The earnings outlook released by Deere & Co. last week confirmed again what has long been a concern for us about the U.S. trade war with China: that the hurt in farm country would ripple into other parts of the Quad-City economy.
Deere said last Wednesday that it expected its net income for fiscal 2020 to be between $2.7 billion and $3.1 billion. That’s significantly below analysts’ average estimates of $3.46 billion, according to Bloomberg. And it comes amid Deere's workforce reductions that are already being felt in our region.
In October, the company announced layoffs of 160 workers in Iowa and Illinois; last week, it rolled out a voluntary buyout program. Company CEO John May said the long-term outlook for Deere is healthy, but he noted "lingering trade tensions with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment."
We doubt jittery feelings on the farm and in factories were eased any by President Trump’s comments Tuesday that the trade war with China could last until after the 2020 elections.
"I have no deadline,” Trump said in London, where he's at a NATO meeting. "In some ways I think it is better to wait until after the election, if you want to know the truth."
We have long become accustomed to the president’s broadsides on trade — one day a deal is close; the next it’s not. It wasn't that long ago that the administration was heralding the possibility of a "phase one" deal with China, an intermediate step, presumably, to a larger agreement.
You have free articles remaining.
With the election approaching, several analysts have said, such a deal could help Trump politically. It also would likely settle markets. However, it’s anybody’s guess whether it will materialize. Meanwhile, lest we dismiss the president's comments Tuesday as bluster, Commerce Secretary Wilbur Ross reinforced them, saying that waiting until after the election next year could give the White House more leverage against China.
There may be something to that, but we wonder whether China will be willing to make major changes to its economic system no matter what the date is on the American political calendar. And what happens in the meantime?
We doubt that workers at the sharp edge of this trade war will be so sanguine about another year of uncertainty — farmers making planting decisions and factory workers wondering whether the next cost-cutting moves will usher them out the door.
A few weeks ago, a Reuters news article highlighted these anxieties, quoting an East Moline worker at a Deere plant. Devin Spencer, a 29-year-old welder with a family, said he had been relegated to a job with less pay, and where he works, there is anxiety and fear about the future.
We certainly understand that. The Quad-City economy is heavily reliant on trade, and much of it is tied to agriculture. Yet, for nearly a year and a half, the U.S. has been in a trade war with China, not to mention skirmishes with other countries. The result has been lower soybean prices and factory layoffs, and there is little positive to show for it.
There is a modest new agreement with Canada and Mexico over revisions to the North American Free Trade Agreement. It was struck a year ago. But the Trump administration and Democrats in Congress have not yet been able to come to an agreement over labor and environmental provisions to bring it to a vote.
We are hopeful these differences will be resolved soon. Meanwhile, we believe that our state and federal leaders should let the White House know that a trade war with China that drags on for another year is unacceptable. The future economic consequences of such a stalemate are frightening. Already, the price has been steep. We'd hate to see what another year of this would bring.