The Dow Jones Industrial Average fell more than 200 points this morning and the other major indexes were lower as of 10:30 a.m. Central, as China’s retaliatory action against tariffs imposed by the United States reignited fears of a possible trade war between the world’s two biggest economies.
Also this morning, a Minneapolis daily ran a story “Cargill sounds alarm as possible trade war with U.S. looms,” though the story was based on comments the company made last week, and its CEO has previously expressed this concern. (http://www.startribune.com/as-tariffs-intensify-cargill-emerges-as-leading-pro-trade-voice/485785831/) This headline was nearly identical to what ran in the Financial Times April 5 (https://www.ft.com/content/fe67b9fa-38ef-11e8-8b98-2f31af407cc8).
In fact, Cargill is perhaps the nation’s most outspoken corporate critic to Trump’s foreign trade agenda. In addition to it’s executives speaking out, the shipping and agriculture giant has enlisted its 155,000-person workforce via “FedByTrade” late last year for its employees, customers and communities to tell stories of regular Americans who depend on international trade for their livelihoods. The company also planned more direct outreach to rural communities and other places that profit directly and indirectly from global trade.
In December, Cargill CEO David MacLennan said Trump’s “America First” agenda in his first year in office “defies past conventions and defies history.” The Trump administration’s insistence that big trade deals cost American jobs reveals that the White House does not have “a full enough understanding of the complexity of negotiating (trade) agreements,” MacLennan said, according to the Star Tribune (https://www.seattletimes.com/business/cargill-workforce-pushes-back-against-trump-trade-policies/)
Beyond Cargill, the largest potential impact in Minnesota would be on soybean growers and companies that make products out of steel and aluminum.
The Trump Administration placed tariffs on $50 billion worth of Chinese imports last week. The Chinese said they will retaliate with tariffs on U.S. products, and this may include soybeans, which are Minnesota’s biggest export and China is the state’s biggest international soybean market. The Agricultural and Applied Economics Association just published an article predicting a $2 billion to $3 billion annual hit to U.S. economic welfare — including Minnesota’s huge soybean sector — if the Chinese retaliate to new U.S. tariffs by taxing U.S. soybeans.
President Trump says the tariffs are necessary to rebuild the U.S. steel and aluminum industries for reasons of national security. He believes the levies will lead to an increase in American manufacturing jobs.
Meanwhile, global financial markets have struggled since February in the face of signs that Washington and Beijing were headed toward a trade war after several rounds of negotiations failed to resolve U.S. complaints over Chinese industrial policy, market access and a $375 billion trade gap.
Boeing, the single largest U.S. exporter to China, slipped 0.8 percent, while construction equipment maker Caterpillar fell 1.3 percent.
Investors this morning are also assessing the impact of tightening monetary policy by central banks after the U.S. Federal Reserve raised interest rate last week and the European Central Bank said it planned to end its bond-purchase program at year-end.
Oil prices, which were lower in early global trading, steadied ahead of an OPEC meeting where top suppliers are expected to agree to increase global crude supply.
On the positive side, North Dakota oil production is near its previous record. Oil production increased 5.4 percent in April and is close to its record set in 2014. North Dakota is the nation’s second-largest oil production state and taps manufacturers, transportation, services providers and other businesses from Minnesota and surrounding states to help build and sustain its oil and natural gas businesses.