Shipping Emissions, Pre-APEC Tit For Tat, and U.S. Agriculture Exports

Summary

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The Trade Guys: "Shipping Emissions, Pre-APEC Tit For Tat, and U.S. Agriculture Exports"

Podcast: The Trade Guys, CSIS
Date: October 27, 2025
Host: Phil Luck
Guests: Scott Miller and Bill Reinsch

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Episode Overview

In this episode, the Trade Guys tackle three major current events impacting global trade and U.S. policy:

• The International Maritime Organization’s postponement of carbon taxes on shipping
• Intensifying tit-for-tat export controls between the U.S. and China, focusing on rare earths and technology
• The sharp decline in U.S. agricultural exports to China, and mounting pressure on U.S. farmers

With candid debate, familiar wit, and deep policy experience, Scott Miller and Bill Reinsch analyze the political, economic, and strategic implications of each issue.

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1. Global Shipping & Climate Change Backslide

[00:27–10:42]

Key Points

• IMO Carbon Tax Postponement
  The International Maritime Organization postponed a crucial vote on establishing a global carbon tax for ocean shipping, after U.S. and Saudi opposition citing consumer price increases.

• Diminishing Focus on Net Zero & Climate
  Scott points out the rapid collapse of “net zero” momentum and climate policy from public and political attention:

  • “It was a big story almost all the time in say 2021, 22, in that period of time. And today, you just can't find it. Nobody even talks about it.” — Scott [02:30]
  • He links this to practical “math” problems as subsidies for renewables dried up and Western central banks raised interest rates, making decarbonization projects less viable.

• Structural Economic Headwinds
  High interest rates, reduced subsidies, and unaddressed challenges in renewable power storage have undermined climate investment.

  • “There’s a lot of pieces of the net zero agenda where the math was never done to a high enough standard, particularly on storage and the efficiency of storage.” — Scott [04:44]

• Political Will & Priorities Shift
  The ascendance of energy-hungry priorities like AI, and shifting incentive systems, further displaced climate action:

  • “If I had to look for a culprit, AI just became a priority that requires massive amounts of energy...it just changed the entire expectation of energy.” — Scott [05:39]

• Bill’s Counterargument: Political Blockage, Not Just 'The Math'
  Bill robustly disagrees, blaming the Trump administration’s “demolishing” of climate programs and renewables for the stalled progress:

  • “We have a president who thinks climate change is a scam...promoting coal and oil, you know, the dirtiest fuels of all.” — Bill [06:59]
  • He laments America’s retreat from global leadership:
    “This is the triumph of national selfishness over the global commons... We've got countries that are going to disappear... And what has happened now is the United States has decided it doesn't want to do anything to solve the problem.” — Bill [08:21]

• Impact on Global Commons
  Host Phil and Bill agree on the tragedy for global environmental cooperation.

Notable Quotes

• “When you set big goals, don’t forget the math.” — Scott [05:20]
• “This is not a small problem... It's going to make them (oil exporters) more money because the price of oil is going to go up...and the result of the world is it’s going to be hotter, dirtier, stormier.” — Bill [08:30]
• “Greta Thunberg has left a job opening in the climate space. Perhaps that's a post CSIS career for you.” — Scott (lightly teasing Bill) [09:56]

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2. U.S.-China "Tit for Tat": Rare Earth Export Controls

[10:42–19:37]

Key Points

• China Tightens Rare Earth Export Controls
  China expanded export controls on rare earths and downstream products, matching and mirroring recent U.S. controls—widely seen as classic “retaliation in kind.”

• Mirrored Policies & 'Hypocrisy'
  Bill highlights the mirroring:

  • “There’s no rule against hypocrisy in the trade business. There’s no WTO rule against hypocrisy. And this is an example of it.” — Bill [11:30]

• Diplomatic Sumo: Summit Leverage
  The moves are interpreted as pre-summit posturing ahead of the upcoming U.S.–China leader summit, with each side seeking leverage:

  • “This is like a sumo match and you got these 400 pound guys... we finished with the rice throwing and now we’re in the belly bumping phase...” — Bill [12:27]

• Substance vs. Symbolism
  The escalation is seen as a means to extract minor diplomatic wins, soon to be traded away after the summit, unless deeper policy intentions are revealed.

• Internal U.S. Policy Debate
  Bill details divisions inside the Trump administration over the scope of technology controls:

  • Deny only advanced tech, or all tech?
  • “There’s consensus that we should deny advanced products to China. There is debate over how far below advanced we should go and deny.” — Bill [15:59]

• Trade Strategy Tension: 'Run Faster or Trip the Other Guy?'

  • Should the U.S. focus on staying ahead (“run faster”) or trying to block China (“trip the other guy”)? This dilemma, Bill notes, has persisted for decades.

• Host Phil: Policy Contradiction
  The administration’s approach is described as incoherent:

  • “There seem to be between policies, choosing very different approaches here.” — Phil [16:44]

Notable Quotes

• “The fact that the administration says, oh, this is terrible, just reeks.” — Bill [11:55]
• “This is an area where [Trump] said different things at different times...and that then leads to the uncertainty that everybody complains about.” — Bill [18:03]
• “We got to do a little better job at both running faster and not being surprised when the Chinese do exactly what the Chinese are expected to do and almost always do.” — Scott [19:19]

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3. U.S. Agriculture: “Food Fight” Fallout

[20:28–29:44]

Key Points

• Sharp Decline in Exports
  U.S. agricultural exports to China down 73% in 2025; soybean exports essentially vanished since May.

  • Beef and other products also hit hard, with Chinese authorities cancelling U.S. beef facility licenses.

• Historical Playbook
  Bill recounts how China weaponizes agricultural imports for leverage:

  • “They stopped buying wheat...and within three months Congress had repealed the tariffs. I think the Chinese took a lesson from that and they’re doing it again.” — Bill [22:57]

• Political Reality for U.S. Farmers
  Farmers remain dissatisfied, but Bill notes their electoral leverage is limited due to persistent support for Trump in “red states.”

  • “He’s not going to lose Kansas or Nebraska because of soybeans. He just isn’t.” — Bill [23:49]
  • “What he’s going to end up doing is...bail them out. And they stopped talking about it because it got awkward during the shutdown to talk about spending another 10 to $14 billion to bail out the farmers for Trump’s policy mistake...” — Bill [24:28]

• Diversification Failure & Lessons

  • Almonds serve as a rare example where U.S. producers successfully diversified to offset China’s market.
  • Soy and sorghum did not, making them vulnerable.

• Scott’s Crop-by-Crop Analysis

  • Soybeans: U.S.-China trade is volatile, but global soybean demand remains steady; beans “are finding a market somewhere.”
  • Beef: Current shortages and high prices are due to multiyear livestock cycles, not just trade friction.
  • Almonds: California’s industry shows how diversification can insulate producers.

Notable Quotes

• “Farmers are never happy. No matter what’s going on, they’re never happy. If they’re having a good year, they’re worried about drought next year and if they’re having a bad year, they’re worried that next year is going to be worse.” — Bill [21:51]
• Host banter:
  • “Does the North Carolina State Fair have a cow made out of butter like the Iowa State Fair?” — Bill [29:16]
  • “Not quite...but there was not a cow made of butter.” — Scott [29:24]

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Timestamps for Key Segments

• [00:27] Episode topic rundown by host Phil
• [01:52–06:17] Scott’s deconstruction of shipping emissions policy collapse
• [06:59–09:56] Bill’s critique and the climate/global commons debate
• [10:42–19:25] U.S.-China rare earths export controls and the pre-summit maneuvering
• [21:51–29:44] U.S. agricultural export crunch and farmer politics

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Tone & Language

• Conversational, frank, with characteristic jest (“end of rant”—Bill).
• Policy nerdiness mixed with deadpan humor.
• Noteworthy for its skepticism, frustration with policymakers, and nostalgia for more coherent strategies.

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Memorable Moments

• Bill’s “sumo wrestling” analogy for U.S.–China trade maneuvering [12:27]
• Scott’s “it was a man-bites-dog moment” description of the U.S. opposing trade costs [01:52]
• Bill’s withering critique of the Trump administration on climate policy (“tragedy when the history of this era is written”) [08:42]
• State fair banter: fried items and butter cows give a brief comic break amid economic doom [29:16–29:44]

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Bottom Line:
This episode highlights the sharp deterioration in global climate collaboration, the predictability (and futility) of U.S.–China tit-for-tat trade policies, and the complicated calculus U.S. farmers face in an election year—delivered with the Trade Guys' signature mix of policy expertise and humor.

Transcript

[A]

I'm Scott.

[B]

I'm Bill and we're the Trade Guys.

[C]

You're listening to the Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand. I'm Phil Luck and I'm here with Scott Miller and Bill Reinsch, the CSIS Trade Guys. Thanks for listening to the Trade Guys. This week we'll discuss more stumbles for the effort to combat climate change, an export control tit for tat in the U.S. china trade war in the lead up to a leader level summit in Korea, and when a trade war becomes a food fight, the impact of the US China trade war on US Farmers. All this and more on the Trade Guys. Hello and welcome to Trade Guys, the show where we're breaking down the big moves in global trade, economics and policy. I'm Phil Luck here with Bill Reinsch and Scott Miller to talk about three big stories in trade. This week we've kind of running the gamut of different issues. We've got carbon taxes on maritime shipping, Chinese export controls on rare earths, and a trade war that's turned into a food fight. First up, global shipping and climate change. Last week, the International Maritime Organization, which regulates international shipping, postponed a vote on establishing a carbon tax for ships. The delay comes after the United States and Saudi Arabia pushed hard against it, both arguing that the proposed carbon tax mechanism would lead to increased prices for consumers. This isn't just a bureaucratic hiccup. It's going to have real implications potentially on decarbonization investments in the shipping industry, which represents about 3% of total CO2 emissions. Let's just skip over entirely the humor of the US Administration saying that increasing shipping costs of international trade is a bad thing. Scott, what should we make of this?

[A]

Well, yes, it does have this sort of man bites dog element to it from a U.S. standpoint, which we always love to catch people doing. But the essential issue is that the maritime industry uses extremely inexpensive grades of fuel to run their business worldwide. The alternative fuels that are viewed as more sustainable or less polluting are dramatically more expensive, four to five times for any given volume. This was basically carbon tax was part of a net zero program to green the shipping industry. And for me, what's spectacular over the last two to two and a half years is the degree to which climate change and net zero have essentially disappeared from the public discussion. I've seldom seen an issue collapse so quickly. It's as if there was some time traveler who disappeared from the news feeds for a couple of years and came back. It was a big story almost all the time in say 2021, 22, in that period of time. And today, you just can't find it. Nobody even talks about it. While, of course, the US Got blamed for this. And that's fine, I think the Trump administration probably likes that. But for me, it just. What's amazing is how quickly the narrative changed on this issue and how much we invested in the idea. And I'm trying to think, why is that? Okay, well, usually when you set a big audacious goal, that's great and you get a lot of kudos for it. But it's very important to do the math. And I think if you were looking for what collapsed the net zero agenda, it was probably the math. The first thing was the math changed for a lot of projects when interest rates got off the zero bound, that as interest rates rose from roughly zero to about 5%, you could see, for instance, offshore wind. And the investor projects that had the sort of the shakiest financings got very bad very quickly and most of the projects got stalled or canceled during that period of time. Second place, that the math changed was on subsidies, that there was a lot of subsidies for all sorts of green energy and renewables, those kinds of things. And as the subsidies dried up, the math changed. Interesting article, for instance, about the electric vehicles, battery electric vehicles in Japan, which. Which are a very low share, less than 1% of the total market sales. And interestingly, Japan never subsidized the sale of battery electric vehicles. So consumers without the subsidies make very different decisions and stick with a hybrid or something like that in any case. So that's another change of the math. The third is sort of the life cycle of many renewable products. I went to university with an engineering school in Northwest Ohio. We had an area of campus we called the Tundra. And we thought the wind never stopped when it came across the tundra. It'd be a great place for a couple of wind turbines, which when there were subsidies, the engineering school had projects to install them. Now they're dismantling them and they have to raise money to dismantle the turbines which have reached their service life. So again, the math turned against it. But also there's a lot of pieces of the net zero agenda where the math was never done to a high enough standard, particularly on storage and the storage requirements and the efficiency of storage. Steven chu, back in 2009, who came at it as an academic, was very concerned about that. Current Energy Secretary Chris Wright comes commercial side also is concerned about energy density. But it's one of these things when you set big goals, don't forget the math. And if I had to look for a culprit, AI just became a priority that requires massive amounts of energy to be generated and have that energy be very stable and interruption free. And it just changed the entire expectation of energy. So I don't know if we'll see it again, but it sure disappeared in a hurry.

[C]

So can I ask you one quick follow up on that, Scott? I mean the math of a carbon tax is relatively simple, right? I mean this is a relatively clear cut case economically of a negative externality of a carbon emission. If we can either shift people to more sustainable lower emission fuels or just even if we don't do that, even if those fuels stay too expensive for relatively long periods time, just reduce the amount of shipping by even a marginal amount, we could both raise revenue that would go towards maybe other types of decarbonization and have a marginal effect. So I mean, why is even things like this, do you think, sort of fading away?

[A]

That's a great question because, you know, this looked like a small change in the right direction and the fact is the public doesn't care. I think the whole notion of creating these systems to move towards something else, the incentive systems, is part of an idea that was overall rejected. And so it no longer has a home. There's no longer some big net zero coalition, there's no longer ESG ratings that include net zero. All the kinds of once again incentive systems that would have supported this. And I think it's just an easy target. But my sense is the politics have changed very deeply in this for this kind of seemingly not all that dramatic issue to fall apart. So obviously, Bill, you may have an idea here.

[B]

The longer I listen, the crankier I get. Maybe it's because I spent the morning at the dentist getting an implant. So I'm going to be cranky about this. I think Scott's wandered pretty far away from ocean shipping, but I don't think the math has changed that much. And I don't, you know, basically to me the problem is we have a president who thinks climate change is a scam and he's busy demolishing every program he can that would focus on renewables or would do, in my judgment, anything intelligent about energy and climate. I don't think that. And people have stopped talking about it because they understand that with the current administration it's fruitless. They're not going to do what the Biden administration tried to do and they're going to try to dismantle the things that the Biden administration did. And they're promoting coal and oil, you know, the dirtiest fuels of all, they're pushing.

[A]

But Bill, it's not just in the United States, you know, it's not just here. And that for me is the surprising part that it really just. We decided to work on something else. We decided to work on AI and that moved in 180 degree different direction.

[B]

I don't agree with that at all. I think you're seeing significant movements towards net zero in a number of locations. Even, believe it or not, China, who's the worst emitter in the world, they're way ahead of everybody else in solar installations, renewable installations. I mean, they have figured out something that we, at least, at least the Trump administration can't seem to figure out. To me, this is the triumph of national selfishness over the global commons. This is a global problem in the long run, it's an existential problem. I mean, hurricanes, tornadoes, floods, monsoons, these things are not coming out of nowhere. They're a product of what the earth is going through. And I think that everybody has. We've got countries that are going to disappear. Talk about Vanuatu. You know, what's going on with Vanuatu is they're trying to persuade the Australian government to give them enough visas so everybody can leave. They may or may not get enough, but, you know, we've got countries that are going to disappear. This is not a small problem. And what has happened now is the United States has decided it doesn't want to do anything to solve the problem. It means that it's just going to be harder for successive administrations to deal with it. And who are the people that are blocking this? The oil states are blocking this. And it's shortsighted and it's selfish. It's going to make them more money because the price of oil is going to go up and demand for oil is going to go up if Trump gets his way. And the result of the world is it's going to be hotter and dirtier and stormier. And I just think it's a tragedy when the history of this era is written. One of the biggest black marks against this particular administration is going to be their failure to understand this. And I think if you look at Norway, if you look at the eu, if you look at lots of countries around the world, they get it. They don't account for nearly as many emissions as we do. So. So it doesn't show up on the blackboard in the same way. But they're moving intelligent directions and we're going in the opposite direction. It's enormously frustrating. End of rant.

[A]

Well, Bill, you know, Greta Thunberg has left a job opening in the climate space. Perhaps that's a post CSIS career for you.

[B]

I'm too old to march, I'm afraid. I can't walk that far and can't stand up that long.

[C]

Well, maybe a silver lining is it's only a one year delay, but I would agree, Bill, this is not moving in the right direction and we'll see if we can find some way to solve these Global Commons challenges.

[B]

Yeah, the thing that I think the Trump people don't understand is that it begins with this idea of America first, you know, and there are problems that are beyond our borders and we're the victims. The air comes from across the Pacific, the pollution comes in, you know, the weather come. We don't control any of that stuff. It's beyond us. And we're just. He's busy denying that this is the problem. It just drives me crazy.

[C]

Yep, Global Commons problems all around. All right, now we're going to sort of get a little bit more earthbound rare earths. To be more specific, let's move to China where they've tightened controls on exports of rare earths and doubled down on high tech self reliance recently. A few week or so ago they announced measures to increase the sort of tightness of their export controls, even sort of extending the sort of theoretical or the legal limits of their controls to basically all of that majority of goods that use the rare earths that are embedded in so many of our modern products. This was a bit of a twist, but you know, potentially one that I think keen observers of this topic probably could have seen coming. I think myself and Bill certainly are in that camp. Bill, why don't you walk us through this a little bit and tell us your thoughts.

[B]

I've made three comments about it. The first one is the topic of my column this week, which is this just reeks of hypocrisy. And we said on this podcast frequently there's no rule against hypocrisy in the trade business. There's no WTO rule against hypocrisy. And this is an example of it. The Chinese are doing to us pretty much exactly what we just did to them. And there's all this outrage in the United States about how unfair the Chinese are being. What have they done? They put in port fees the same day that our port fees on their ships went into Effect their controls on rare earths, export controls on rare earths that Phil referred to match provision for provision, our controls on chips going to them. They've even put in their version of the foreign Direct Product rule, which captures jurisdiction over stuff based on a minimal, in their case, a minimal amount of content. It's classic tit for tat. And Phil's right. I mean, you can see this coming. They always retaliate and they usually retaliate in kind. And here we are. And the fact that the administration says, oh, this is terrible, just reeks. Now you get to substance. I think there's two ways to look at this. Probably the easiest way to look at it is this is pre summit maneuvering. My metaphor is this is like a sumo match and you got these 400 pound guys in the ring and we finished with the rice throwing and now we're in the belly bumping phase and eventually they're going to grapple and it's a leverage game. Trump put these controls on. The Chinese responded. Trump has threatened, you know, 100% tariffs in response to what they did, which was entirely in response to what we did. This is all leading up to the summit, which has now been announced for Thursday, October 29th, my wife's birthday. It'll be a wonderful present for her and, you know, we'll see what happens. My guess is that what will happen will be some kind of deal which will be very small and minimal, but which Trump will say is very large and very big. And a good many of these things that we've just been talking about are going to go away because it's pre summit maneuvering. And once the summit's over, they don't need to do that anymore. Now, the third thing is that might be wrong and there might be actual policy involved in all this stuff. And I think in the Chinese case, it's leverage. It's not really a national security issue for them. I don't think they're about to run out of minerals. I mean, they can say they're about to, but I don't think anybody's going to believe that. It's revealed in the United States, I think a debate over export controls that's worth spending a minute on. And you can see this in the different statements from different administration officials. They got rid of are busy dismantling the Biden controls, or in some cases enhancing, in some cases dismantling. They dismantled the AI diffusion rule and they're going to go back, I think, and do some more tweaking of the controls. On the one hand, they're saying, we want to deny all this stuff to the Chinese. And you've got people in the administration who want to go lower. The Biden controls were aimed at the very high end AI chips. Nvidia. You know all the stories that we've talked about several years ago, there was not an effort on the Biden folks to control the low end, the chips that go into your automobile or your toaster or your refrigerator. And there still isn't, although you have some people in the administration and some people in the Congress who say that's what we should do, we should make sure that they don't get anything. So that's one debate. I don't think that's Trump's view, but there's a tension in the administration because at the same time, when it comes to the high end, the AI chips, you've got Trump's AI advisor, David Sacks, saying, the answer here is flood the zone. We want the United States to be the global leader in artificial intelligence. And the way to get there is, is to persuade everybody in the world except China to use the US AI tech stack. This is exactly the same speech I gave about encryption in 1997. So it resonates, and there's a lot to be said for it if you do your due diligence properly. But it's a simple idea. Let's make the US Product standard and let's get everybody in the world except for China using the US product. So, A, we make a lot of money and B, it's our product, we understand it, we know how it works, and it keeps China from capitalizing on their own developments in the AI space. At the same time, if you do that, you run an enormous risk of leakage because we're going to be selling this stuff to countries that don't necessarily share our views about China and don't often have the enforcement, internal enforcement mechanisms do anything about it, even if they did share our views about China. So you're going to get leakage to Russia, you're going to get leakage to China, and the China hawks are going to go crazy. And that's the debate that's going on, I think, inside the administration right now. There's consensus that we should deny advanced products to China. There is debate over how far below advanced we should go and deny. But then there is also this question, which is the eternal question. It's the marathon question, is it better to run faster, which is the David Sachs argument, basically, and outpace everybody else, or is it Better to try to trip the other guy. And that problem has not been solved in 40 years. And it's beginning to come out in this administration as well.

[C]

Bill, I mean, I agree with you, but I feel like it's even more schizophrenic than that. There seem to be between policies, choosing very different approaches here. So, I mean, to your point, I think we've been sort of alluding to this new Chinese rule in a lot of ways mirrors the new BIS affiliate rule that came out about a week ahead of time. Basically, it vastly expanded the number of establishments that were on the BIS entity list by essentially saying any firm with sort of above a 50% ownership share. And that also on the list estimates say it's upwards of 20,000 new entities. But honestly, it's remarkably opaque. Firms are trying to figure out exactly how they can do this. So in that case, I mean, they're going really quite far in sort of expanding the expense of these controls. At the same time, they're considering sending pretty high level Nvidia chips over to China. So, I mean, how do you think the sort of underlying schizophrenia of this is going to interact with the sort of strategic competition which, again, we have these sort of these body blows going back and forth?

[B]

Yeah, that's a really good question. It's unresolved, you know, I think in this administration, particularly on stuff like this, anything that involves trade. There's only one person that is really a player here, and that's Donald Trump. And this is an area where he said different things at different times. You know, and Phil's used a word that is apparently unacceptable to our editors. I tried to do a column about schizophrenia in the Trump policy and was told I couldn't do that. But they did allow me to say that our policy was incoherent, which I don't think is an improvement over schizophrenic. But anyway, Trump apparently believes that, and he said this yesterday, you know, we're going to have a big agreement with China and we're going to address all these problems. And what he mentioned were the transactional problems. He mentioned soybeans, he mentioned rare earths, he even mentioned nuclear weapons, oil, you know, buying Russian oil. These are the products of the moment. Most presidents, including he in his first term, tended to focus on sort of the bigger macroeconomic issues of overcapacity and treatment of Westerners doing business in China, forced technology transfer, stuff like that. And now he seems a little bit more caught up in, well, I got to get him to buy more Soybeans and I got to get him to stop buying Russian oil and we got to solve the where earth's problem. And so he goes back and forth and I can't predict what will come out. And of course that then leads to the uncertainty that everybody complains about. You know, if you're in this business, can you sell, can you not sell? Who's an affiliate? You know, how do you figure that out? And since, you know the story of affiliates is it's in all these countries, it's very easy to change the name. US enforcement is getting better but needs more money plug there. But it's always one step behind. So I think we're just going to have to wait and see how it turns out.

[C]

Scott, as Bill mentioned, we're hitting on all these sort of peripheral issues and kind of not dealing with the main event. Would you put this rare earth issue as sort of the main event peripheral? A bit of both. And how do you see this going going forward?

[A]

Well, look, I think Bill has correctly outlined the structural elements here, which is China is the best negotiator out there. They do this so well all the time. I happen to think the American system is the best for long term producing returns on capital innovation, however you want to measure it. And when you have these strong, fast moving, creative system like the US the US Prevails. When you have the negotiators directing the operation, Chinese tend to get what they want. Now what we have the oddity is that we have the innovative fast moving system with the dealmaker in chief and it leads to these kinds of perplexing issues. But I think those structured the argument exactly right. But we got to do a little better job at both running faster and not being surprised when the Chinese do exactly what the Chinese are expected to do and almost always do.

[C]

Okay, great. Well, let's move to our third segment and the last front or another front of this trade war, which is agriculture. So the US China trade war has turned into a bit of a food fight and again another set of actions that like you really should have predicted this. This is not rocket science. Just like in 2018 when we started a trade war with China, China retaliated by sort of reducing its purchase of soybeans and other products. We're seeing the exact same thing again here. So in 2025, so far, US agricultural exports to China are down a whopping 73%, down 100% of soybeans since early in the year. We haven't seen a single sale since May, down 95% in beef, where they've basically canceled licenses for beef processing facilities in China so we can't get our products in there. And another number of other products have been affected as well, from tree nuts to cotton to corn. This is putting a lot of strain on US farmers, US agriculture, unlike the case of 2018, that strain's not just restricted to the bilateral relationship. Farmers are seeing higher prices for steel, aluminum, machinery, fertilizer and restriction in labor supply due in part to migration policy. Bill, how do you see this shaking out? I mean, US Farmers are certainly not happy right now. They're more vocal than I feel like I've seen them quite some time. Is this going to work for the PRC or is this just another negotiating principle?

[B]

Well, first I have to say my father in law was a farmer. And I can tell you from experience, farmers are never happy. No matter what's going on, they're never happy. If they're having a good year, they're worried about drought next year and if they're having a bad year, they're worried that next year is going to be worse. Farmers are always unhappy. I think what we're seeing here, you know, the Chinese are good at, it's the leverage game and they're good at playing it. And I mean, ancient history. This is such an old idea. I can take you back 40 years. In 1982, the Congress, in a fit of strange behavior, actually imposed tariffs on textiles and apparel, which hit China hard. And the Chinese reaction was fascinating. They didn't, they have, they put out a standard press release saying this is unfair. But they stopped buying wheat, which was the big purchase at the time. It wasn't soybeans, it was wheat then. And within three months Congress had repealed the tariffs. And I think the Chinese took a lesson from that and they're doing it again. And this time it wasn't Congress that imposed the tariffs. We'll see what happens. I think the politics are different this time though. And in a way I think the farmers are in an awkward position because they've basically, you know, they all voted for Trump. They voted for Trump three times. And you know, he's not going to lose Kansas or Nebraska because of soybeans. He just isn't. And as a result of that is they don't have a lot of leverage here. They can complain and he'll try, you know what he's going to do? I think, you know, he's going to try to get the Chinese to buy more soybeans. The crop year is, the harvest is well underway. And even if they come across, it's not going to make the soybean farmers whole. It'll make them partially whole. So. So what he's going to end up doing is what he did the first time, which is bail them out. So what you're going to see. And they stopped talking about it because it got awkward during the shutdown to talk about spending another 10 to $14 billion to bail out the farmers for Trump's policy mistake, which is what's going on here. But it'll come back once the shutdown is resolved, one way or the other, or when the farmers begin to scream louder, it'll come back. But you saw what he did to the cattlemen. You know, the cattlemen screamed because they thought he was going to try to lower beef prices by bringing in Argentine beef. And his comment to the cattleman was sort of, you know, after all I've done for you, you should be grateful and you should lower your prices. He knows where the leverage is, you know, and the states where this is big, for the most part, they're still going to vote for him or not, you know, the next guy, whoever it is, that gets nominated. Now, ironically, and he probably doesn't know this, agriculture is actually big in a lot of places that we don't always think about Pennsylvania, believe it or not, I learned this working for Senator Hines. Pennsylvania is one of the biggest agricultural states in the Union, and people don't know that. And so maybe this is going to come back to bite him. But if you think about large commodity crops, corn, wheat, soybeans, cotton, beef, these are predominantly in red states, and those, they're going to stay red. And as Phil mentioned, some of them, corn in particular and cotton, have found other markets and are doing not great, but okay. The cattlemen have a problem, soybean people have a problem. The sorghum people have a problem. And I don't think there's a quick solution to it. The Secretary of Agriculture has discovered exports a little bit too late. And unfortunately, you know, you ought to put this in a recent historical context, too. This is, I think, the fourth or fifth year in a row we've had an agriculture deficit, and we had one in the entire Biden administration. It started in the first Trump administration. So the Biden administration never cared about exports. I never understood that, but they didn't, you know, and there's not, until recently been much of a sign that Trump cares about them. But that would be the answer. Get out and market these products. You know, Secretary Rollins was going to Take a trade mission and she canceled it because of the shutdown. So hopefully if the shutdown is ever over, she'll start up again. But that's the other way out besides a bailout. And I just don't see that making much progress right now.

[C]

So Scott, to Bill's point, I mean, one argument here would be for diversification, right? So I mean, you know, this is a classic tactic in a trade war. You not only hit things that are not diversified, but agriculture is a great thing to hit because nobody likes pissing off farmers. Agricultural goods are just genuinely pretty good or hard to sort of reroute. You need phytosanitary agreements, you need. There's a lot of reasons why this stuff is hard to reroute. A lot of products spoil, so you can't even store it that long. So some of these markets have done this. Almonds has actually been quite good at sort of reorganizing their markets after 2018. Soy didn't do that. Sorghum didn't do that. Do you think this administration was kind of just baking in that these guys would get whacked and why didn't they sort of diversify after 2018?

[A]

Well, look, let me talk about three different kinds of farm produce. Soybeans, beef and almonds. Because I think it tell. Each tells a different story. The soybean story with China, as your paper shows, in terms of that bilateral relationship has been targeted. The Chinese are very effective at not buying things they don't want to buy. Of course, that was a long term strategic opportunity seen by the agriculture industry as the East Asia and the Pacific improved their diets. Soybeans basically go to feed pigs. And so the first question when you see a big bilateral shift like the one between China and the US Is so who's not eating? Well, I can tell you I visited the North Carolina State Fair this weekend and I looked around at my fellow Americans. I couldn't find many that weren't eating. What I would reflect on is the fact that soybean supply and demand look very steady on a global basis. And so that means those beans are finding a market somewhere. Your paper didn't elaborate on that. But if you look at overall soybean production and demand on a global basis, and this is USDA's own numbers, the 10 year average rate of growth is 3%. They're up a little higher in the most recent year, 7% or so. But the overall volume of crops look pretty steady. So it's hard to find the big ups and downs in the bilateral relationship on a global basis.

[C]

But the big down is. I mean, the US Total exports of soybeans are down quite considerably.

[A]

They're somehow disappearing. And you can't see these ups and downs in the global market. So I'd be curious about why that would be. But there's definitely a problem with China that is both predictable, as you noted, and has happened before. Is Bill Nord on beef. I actually think the story is different. I think we're at a very different stage in the beef cycle. And farmers cut the size of their herds dramatically about two or three years ago because of high input costs. And it takes five years to grow a heifer, basically. So these things take time to work out. But beef is good. Beef is scarce. Most beef is expensive. Ground beef is less 60% higher than year ago for the cycle reasons, not international competition reasons. And I think that'll work itself out. But I agree with you that almonds points a way forward. The California almond industry is about 80% of the world almonds production and sales. They've done a great job of diversifying their customer base. They do it and as tree nuts go, it's one of the more mechanized products. So they're less susceptible to labor costs, things like that, because of their production methods. So I think it's a good model. Not everyone can do it, obviously, but there are things to be learned. I think exports are terrific when it comes to agriculture. And the more export markets you have, the more you're protected from a situation like this.

[B]

So, Scott, what I want to know is, does the North Carolina State Fair have a cow made out of butter like the Iowa State Fair?

[A]

Not quite. They have other very dramatic things, including craft musical instruments made from North Carolina wood, which were quite amazing. So very impressive things. But there was not a cow made of butter.

[B]

No Butter Co. Fried Snickers bars, maybe?

[A]

Oh, lots of fried items, for sure. State fair food is unique.

[C]

So I'm glad we got to the important things at the very end there. Okay, so we've gone through two fronts in two different trade wars, and that's both of which are a little tumultuous. Also a little tumultuous war on the climate change. So we'll report back on these issues next episode. Thanks a lot, guys.

[B]

Thank you.

[C]

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