One captivating topic, that may become further charged, is that of trade. There is a dominant opinion of economists in support of the free exchange of goods, or Cobdenism. Because those in favor of protectionism garner little affirmation from peers, ascribing effort to them could be counterproductive. However, mainstream backing for the subsidization of agriculture should be maintained in the future.
Currently, when a new economic book is published, it frequently has praise from persons deemed important to the field. It is displayed on the back cover when available. On rare occasions, you can scroll down to the customer review section at an online store and find opinions that differ substantially from the endorsements. Known books by economists in support of protectionism tend to lack the statements of luminaries as a marketing feature. Here are two examples:
- Economics and World History: Myths and Paradoxes, Paul Bairoch
- Trade Policy and Economic Welfare, W. Max Corden
In order to make a case for protectionism, it seems that the best support is to be found through other framework. Political arguments can readily be made as President-elect Trump is conforming with a longstanding tenet of the Republican party. Reasoning can also be derived from extensive historical precedent. Certain businesses should benefit. Perhaps there are philosophical underpinnings, but that could be getting in over one's head. There are also an assortment of legal issues that are important, provided the prevailing economic arguments are not in power.
Protectionism itself comprises a wide scope of policy actions. Greece's tax on imported coffee is a nuanced incidence. As the USA moves toward it, economists are obviously attempting to adjust.
However, there currently is little available commentary among them about multiple schedules, judicial review of import-related injury, or the Dingley Tariff. Rather, you have academic criticism of the President-elect's position and esoteric, non-sympathetic, criticism of related measures. The perspectives find firm support within the tradition of the Democratic party, and members such as former Secretary of State Cordell Hull, who served during markedly different times.
Future policy, under Republican leadership, has implications for an assortment of industries. Steel is one. Another that is near the forefront is agriculture, which is at the origins of Cobdenism and The Economist magazine.
The prices of corn (NYSEARCA:CORN) and wheat (NYSEARCA:WEAT) have fallen to levels at which most farms would not profit - and other products such meat have also cheapened. The importance of food should not be understated: starvation in Maoist China is one example of what can happen if resources become scarce. As a flip side to the coin, when food is abundant and inexpensive, it should help the budgets of consumers.
Thus, there is likely to be a broad-based perspective that agriculture should be subsidized. Even if it costs over $4.50 to grow a bushel of corn that can only be sold for $3.58, there is benefit when the government actively supports farm activity. The subsidy is a form of protectionism.
Throughout the recent electoral process, we have heard of the prospects for tariffs. Two frequent targets of the successful campaign are China and Mexico. The Mexican response has mostly been aimed at a prospective wall. China has issued statements indicating that it is willing to form a barrier against corn and soybean imports. China's actions would occur after a probable devaluation of its currency, the renminbi.
Incidentally, a full-scale devaluation of the currency could level global markets. From an investor's perspective, a more efficient investigation might try to identify what would be left standing. The cryptocurrency Bitcoin (COIN) had been gaining amid the situation, but has recently tumbled pursuant to warning by China's central bank. Per President-elect Trump, a tariff would be in response to a weakened currency.
Internationally, the nation's support of its steel industry differs from ours with agriculture. China's metal factories are needed to employ persons with the dumping of steel occurring pursuant to its manufacture. To my knowledge, China has not claimed that farm subsidization is a source or injury; rather, retaliation would be in response to a future tariff.
There is the possibility that The People's Republic can protect its own agricultural sector by limiting the availability of imports. Such an initiative would apparently differ with China's need to transform into an economy that is not as dependent on government investment, but consumption. If food prices inflate, other things being equal, the persons who spend have less money available. However, as returns on debt-fueled government expenditure get smaller, an expanded agricultural sector perhaps offers a better type of investment, as well as a source of security. There also could be rhetorical issues, as 2017 is a political year.
If China ultimately discriminates against corn and soybeans an important foreign market could be restricted or taken away from the agricultural sector.
Provided the ongoing imbalance between supply and demand continues, food products could then become even less expensive, further fueling consumption. However, subsidy would be required for farms. If such spending is continuously authorized it may be described as protectionism but could actually be a meaningful form of stimulus.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in WEAT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.