Thinking About Tariffs — Kevin Van Trump

by Kevin Van Trump (with permission)
May 13, 2019

From my perspective and many others, farmers have certainly taken the brunt of the hit associated with current trade negotiations. Yes, in the end farmers could be the biggest winner, but some are worried they won’t be able to hold their breath long enough to see the light of day.

It was interesting to hear President Trump talk about possibly using the increased tariff money from the Chinese to purchase agricultural products from the U.S. producer. This obviously sounds good in theory, but there’s a ton of debate. One side says it’s fairly simple: we use the increased revenue to purchase crops and other ag related products from U.S. producers to help hungry nations that need it most.

The argument on the other side is that China isn’t really paying the tariffs; U.S. consumers and U.S. corporations are paying the tariffs. The goods being taxed are the goods being imported by American companies. In many instances the companies importing the goods pay the tariffs and are then forced to pass on the additional cost to American buyers. If American buyers don’t want to pay the additional money, then you have to imagine they will start to look for alternative options.

A bright spot is the fact this might also force U.S. corporations to look for alternative ways to produce or gain access to their goods—perhaps bringing jobs back to the U.S. and or finding cheaper alternative means for production. Either way, I don’t see it as a good thing for the Chinese.

I thought it was interesting to hear a few well-known investors say the irony of the entire thing is that we will probably borrow money from the Chinese through the sale of Treasuries to help bailout and pay the U.S. farmer. It’s just crazy when you start thinking about all of the variables and moving parts associated with trying to renegotiate more fair-trade deals.

Washington certainly has its work cut out. Final winners and losers are still yet to be determined. In the end, regardless of political preference, I still believe we are going to come out in a better position!

Kevin Van Trump if CEO of Farm Direction, an angel investor, and author of the Van Trump Report. Subscribe to his report here.