9 July 2018   Leave a comment

The trade war between the US and China will probably not have much of an effect on the overall economies of both.  But certain economic sectors will be significantly affected, and the Chinese retaliation will unquestionably have an effect on US farmers.  Two major crops, soybeans and corn, will be dramatically affected by the Chinese tariffs, and farmers of both of those crops are already facing lower prices. Tom Philpott of Mother Jones presents the relevant data:

“The current slide comes at a precipitous time for US farmers. They have about 179 million acres of the two crops growing in their fields—a combined land mass equal to nearly two Californias, and just 1 percent less than last year’s plantings. To make a profit on these crops, farmers will have to make at least $4 per bushel on corn and $10.05 on soybeans for the 2018 harvest, a University of Illinois analysis found. Currently, the two commodities fetch $3.43 and $8.40, respectively.”

We will see what the political effects of these price declines will be in the November elections in the US.

 

Just as he prepares to leave for a NATO summit, US President Trump issued harsh criticisms of the alliance.  Trump complained about the fact that only a few of the NATO allies meet their promise of spending 2% of their GDP on defense and that European states have trade surpluses with the US.  The US currently spends about 4% of its GDP on the military, but it also maintains nearly 800 military bases all around the world.  According to Bloomberg:

“Total defense expenditure by North Atlantic Treaty Organization members grew to 2.42 percent of their gross domestic product last year from 2.4 percent, the alliance said in an annual report released on Thursday in Brussels. The increase in 2016 was the first since 2009.

“The U.S. led with defense expenditure of 3.57 percent of GDP last year, up from 3.56 percent, while European nations boosted their spending on such outlays to an average 1.46 percent from 1.44 percent, according to the report. Canada, the second North American member of NATO, registered 1.29 percent last year compared with 1.16 percent in 2016.”

The difference in military spending is largely a feature of the global commitments of the US–a choice made by the US which is similar to the choice it has made to spend more than it saves which explains the balance of trade deficit as well.  It is difficult to imagine how Mr. Trump’s words will be received at the Brussels meeting, but he has definitely done a very good job of implementing Russian foreign policy.

 

British Prime Minister Theresa May faces a serious crisis as two members of her Cabinet–David Davis and Boris Johnson–have resigned in protest of her decision in favor of retaining limited ties with the European Union after Britain leaves.  Both Davis and Johnson represent members of her party that favor a “hard” Brexit–a dramatic cessation of ties with the EU.  It is unclear whether May’s government can survive, nor is it clear that Britain’s exit from the EU is assured.  The confusion means that both Great Britain and the Union have to reconsider their options.

Posted July 9, 2018 by vferraro1971 in World Politics

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