Looks like trade wars are not that good or easy to win.
It seems the Trump administration finally has a plan to bail out American farmers feeling the pain of the deepening trade war with China. But will the plan bring real relief to strapped agriculture markets, or is it a band-aid on an open wound?
Prices on farm commodities like corn and soybeans have been cratering for months as trade relations between China and the U. S. have worsened, leading to worries that farmers may lose access to China’s invaluable food markets. On Tuesday, Politico and the Washington Post reported that the Trump administration was prepared to announce their solution: a $12 billion package of emergency aid distributed to farmers hit hardest by crashing markets. According to WaPo, the plan will rely on a 1933 program called the Commodity Credit Corporation, which allows the Agriculture Department to “borrow up to $30 billion from the Treasury Department to stabilize, support, and protect farm income and prices.”
If you think it’s odd to see a Republican administration using Depression-era protectionism to bail out markets, you’re not alone. Free trade-oriented Republicans have been roundly criticizing such an approach for months. All the way back in April, Nebraska Sen. Ben Sasse slammed potential subsidies as “Saturday-morning-cartoon central planning,” saying that “We want more trade, not less.”
“Farmers want to feed the world and win with trade,” Sasse said then. “Now, some in Washington instead want to pay them to lose. That’s a bad idea and not a real strategy to fight Chinese cheating.” On Tuesday, he was equally fiery: “This trade war is cutting the legs out from under farmers and the White House’s ‘plan’ is to spend $12 billion on gold crutches.”
Farmers and farm groups that spoke to THE WEEKLY STANDARD echoed Sasse’s sentiment that subsidies are not a permanent solution. But some also said that tariffs had already damaged agriculture markets so dramatically that government aid might be necessary for farms to weather even a few more months of the trade dispute.
“I’m not a big guy on government aid. I prefer the free market. But I do think that they depressed the market in a significant way,” Illinois farmer James McCune, a longtime Trump supporter, told THE WEEKLY STANDARD. “Most of these guys finance these farms for 20 years, and you’ve got a 20-year window on this stuff you’re trying to pay for… And then to get just blindsided by a tariff deal, and just set everything into a cataclysmic state where nothing works, everything on your whole farm, everything you look at is losing money or going down in value. It’s just like a nightmare scenario.”
The Trump trade war has been particularly devastating to agriculture markets for a simple reason. Although the United States buys more products overall from China than it sells to the Chinese, the opposite is true of ag commodities. China, by far the world’s largest agricultural importer, has in recent decades grown into a crucial market for U. S. farmers, particularly soybean growers: According to the American Soybean Association, China imported 31 percent of total U. S. soybean production in 2017, to the tune of $14 billion. But as trade tensions have grown, China has deliberately begun to wean itself from U. S. farm markets, instituting retaliatory tariffs that have made Brazilian soybeans—or even beans grown domestically in China—more attractive to Chinese buyers.
As a result, farmers have more to fear than just the dramatic tailspin their markets are enduring today. International trade markets are not easy to rebuild. Once the Chinese give up U. S. agriculture, there’s no telling how long it will take for them to return to our markets—if they ever return at all. This would leave the Trump administration with two unsavory options: Provide huge agriculture bailouts year over year indefinitely, or allow thousands of U. S. farms to go belly-up as a direct result of its trade policies.
“If they give a direct payment to the farmer, well, that doesn’t really get rid of the corn and beans we have sitting around, doesn’t get rid of that surplus,” McCune said. “They need to find somewhere else to go with that also. It could be a self-perpetuating problem if they give the farmer money and they don’t get the market fixed, well, we’re right back to where we were.”
Dan Basse, president of the Chicago-based agriculture research firm AgResource, agreed: “The U. S. is losing its biggest agricultural customer all in, at $19.6 billion. Just think, if you’re a business and all of a sudden you woke up the next morning, you’ve lost that biggest customer of yours, where would you turn for business? How would you manage, and especially following years of red ink, how would you stay in business?”
In recent months, U. S. agriculture secretary Sonny Perdue has worked hard to reassure farm groups, insisting that the Trump administration realizes a government bailout would do little to cover the catastrophic damage of a lost Chinese market.
“We’d rather have trade than aid,” Purdue said at an ag forum in Washington state earlier this month. “There’s not a farmer in your area that would not rather have a good crop at a fair price than a government check.”
The fact that the Trump administration is going forward with the government check anyway illustrates just how few alternatives they have at their disposal. But no matter how grim things may be behind the scenes, the president, at least, has remained publicly ebullient.
“Tariffs are the greatest!” he tweeted early Tuesday morning. “Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that—and everybody’s talking! Remember, we are the ‘piggy bank’ that’s being robbed. All will be Great!”
