By admin       2018-10-15

The tariff battle between the U.S. and China is ongoing and, as stated last week, I remain very much in favor of the tariff. It is the only way cotton production will survive in the U.S. as a significant part of American agriculture. Nevertheless, unless cotton growers actually receive real relief from either the market or in the form of government tariff disaster payments, a crisis is front and center in the Cotton Belt. Assuming growers are fairly compensated, then the U.S. holds considerable leverage over the Chinese government in the tariff battle. The Chinese debt has all but overtaken the RMB and the economy has weakened. As a reminder, the U.S. gave its entire cotton supply chain to China in exchange for the promise of fair trade. For over 20 years the Chinese have reneged on each and every trade promise they had made to the U.S. (Actually, they have not spared other countries with their broken trade promises either.) Then, when the current U.S. administration asked the Chinese to finally honor their signed commitments, the Chinese reneged. They not only reneged, but even genuinely acted shocked that this U.S. would even ask them to obey the terms of their promises. After all, no other U.S. president had ever asked China to obey the rules.

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