How a Global Collapse Would Affect American Farmers
By Betsy Freese, Successful Farming
Agriculture.com - 1/10/2019
Are we heading for a global financial collapse? What can we expect from the trade wars? Should we build a wall? Geopolitical strategist Peter Zeihan will be sharing his answers to those questions, and many more, at the Land Investment Expo on Friday, January 25, 2019, at the Iowa Events Center in Des Moines, Iowa. Tickets are still available.
Successful Farming caught up with Zeihan ahead of the Land Expo to get a preview. His responses are eye-opening.†
SF: What is the top global issue?
PZ: The trade war. People are underestimating the impact the trade war is going to have on the global system. This is the year that historians will look back on when everything broke. This is the beginning of the end of the last 70 years of international stability.
We are currently on a break from the trade war. The tariffs are locked and loaded and ready to go. With a tweet from the administration we will have 25% tariffs on about half of what the Chinese export to the U.S. The Chinese do not have the capacity to respond in kind, because there is not enough of a trade portfolio there for them to tariff.
SF: What is the end goal of the trade war?
PZ: That is the big question I have for the Trump administration. Is it for the Chinese to be subordinate to American interests for the next half century? Or is it to destroy them as a country? From the way the Trump administration seems to work, it looks like the second option.
SF: How will American farmers come out?
PZ: It will shake out for America very well and American farmers far better than most sectors, but there will be ups and down. The process of the old system breaking down will cause instability. It wonít be fun.
SF: What is the worst-case scenario for the U.S.?
PZ: In the long term, the worst thing we can do is try to preserve the global order. You can do that when you are one third of global GDP, but today the U.S. is only 20% of global GDP.
The whole premise of the old structure was that we would stabilize the system and support your economy if you sided with us against the Soviets. The Soviets are gone, so the strategic rationale for that system is gone. We canít support that kind of system anyway. So this was all going to break down. The only way this ends badly for the United States is if we try to preserve the old system.
SF: What is the worst-case scenario for the Chinese?
PZ: That they are not a functional country. The strategic environment that the United States created to fight the Cold War is what allowed China to unify and develop. Without that environment the whole thing falls apart. [President] Xi Jinping and his administration are terrified that the whole system is going to collapse and they are absolutely right. It is going to, and it wonít go down quietly.
SF: Letís switch to Mexico. How important is Mexico?
PZ: If there is one country on this earth that the United States should actively seek to maintain and expand good relationships with, it is Mexico. The reasons are economic, security, trade, drugs, and population. About one sixth of the American population has roots in Mexico. It would be ridiculous for us to ignore that.
SF: Should we build a wall?† ...
SF: U.S. farmers have a shortage of labor. Is Mexico the answer? ...
SF: What is the answer? ...
SF: Whatís happening in Brazil? ...†
SF: Where do you see world meat demand going?
PZ: I see global demand for animal protein dropping, but the markets that the U.S. has the most exposure to will be great Ė Southeast Asia, Mexico, and Central America. These are the places American farmers should look at.
Mexico, especially when it comes to beef, is far and away No. 1 for us. In Mexico, beef is considered a staple like it is here. When they get a little bit of money and can afford something better, they switch from Mexican beef to higher quality American beef. Any economic growth in Mexico immediately translates to support for the beef supply chain in the United States. Iíve always been a fan of Mexico as a destination for value-added agricultural exports.
In China, pork is a luxury good. If you get a period of economic duress you cut that out of your diet.
SF: Could livestock diseases affect the global meat supply? ...
SF: Is the U.S. headed for an economic recession? ...
SF: Whatís happening with global population demographics? ...
SF: Anything else farmers should watch? ...