Analyst: Trade War with China is Justified

Juggling Trade Deals 100818
Andy Shissler of S&W Trading said juggling all these trade deals at once can be viewed as a game of dominos. China will be the last domino to fall, but it will take time. ( MGN )

Trade issues with China continue to hang over the market. After a meeting with North Korea over the weekend, U.S. Secretary of State Mike Pompeo called the issues with China a “fundamental disagreement.”

It’s that disagreement not only weighing on U.S. commodities, but also hurting China’s economy. Farm Journal Washington Correspondent Jim Wiesemeyer said China’s central bank cut the amount of cash lenders must hold as reserves for the fourth time this year. It’s that move that Chinese leaders hope will shore up activity in the midst of what Wiesemeyer called a “faltering domestic economy.”

Chinese stocks responded negatively to the news on Monday, with Chinese stocks plunging. The China A50 - which includes major companies from both the Shenzhen and Shanghai indexes- fell 4.8%. 

It’s not just China on the U.S. trade agenda. Leaders just struck a new trade deal with Mexico and Canada – called USMCA, and the Administration is also entering into bilateral talks with Japan.

Andy Shissler of S&W Trading said juggling all these trade deals at once can be viewed as a game of dominos. China will be the last domino to fall, but it will take time.

“If you think they're going to fix 10 years of trade with China in three months, it's never going to happen, but you can start the process and makes changes as it goes,” said Shissler, “Right now, I agree with Trump. It was not free; it's not free trade and it's not really fair. The way the money flow works in and out of China, it's a bunch of crap, really.”

Analysts called the trade war process with China painful for farmers, but the window to fix the issues was overdue.

“It’s definitely painful, there’s no question that this process is painful, but as Andy pointed out, it’s been overdue,” said Mike North, Commodity Risk Management Group. “We needed to cut this off at the head now, otherwise we’re going to live with the issues forever.”

Shissler said trade with China is tricky, as Americans desire to buy cheap goods. That means the U.S. will always be in a trade deficit.

Comments
Submitted by Sharon Karpinski on Tue, 10/09/2018 - 14:08

Re: Have patience with trade war because it's long overdue and China will eventually capitulate.

Facts the article overlooks:
1. Chinese leaders don't have to worry about getting reelected.
2. Unlike Americans, the Chinese are savers, not spenders.
3. China has specifically targeted ag products because the producers are a.) majorly Republican and b.) the most economically vulnerable of China's US suppliers.
4.) There are millions of people in China that have known devastating hardship fairly recently---famine, the Cultural Revolution, severe punishment and relocation for violating the one child rule, etc. etc. Even a loss of investments is mild comparatively.
China can, and will, wait out Trump economics at huge cost to American farmers and ranchers.