Development. With China accounting for 15 percent of global debt, NIFD warned the strain of heavy debt and high inflation is hurting consumption.

Domestic inflation is credited with forcing China on Nov. 13 to lift its…

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