Welcome to Thoughts on the market. I'm Michael Zezes, head of Public Policy and Municipal Strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and

financial markets. What can the challenges facing U.S. farmers tell you about

bond investing? Quite a bit, we think. Let's start with the American farming

industry. It's caught in the middle of the trade conflict between the governments of the US and China.

Chinese tariffs have targeted US farm products.

And following the US announcement of further tariffs at the start on September 1st,

China has now ordered its state-operated enterprises

to stop buying U.S. agricultural products.

That's a real challenge for farmers.

The U.S. exported about $19.5 billion in farm goods to China in 2017 and had already fallen to $9.2 billion in 2018.

But so far, it hasn't translated into political pressure to change the U.S US's stance towards China.

According to a couple recent opinion surveys, 78% of farmers believe the trade conflict will

ultimately benefit the US, and 79% of farmers approve of the president's job currently.

Those numbers largely sink with the roughly 75% of rural farmers who voted for Trump in 2016

per the Washington Post.

That obviously could change if the economic damage of trade confrontation becomes more widespread or acute.

After all, economic challenges over time do have a way of changing voters' minds.

And that brings us to the Fed. As Chair Powell has rather clearly stated,

trade policy is now a key factor in monetary policy.

Since we don't see trade tensions getting better anytime soon,

our economics team now forecasts two more rate cuts this year in September and October.

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