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Trump's Soybean 'Deal' With the E.U. Is Actually Pretty Insignificant

Europe already imports soybeans for free, and the European market isn't big enough to make up for China anyway.

Dan Koeck/REUTERS/NewscomDan Koeck/REUTERS/NewscomIt's a testament to the power of the tiny soybean—or, actually, the political power of the farmers that grow them—that the Trump White House has been scrambling this week to appease growers' complaints about the consequences of the president's ill-thought-out trade war. But the president's latest maneuver will do nothing to alleviate the harm caused by his own bellicose trade policies.

First, there was the attempt to buy farmers' support, with the White House announcing that it would spend $12 billion through a New Deal-era crop insurance program to bail out farms harmed by tariffs. This is the policy equivalent of lending a garden hose to the fire department after setting your house on fire (and then sticking taxpayers with the water bill). Then, on Tuesday, Trump was eager to announce the bare bones of a trade deal with European Commission President Jean-Claude Juncker that would see the E.U. importing more soybeans.

Soybeans are a critical battleground in the trade war because the United States produces so damn many of them. Farmers planted more than 89 million acres of soybeans across the United States in 2018, narrowly edging out the 88 million acres of corn that were planted, according to an annual survey by the Department of Agriculture. The United States is the world's largest exporter of soybeans, with nearly half the U.S. crop exported annually—and China is the largest importer of them. There are few singular products that better illustrate the benefits of global trade between the world's two largest economies than the humble soybean.

But it was only after this year's soybean crop was already planted that Trump announced his tariffs on steel, aluminum, and Chinese-made goods. China responded to those tariffs by targeting America's soybean crop—since then, the price of soybeans has fallen dramatically—leaving American farmers in the lurch.

That's why, at first blush, yesterday's joint announcement by Trump and Juncker appears to be a positive development—and, to be fair, any indication of a cease fire in the trade war is welcome. But a mere handshake agreement to send more soybeans across the Atlantic won't make up for a reduction in exports across the Pacific.

For starters, that's because the European Commission doesn't actually have authority over how many soybeans Europe imports. It doesn't procure soybeans for European markets and it doesn't tell European businesses where to buy their soybeans.

Of course, there are other ways that governments can encourage businesses within their borders to purchase materials from certain sources. Lowering trade barriers is one way to do it. If the Trump-Juncker agreement would lower European tariffs on American-grown soybeans, for example, that might do the trick of getting Europe to buy more American beans.

Except, well, the European Commission currently doesn't charge any tariffs on American soybeans. Which means European businesses already have access to all the American soybeans they would want. It's hard to see how—short of subsidizing demand across the pond—Juncker will follow through with his promise to have Europe buy more soybeans (falling global prices might encourage more buying in Europe, but not to a significant degree).

Rather than being an agreement to import more soybeans, it seems like Tuesday's deal was really nothing more than a pledge that Europe would not slap new tariffs on soybeans in response to American tariff-raising, like China did. Further reporting from Brussels seems to bear out that conclusion.

In other words, Tuesday's deal was not a sign that Trump's tariffs are forcing foreign officials to accept more global free trade—as the administration's defenders continue to claim.

It's also worth considering the scale of the soybean markets in China and Europe. In 2016, the most recent year for which full data are available in the United Nations Food and Agriculture Organization database, China imported more than 86 million tons of soybeans while Europe imported just under 19 million tons. Unless Juncker and Trump plan to start jamming soybeans down European throats, foie gras-style, there's simply no way that Europe can consume enough soybeans to make up for the loss of China as an American export market.

Source: Food and Agriculture Organization of the United Nations; Chart by Eric BoehmSource: Food and Agriculture Organization of the United Nations; Chart by Eric Boehm

And all of this posturing ignores one simple fact: Even if Europe did somehow manage to buy up all the soybeans that won't be sold to China this year, American farmers would only be breaking even, not coming out ahead. At best, the Trump-Juncker deal, like the White House's plan to bail out tariff-stricken farmers, is a band-aid on a wound willfully inflicted by Trump. This isn't improving global markets or increasing free trade; it's just damage control.

Photo Credit: Dan Koeck/REUTERS/Newscom

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  • loveconstitution1789||

    Of course, its not even a deal yet.

    The important part is the Reason staff and every other person with TDS said that Trump would fail 100%. There is no precedent that escalating trade wars works and this Trump plan will never work.

    You are all wrong and just admit it. Stop with the TDS and push the EU and China to move toward free trade by lowering their trade restrictions. Lowering trade restrictions in the EU and China would be good for America.

    Be an American not an American't

  • chemjeff radical individualist||

    The important part is the Reason staff and every other person with TDS said that Trump would fail 100%.

    So where's the winning part of all this?

    Trump seems to want to use American economic leverage to force open foreign markets to American products. If the goal is free trade, then that's not free trade either, that is just mercantilism. A world in which trade is dominated by an American mercantilist order is no more free trade than a world in which trade is dominated by nationalist tariffs all over the place. But I don't think Trump's real goal is free trade. He's a mercantilist.

  • Chipper Morning Baculum||

    Dude, it's lovecon89. Trump could eat a baby on national television, and he would be on here pronto, explaining how baby-eating will scare other nations into giving us their stuff, and how the baby was gonna grow up to be a Democrat anyway.

  • loveconstitution1789||

    How is Trump eating a baby really any different than aborting a baby?

    What is so funny, is that if you with TDS would simply focus on Trump's bad decisions that are real you have more supporters, including me.

    Trump not pushing Congress to pass budget cuts like he wanted- Bad
    Trump not gutting every government agency by 75% - Bad
    Trump not deporting every illegal in 30 days - Bad
    Trump not vetoing 2018 budget - Bad

  • sharmota4zeb||

    We outlaw baby eating, because baby eaters are easier to catch and prosecute. People tend to notice when a woman gives birth, but not when she stops menstruating.

  • sharmota4zeb||

    Wow, that's about as bad as donating to Planned Parenthood to help future Republican candidates win elections.

  • loveconstitution1789||

    There was no free trade pre-Trump.

    Trump offered to end trade restrictions if our trading partners ended trade restrictions. They declined. That would have been free trade or some awesome low trade restriction trade at least.

    Trump is using the trade restriction game against Europeans and Chinese because they will break before the USA. The goal is to get as near free trade as possible. Trump knows how the game is played because he mingled with Democrats and RINOs for decades.

  • Overt||

    I would agree that Trump's policy hasn't failed 100%. But wouldn't you also agree that Trump's policy hasn't succeeded yet?

    So far, there have been no concessions made that improve the trade situation prior to Trump's escalation. As this article points out, it wasn't a victory for trade. All the US got was agreement from the EU that they wouldn't mess with the small soy bean trade to Europe. They did not agree to lift prior tariffs. China still has a huge tariff on the US soy bean production.

    So while Trump may have a victory coming, it hasn't arrived yet, despite the cheering from the Trump supporters like you.

    And note that I have often gotten on this site to defend Trump against TDS. But in this case, he is just flat wrong. Making Americans pay more for their goods and services to punish foreign nationals is not moral. Whether it ultimately works (which I doubt), it was wrong for Trump to force Americans to pay extra for goods and services to protect some favored class.

  • loveconstitution1789||

    Its absolutely not a success, yet.

    People with TDS are absolutists about Trump being literally Hitler who conquered Poland with Tariffs.

    I hope it works out well for the USA and the EU too.

    Sometimes it takes a guy like Trump willing to stand up for America and push back to get others to see that the status quo managed trade is not as good as freer trade.

  • Paulpemb||

    I personally wouldn't expect to see any concessions until at least after the midterms. Trump's negotiating partners know that if the Democrats do really well in the midterms that Trump will lose a lot of leverage. They also know that hanging tough now makes it more likely that the Democrats will do well in the midterms.

  • loveconstitution1789||

    What the plan when Democrats do very poorly in Mid-terms and Trump continues putting pressure on trading partners?

    If their strategy is what you say, then they really have not learned anything. Trump is unstoppable using typical Lefty politics.

    Lefties try and rig an election- doesnt work
    Lefties throw a 'sex scandal' at Trump- doesnt work
    Lefties sue Trump for violating Emoluments Clause- Congress just consents to payments.
    Lefties use RINOs to get a Mueller investigation going to accuse Trump of some illegal activity- doesnt work

  • sharmota4zeb||

    I'm not sure the Democrats will do better in the elections. My co-workers are thrilled that their hourly wages are going up and the restaurants in the area all have help wanted signs. Democrats who earn hourly wages outnumber the Democrats who read the news.

  • Happy Chandler||

    But they aren't.

    All employees: Average wages June 2017: $10.76, June 2018: $10.76
    Non-supervisory employees: June 2017: $9.26, June 2018: $9.24.

    Trump has 100% failed the working class.

  • modis||

  • sharmota4zeb||

    Good point, Overt.

  • loveconstitution1789||

    Trump offered to end trade restrictions with our trading partners, if they end their trade restrictions. They refused.

  • Yellow Tony||

    Either lc1789's account is now operated by a script or he's lost it.

  • jcw||

    He's out of his depth and going with his tried and trusted "they refused" rhetoric.

  • Homple||

    He offered. They didn't accept. I think that means the same as "refused".

  • loveconstitution1789||

    The media refuses to cover the story in depth, so I guess we'll never know.

  • loveconstitution1789||

    I know you dont want it to be true, so you defer to your M.O. Lunacy.

  • Happy Chandler||

    I was just thinking that he's always been a bit of a parody, like OBL. But, Trump supporters are so hard to parody, that everybody missed the joke, and he realized he had to go totally batty. Now he just looks like Alex Jones.

    Or, the orders through the GRU were modified? I hear that Reason freely shares the IP addresses of its commenters, right?

  • Happy Chandler||

    Argh. Missed my /sarc tag at the end. Stupid HTML.

  • loveconstitution1789||

    Chanandler, have you and your Comrades gotten all your wagons circled yet?

    Election 2018 is going to be rough for you too.

  • loveconstitution1789||

    What moron uses their actual IP address?

  • Happy Chandler||

    Your komrade forgot to activate his VPN once. Hopefully you're more careful!

  • loveconstitution1789||

    Oh no! You mean the Russians 'forgot' to hide their IP this one time but remembers all the other times?

    If I was going to run a Frame-Up scam on you, don't you think that I would spoof your IP and make it seem like my info was coming from your IP? its the equivalent of leaving a gun at a murder scene with YOUR fingerprints on it.

    Do you even know how the spy game via the internet works?

    Only a moron thinks that an IP actually can be linked to someone without any further proof.

    You probably think DNA of someone at a crime scene without any other evidence means that the person is 100% guilty of that crime?

  • Cathy L||

    So you do have experience socking.

  • loveconstitution1789||

    Cathy L, You're a sock puppet. Well that explain a lot.

  • sharmota4zeb||

    That reminds me, I saw a guy walking down the street with a chain saw in his hand earlier this week.

  • Tony||

    "So now we will also impose import tariffs. This is basically a stupid process, the fact that we have to do this. But we have to do it. We will now impose tariffs on motorcycles, Harley Davidson, on blue jeans, Levis, on Bourbon. We can also do stupid."

    --Jean-Claude Juncker

    Is America great again yet?

  • Don't look at me.||

    It must be . Europe is emulating us.

  • loveconstitution1789||

    Good thing we only have an Emoluments Clause not an Emulating Clause.

  • Juice||

    the fact that we have to do this.

    You don't actually have to shoot yourself in your other foot, you know.

  • DesigNate||

    But they don't have to do this. And neither do we for that matter.

  • sharmota4zeb||

    The Soviet Union and its allies used to make it difficult to get American products behind the Iron Curtain. How many of Trumps critics voted for Reagan?

  • Ken Shultz||

    I'm not sure why we're zeroing in on soybeans. If Trump says they're trying to eliminate all non-auto related tariffs to zero, then that's a good thing. It's not as good as actually eliminating all those tariffs, but the markets aren't rallying because Trump's statements are meaningless on this.

    Meanwhile, spot prices for soybeans rallied yesterday.

    The big issue is China, and the considerations there are political rather than economic. Put simply, swing voters in rust belt swing states voted for Trump in no small part because they wanted someone to stand up to China for the rust belt. Trump has delivered on that. Whether that's to their benefit is a separate question. The fact is that Trump has stuck it to China as promised, and swing voters in swing states like Wisconsin, Michigan, Ohio, and Pennsylvania are likely to reward him for that come 2020.

    In fact, Trump can probably run on his record against some wanna be populist Democrat in those swing states--and win. He's not about to throw that advantage away before November 2020. If China wants to make a deal with the U.S., they'll have to offer Trump something even better than that election advantage, and that's unlikely. More likely that China will stop hurting its own people with soybean tariffs than that Trump will embrace European style trade truce with China. Beating up on China is what's going to get Trump reelected--regardless of whether beating up on China is in the best interests of the U.S.

  • Happy Chandler||

    All non-auto industrial tariffs. Excluding agriculture and autos, which are the two industries with the most protection. The EU gave nothing but a photo op for Trump, and he claimed victory. There's nothing there. This agreement is as much progress as the NK agreement.

    Soybeans are a huge commodity crop, and the rally today is about a nickel, after falling about $2. It is a huge loss of income for farmers. American tofu eaters are doing great though! China is not as dumb at Trump about tariffs. They only levied the tariff on American sobyeans, so they are sourcing from South America and will not see huge price jumps. Contrast that with Trump's tariffs affecting most or all countries on steel and aluminum, which hurt Americans most. His mercantilism might have stood a choice if he worked with allies to isolate China. But, he has raised taxes on all Americans and expects other countries to save him.

  • loveconstitution1789||

    Protectionists in the EU and China are shaking in their boots.

    Trump has successfully got the EU to crack and discuss lowering trade restrictions.

  • Happy Chandler||

    Maybe they would be willing to discuss a partnership regarding investment and trade with the US. I don't know, maybe call it the Transatlantic Trade and Investment....something.

    Give it a few years, and we might get back to where we started. At least, with the EU, Trump has agreed to stop digging.

  • loveconstitution1789||

    The TTIP that was never ratified or went anywhere?

    So discussing that managed trade agreement is 'success' but Trump getting the EU to crack and discuss managed trade is not success?

    What color is Wagon #2?

  • Overt||

    While I think you make a fair point about the politics, it is also fair to make a political point about what this means: The people weren't in reality asking Trump to stand up to China. They were asking Trump to force other Americans to subsidize them.

    The reason why Soy Beans are being discussed was that in the process of forcing Americans to pay more for Rust Belt products, Soy Bean exporters are also getting screwed. This is the direct consequence of his original action. And for people then to declare victory when Europe merely agrees that they won't also screw soy bean exporters is a bit silly. Soy Bean prices are off ~18% since late May when this all started. I'm glad that they have rallied a small amount as the market prices-in its relief that Europe ALSO won't screw them, but they are still in a worse place than they were before this began.

  • Ken Shultz||

    "The people weren't in reality asking Trump to stand up to China. They were asking Trump to force other Americans to subsidize them."

    Because swing voters in rust belt swing states are wrong about the impact of what they want, that doesn't mean they don't want it.

    Yes, ultimately, tariffs mean making American consumers pay more for things than they would otherwise. I'm not sure your average factory worker really understands that.

    In their minds, your "theory" sounds something like global warming--something all the elitists believe in but mostly just means working stiffs losing their jobs to Chinese competition.

    We need to persuade them of the truth, but I see them as the battleground rather than as the enemy. We want to take as much of the battleground as possible from the enemy. The enemy is politicians, unions, and others who prey on our fellow Americans' ignorance.

  • sharmota4zeb||

    Yes, ultimately, tariffs mean making American consumers pay more for things than they would otherwise. I'm not sure your average factory worker really understands that.

    You might be right. Plenty of my coworkers think that damaging a fellow employee's car will cause them to get more gigs. They fail to understand that it also means the branch office will get fewer clients.

  • Shirley Knott||

    After all of yesterday's crowing about how Trump's "policy" worked, commenters are now acknowledging that it's not yet a done deal.
    Do you suppose tomorrow they'll acknowledge that the EU already has no tariffs on soybeans?

    There's nothing quite as bitterly absurd as self-described right-wing libertarians cheering on government meddling with the economy. Except maybe those same folks cheering against principles of non-interference in foreign governments when it's to support said government meddling in the economy.

  • Ken Shultz||

    I don't know who said it was a done deal. There was plenty of crowing about how so many of the tariffs on China were a done deal--long before they were actually implemented three weeks ago.

    Yeah, actually doing something is more important than talking about it.

    But talking about it isn't exactly nothing. In fact, one is probably a prerequisite for doing something.

    It won't be over until the tariffs are actually reduced, but there's plenty of room for cautious optimism. The heavy industrial potion of the S&P 500 rallied 1.2% yesterday on this announcement. If you're so sure nothing will come of it, then go ahead and short the ETF. Do it on margin! I dare you.

    Wait, we're talking about soybeans. Why?

  • sharmota4zeb||

    When I was a kid, people talked about becoming rich by trading pork belly futures.

  • loveconstitution1789||

    Trumps plan worked. Pushing back against EU trade restrictions got the EU to talk.

    Those with TDS said it would never get to this stage.

    Admit you were wrong so we can move on.

  • Ken Shultz||

    Why are we focusing on soybeans?

    Isn't it because China imposed a retaliatory tariff on soybeans, and Trump is looking to take some of that pain away from U.S. farmers? Didn't the EU promise to buy a bunch of soybeans right away? This isn't about the free trade of soybeans with the EU. It's about alleviating the pain of China's retaliatory tariffs on soybeans--without lowering tariffs on China. If you want to go after Trump for something, why not go after him for that?

    The media will presumably ignore that inconvenient truth because they don't want to make it look like Trump is trying to help farmers. They'd denounce Trump for trying to help farmers ahead of elections to control the senate, in which farming interests have a disproportionate amount of influence. But then the media isn't against that sort of thing. They avoid talking about it because they think buying farmers off like that is a good thing.

  • Happy Chandler||

    It's a statement by a man with no ability to follow through with it, and with no mechanism to make it happen.

    The EU was already going to buy more soybeans, because the US soybeans are now the cheaper option.

    The agreement was that, if Trump didn't levy his idiotic auto tariff, the EU wouldn't retaliate. Trump got a photo opportunity, and the world got that Trump backed down. And that's why the market went up.

    And y/y real wage growth is still zero.

  • loveconstitution1789||

    How many people are you hauling in Wagon #2 Chanandler?

  • Happy Chandler||

    Did your meds run out? I can help you, and have some shipped out if you need. Lithium? Lexapro?

  • loveconstitution1789||

    You're the retard circling the wagons.

  • DesigNate||

    I didn't see anyone crowing about how it worked. What lovecon WAS saying, is that most people here were saying it would 100% fail (hell, I thought so too) and we should at least admit that talking about tariff reductions/eliminations is at least 1% evidence of his gamble working.

    Personally I think even if it 100% works, it was not a good gamble to make.

  • Eddy||

    What's a "soyabean"? Is it like a meat-a-ball?

  • loveconstitution1789||

    Its what the Soy-a-Boyz eat.

  • Happy Chandler||

    British spelling. Should be two words.

  • Jerryskids||

    Look, none of this will matter by Saturday when Trump calls the Pope a pedophile and that's all we'll be talking about then.

  • Ken Shultz||

    Or maybe Stormy Daniels will get a parking ticket.

  • sharmota4zeb||

    As a matter of general principle, I hope the tariffs go back down soon. However, perhaps the EU will have an easier time absorbing refugees if they feed an all soy diet to the refugees who live off welfare.

  • ChuckNorrisBeardFist||

    Yeap all about the Soybeans...not about

    "Fourthly, we agreed today to join forces to protect American and European companies better from unfair global trade practices. We will therefore work closely together with like-minded partners to reform the WTO and to address unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state owned enterprises, and overcapacity."

    Oh and let's not leave off Europe buying natural gas from US instead of Russia. Wait, he's Putin's puppet.

    Reason..Reason..why have you jumped the shark so hard?

  • Rev. Arthur L. Kirkland||

    Trump's Soybean 'Deal' With the E.U. Is Actually Pretty Insignificant
    Europe already imports soybeans for free, and the European market isn't big enough to make up for China anyway.

    Trump isn't trying to, does not need to, and could not persuade informed, educated, smart people. His target audience is gullible enough to follow anything shiny and tweety.

  • Bearded Spock||

    If the Media, libertarians, Reason mag, and the Beltway establishment had shown as much concern over the past 25 years for the effect of Free Trade on US blue-collar industrial workers, as they are showing now for the effects of tariffs on a few thousand soybean farmers, then Donald Trump would not be president today.

  • AD-RtR/OS!||

    Whatever he does is either "not enough", or "insignificant".
    Making The Good the enemy of The Perfect - the always constipated world view of the Libertarian.

  • buybuydandavis||

    "Look, trade negotiations have a temporary effect on a US product"

  • Dorila||

    Most of soy bean produced in the US, Brasil, Argentina and Africa are gmo and use tons of herbicides and pesticides, particularly Monsanto's RoundUp which contains glyphosate. This chemical has been tried to be forbidden in the EU. France and the Netherlands already did. Europe is on its way -sooner or later- to ban glyphosate, therefore it is most probable that soy bean containing traces of this chemical will also be banned.

    About 80% of soy bean produce is fed to animals contaminating milk and derivates. I prefer to buy glyphosate free French and Dutch cheese. Gmo soy has no life in the EU in the long term. All this looks to me like a Trump mediatic show. The chemical industry is probably working hard to come up with another herbicide to substitute glyphosate, to be banned a decade later.

  • Dorila||

    The president of the European Union declared a while ago that Europe will not buy GMO soybean!

  • Gunjan Chokshi||

    This will create panic in market. pls suggest how to protect price form this effect

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