Friday, February 17, 2017

The first casualties of Trump's trade wars are Texas cattle ranchers

If the first casualty of war is truth, then the first casualties of trade war are the working man and woman. And first among them is about to be the iconic Texas rancher. Here in the rolling pastures of bright, green spring grass at the edge of the Texas Hill Country, the handful of large spreads prosper from a wet winter. The short-horned charlois breed, imported from France via Mexico, grow thick and wide, their white coats bright in the sunshine of impending spring. The charlois makes for some of the finest grass-fed beef in the world. Now that a years-long drought has broken, ranchers can count on trucking in less of that expensive coastal grass they require in the dry months. But the Texas cattle rancher now faces a new threat: the Trump administration's blundering, blustering trade policy. By threatening a trade war with Mexico within days of inauguration, the president helped trigger a slide in cattle futures. Mexico is a major export market. By sinking the Trans-Pacific Partnership, the new administration cut off long-sought access to the Japanese market. Now banks have raised the conditions for collateral for loans for ranchers. Texas ranchers, though, will not be alone for long. Beef producers from Nebraska to the Dakotas face the same problems. So do grain farmers in Kansas and the snow-covered corn fields of Iowa, just like tomato farmers in California and Florida and autoworkers in Michigan, longshoremen, truckers and railway workers in Miami and Houston and Long Beach. These will be the first casualties of a trade war. Trump fired his opening salvo right after his inauguration by threatening a 20 percent tax on Mexican goods coming into the United States, the funds would ostensibly fund the border wall. That led to Mexican President Enrique Peña Nieto to cancel a summit with the new American president. Trump's was an artillery shell delivered for effect. Peña Nieto answered in kind. Within days, both beat a hasty retreat though, putting their diplomats behind closed doors with the Canadians to work out a new trade agreement. By then, however, the collateral damage was done. It was clear that the Trump administration would at least re-write trade agreements if not scuttle them. The first to go down was the Trans-Pacific Partnership. And re-writing the rest means, at the very least, injecting uncertainty into what the new rules of trade look like. At the worst, it means that the trade wars will resume in earnest. No state in the country has more exposure to economic damage in each scenario than Texas.  Now all that is at varying forms of risk. Sinking the Trans-Pacific Partnership may have been popular with Trump's supporters, but it was not popular with cattle ranchers. They have been building herds for years and anticipated shipping beef products -- some of which are not exactly popular among American consumers -- to Japan as tariffs fell from 38.5 percent to just over 9 percent. Now that opportunity is gone. Instead, other cattle-producing nations like Australia will try to seize the Japanese market on a bilateral basis.
Last week, Texas ranchers shipped 1,430 cattle to Mexico, most to slaughter and to market. On an annual basis that's 74,000 head, part of a brisk two-way business that sees hundreds of thousands of Mexican cattle coming north to be fattened in Midwestern feed lots. But in the event of a trade war, all bets are off. A tariff here means retaliation by the Mexican government there, and the last time that happened, it was the United States that surrendered...more

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