Some of the most common questions about President Donald Trump’s tariffs and the trade wars the US finds itself are “why upset the apple cart on the balance of trade?”
Carl Zulauf, agricultural economist of environmental and development economics at the Ohio State University, along with Gary Schnitkey, Jonathan Coppess and Nick Paulson, all of the Department of Agricultural and Consumer Economics at the University of Illinois did some study on this and came up with some answers in the University of Illinois’ “Farmdocdaily,” a newsletter to Extension agents.
The answer for those economists was the rapid decline in US share of world economic growth since the turn of the millennium. A common measure of a country’s economic size is its GDP, but a more important measure is its contribution to world economic growth, they said.
DATA COLLECTION AND PROCEDURES
For their study, the economists gathered Gross Domestic Product data from the International Monetary Fund’s October 2017 World Economic Outlook database. GDP is measured in international dollars adjusted for purchasing power parity of a country’s currency.
The economist said most economists consider that adjustment to be the most appropriate when comparing economic variables across countries.
The data spanned 1980 through 2017 because 1980 was the first year of data on GDP. And then to dampen short-term aberrations, GDP growth was calculated over five years.
US SHARE OF ECONOMIC GROWTH DECLINING
Between 1980 and 1985, the US accounted for 24.6% of world economic growth, the economists said. Since then, two distinct periods emerge, with the millennium being the break point.
Until 2000, US share fluctuated around a very slight downtrend. The US’ share of world economic growth was still 24.1% from 1995 to 2000, but since then, US share has dropped at an annual rate of about 0.7 percentage point a year. US share was 12.6% of world growth between 2012 and 2017.
Over the 2012-2017 period, US share of world economic growth was well less than half of China’s 31.1% at 12.6%, the economists said. The US was not even in second place as India nudged it out at 12.7%.
As the US’ role in world economic growth has shrunk, its share of freer trade’s additional growth has shrunk, the economists said. This has changed the math of the US position on freer trade.
When the US’ share of world economic growth was larger, it could consider whether it might take a smaller initial share of the benefits of freer trade since it was a major beneficiary of the additional world growth. But now that its share of additional growth is smaller, the US likely will focus more on capturing a larger share of the initial benefits of freer trade, they said.
CATTLE, BEEF RECAP
851 head of fed cattle sold Wednesday on the Livestock Exchange Video Auction at an average price of $110.07 per cwt, down from the last sale at $112 two weeks previous.
Cash cattle traded last week at $112 per cwt on a live basis, steady to down $1 from the previous week. Cattle traded on a dressed basis at $176 to $178 per cwt, down $2.
The USDA choice cutout Thursday was up $0.05 per cwt at $203.80, while select was off $0.48 at $197.10. The choice/select spread widened to $6.70 from $6.17 with 106 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday, was $149.13 per cwt, down $0.26. This compares with Thursday’s Aug settlement of $151.20, down $0.62.