We’ve yet to reach a trade agreement with China, and now both countries plan to hike tariffs yet again. Pressure from farmers is mounting and the Trump administration is now discussing plans for additional aid. Trump has tweeted his ideas for potential solutions, but experts, politicians and farmers alike are becoming increasingly critical of the president’s plans. Is the trade war doing more harm than good? If an aid package for US farmers is put together, what form is it likely to take?
No Trade Deal With China
Ken Anderson of Brownfield Ag News reported at the end of last week that the US government has plans to provide additional aid for farmers to ease their Chinese trade woes. A trade deal between the two nations has yet to be reached. The deadline last Friday came and went, and now Trump has followed through on his promise to hike tariffs on more than $200 billion of Chinese goods. China is likely to retaliate with their own additional tariffs.
On May 13, Larry Lee of Brownfield Ag News reported that China has indeed responded with their own increased tariffs. Beginning June 1, the new retaliatory tariffs will affect over 5,000 US products or $60 billion of goods and will jump from 10 to 25%. The exact goods the Chinese plan to tariff have yet to be specified.
The Chinese are saying that they will never succumb to foreign pressure and hope the US can meet them halfway.
Trump is saying that the US could avoid the tariffs by buying from a non-tariffed country or buying goods made in the USA.
Trump Tweets on Additional Support for US Farmers
US Vice President Mike Pence met with farm leaders last Thursday and says the White House is considering “additional support” for farmers to compensate for lost income during the trade war. He did not specify what form that might take.
One of Trump’s tweets on May 10 was a little more specific.
“We will buy agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance.”
This tweet seems to have a lot of people fired up. Commodities analyst Arlan Suderman with INTL FCStone said,
“I think the American farmer wants a free market answer. They would rather be producing for the marketplace than for the government,” Suderman says. “But I think the markets and farmers are also encouraged that there was some indication that there may be some relief.”
Suderman thinks it could just be a negotiating tactic from Trump.
“I do think it does suggest some commitment to the agricultural community. But I think it is also largely to try to send a message to China that, ‘we’re on the car lot, you’re the salesman, and we’re willing to walk away from this deal. Now we’ll see if that’s effective or not.”
Pence Chimes In
DTNPF’s Washington Insider reported on May 13 that the Trump Administration is now considering another round of aid that was similar to what was provided for the last Market Facilitation Program (MFP). Late last week Pence said,
“Make no mistake about it: We have already had preliminary discussions in the White House for additional support for farmers if this impasse with China continues,” Pence said. While noting trade talks with China continue, Pence said the administration was ready to “continue to expand on the tariffs” that have been put in place.
He went on, saying that farmers can be,
“Very confident that President Trump and I and our entire administration are going to look for ways to provide additional support to American farmers that would be impacted by the negotiations or uncertainty in our relationship with China.”
Trump wants to buy US grain and use it to feed starving nations. This idea is in direct contrast with what we’ve been hearing from US Agriculture Secretary Sonny Perdue over the past year. Perdue has maintained his position that there won’t be any more trade aid through MFP.
Farmers Pressuring Lawmaker for More Aid
But pressure is mounting. Farmers have been communicating to their lawmakers that they are in need of more aid. At a House Agriculture subcommittee Thursday, the success of the last Farm Bill was acknowledged, but it doesn’t appear to have been enough. Subcommittee Chairman Filemon Vela of Texas said,
“The farm economy is better off because the farm bill passed. But is that enough to fix the downturn in the agricultural economy?”
Texas Farmer Mike Huie told lawmakers,
“I think additional action will be required. Even if the trade war ends tomorrow,” the distress in the ag sector will not be resolved, he argued.
Mike Peterson, a farmer from Minnesota agreed and took it one step further.
“We may have to look at some sort of supply management,” he observed. For his own farm, Peterson said, “If our markets don’t come back and we don’t have any additional support, we’d be better off not producing.”
“Bottom line is there is no way to make a profit if we don’t have a market for our product.”
Where Perdue Stands
Successful Farming published an article by Tom Polansek, P.J. Huffstutter and Humeyra Pamuk of Reuters on May 10. They covered Sonny Perdue’s comments about the possibility of additional aid for US farmers. Perdue said President Trump had asked him to come up with a plan to help farmers cope with the impacts of the trade war with China.
If an aid program were implemented, this would be the second round of assistance for farmers.
Like Trump, Perdue took to Twitter.
“While China may backtrack, @POTUS is steadfast in his support for U.S. farmers and directed @USDA to work on a plan quickly,” Perdue said on Twitter on Friday.
Details of an additional aid package haven’t been released yet, and a USDA spokesperson declined to comment. Just until this week, the White House budget plans have called for a 15% reduction in USDA funds, calling farmer subsidies “overly generous.”
This Isn’t a Dictatorship
But it appears that Trump now has a different idea of how he’d like it to take shape.
The flaw in this plan though, is that funds from US tariffs go into the general treasury fund- where spending is controlled by Congress, not the White House. Tom Vilsack, who was USDA secretary under Democratic then-President Barack Obama, and his now chief executive of the U.S. Dairy Export Council industry group didn’t mince his words when commenting about Trump’s plan.
“I don’t think he understands that he’s not a dictator. He can’t just order this to happen.”
Farmer Owned Reserve
Sonja Begeman of AgWeb also paints a grim picture. She reports that the US has only exported $66.95 billion this year, compared to $74.86 at this point in 2018. Imports are actually up $1.23 billion from a year ago.
It’s possible the administration could return to a Farmer Owned Reserve (FOR). However, the FOR has had unintended consequences in the past which included:
- USDA is heavy in grain merchandising and those who have experience are no longer with USDA’s Commodity Credit Corporation (CCC)
- FOR became a “wet blanket” when commodity prices increased because USDA’s FOR triggered release of the grain at certain price points
- Taxpayers had to pay storage payments for grain
- Carryover eventually led to the Payment-in-Kind program but not before making changes to FOR to make it “more effective”
It’s difficult for the USDA to manage markets, and the CCC might not even be able to buy farmers out. There’ just not going to be an easy solution. Former USDA official and Pro Farmer Washington Analyst Jim Wiesmeyer isn’t going easy on Trump’s proposed solution.
“I have no idea who is feeding him this. CCC can buy but has great limitations on donating internationally.”
Support of Trump is Fading
By and large, US farmers have been big supporters of Trump’s plans to hold China accountable and secure better trade agreements. But US farmers have been the worst hit from the ongoing trade disputes with China. Farm debt is the highest it’s been in decades, and many are beginning to question both the effectiveness of Trump’s trade policies and efforts being made to offset losses. Is Trump just causing lasting damage that will take years to overcome?