Meat+Poultry - April 2019 - 14

WA S H I N G T O N

Trade war impacts
Both the US and China have suffered
more damage from the trade war than
expected, Blu Putnam, CME Group
chief economist and managing director,
said at the opening session of INTL
FCStone's annual Global Markets
Outlook conference in early March.
China felt pressure initially and
the US has felt more pressure as the
trade war continued, especially in the
automobile and agricultural sectors,
Putnam said. As a result, the pressure
to get a deal done "has gone way up."
"The US farmer has really paid for
the trade war in many ways," he said.
Putnam suggested an immediate
response to a trade deal with China
would be "buy the rumor, sell the fact."
The key point to a deal will be whether
the tariffs come off or not, he said.
At the same time, he suggested the
Democrat-run US House will "reject
any agreement" with China.
The removal of tariffs also will
affect whether Canada approves
the United States-Mexico-Canada
Agreement (USMCA), which he
suggested was the North American
Free Trade Agreement under a new
name. He said Congress' "lack of
approval may not matter" if the US
decides to honor the USMCA anyway.
Aging populations in both the US
and China will affect economic growth

going forward, Putnam said. In the US,
16 percent of the population was over
65 years of age in 2018 and about 21
percent will be by 2030. In China, about
11 percent was over 65 last year and
17 percent will be by 2030. However,
the impact of an aging population in
China is delayed a few years as people
continue to move from rural to urban
areas, he said. He noted that China's
economy still was growing, but not as
fast as in the past. China has about five
years to get its trade policy "figured
out," he said.
In the US, the economy has shown
signs of strengthening, and a growing
economy can take on more debt,
Putnam said.
"Debt doesn't cause recessions,"
Putnam said. "Economies need debt
to grow."
Arlan Suderman, chief commodities
economist at INTL FCStone also
analyzed how a clash of basic values is
hindering progress in a new China-US
trade deal as well as in getting trade
talks going with the European Union,
during remarks at INTL FCStone's
Global Markets Outlook conference.
Suderman said asking the European
Union to include agriculture in
upcoming trade talks would be like
asking China to move to a free market
economy, terming both situations a
"significant values clash."
China sees its economy and military
as one with no interest to change,

Suderman said. China's strategy
for superiority is seen as a strategy
for security.
US President Donald Trump needs
to think about the next election in two
years, while China's "president for life,"
Xi Jinping, needs only to keep the core
group of 400 leaders in the communist
party happy, Suderman said. China
knows that the recently elected
Democrat-controlled US House makes
Trump a weaker negotiator, as does the
short-term nature of his presidency,
either two or six more years. Under
China's current structure, it would take
another eight years to change how the
economy operates. If the European
Union joined the United States in its
pressure on China, the change could
happen in four years, he said, but
the EU lacks the willpower and the
economic strength to do so.
Instead of moving toward reform,
China's government has moved
toward stronger control, in part due to
rumblings within the Communist party
about Jinping's handling of the trade
war. China has a history of making
promises and not keeping them,
Suderman said, noting that in the past
China has made promises to one US
administration and then not kept them
under the next administration without
repercussions. There's little chance that
a trade deal will change the way China
does business long term, he said.
RO N S T E R K | m e a t p o u l t r y @s o s l a n d.c o m

"Debt doesn't cause recessions.
Economies need debt to grow."

14

MEAT+ POULTRY | 04.19 | www.meatpoultry.com

Gary Blakeley/Shutterstock.com

- BLU PUTNAM
http://www.meatpoultry.com
Meat+Poultry - April 2019

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