The China Impact

Oil prices are normalizing. The Dow is near the 20,000 barrier. Unemployment continues to improve. Consumers are spending money on cars, houses and durable goods. President-elect Trump is promoting an “America first” agenda along with a promise for investment in infrastructure and defense. It all adds up to a lot of positives in the economy.

Such a strong economic position relative to other international economic powers like China opens the door for the U.S to take a more aggressive approach to trade policies.

The Office of U.S. Trade Representative estimates the U.S imported nearly 500 billion dollars in goods and services from China in 2015. The U.S exported 161 billion dollars in goods and services to China. Add to that the combined direct foreign investment between the two countries of 75 billion dollars in 2014 and you can see there is a lot of room for trade negotiation, with both sides having great incentive to work across the table.

It’s not a secret that President-elect Trump has already been poking a stick at China’s trade practices since the early days of his campaign. China’s economy is struggling to match the rate of growth it had been experiencing just a few years ago. The Chinese demographics are becoming older, further hurting its ability to absorb decreased international trade within its own economy in the near future. The U.S. will be in a strong position to continue putting pressure on China to increase imports of important U.S. products.

Fortunately for those involved with U.S. agriculture, an industry which has struggled the past couple years, the Chinese market for U.S. agricultural products totals 20 billion dollars, with soybeans (11 billion dollars) and coarse grains like corn (2.1 billion dollars) among the leading agricultural products.

Pressure from the new administration could help strengthen opportunities to grow U.S. ag exports even more. Additionally, the strong, decades-long relationship forged with the Chinese leadership by Iowa Governor and U.S. Ambassador to China nominee, Terry Branstad could greatly improve trade opportunities for the ag industry.  This, in turn will help industries in rural communities ranging from financial to manufacturing.

Of course, with international trade, there are always risks and a lot of moving parts. However, the U.S. is in a better position now in negotiating advantageous trade agreements with China than it has been in a long time. With agricultural products being one of the biggest trading chips and a strong U.S. economy that has, in recent years, consumed nearly 20 percent of China’s exports (the largest of any of China’s trade partners), the prospects look good for trade opportunities that will benefit middle America for potentially the long term.

Sources:
https://www.fas.usda.gov/regions/china
https://apps.fas.usda.gov/psdonline/circulars/production.pdf
https://www.bloomberg.com/news/articles/2015-09-09/this-table-shows-what-s-happening-with-chinese-trading-partners-all-around-the-world
https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china

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