National Post (National Edition)
American farmers want trade, not aid
President Donald Trump is considering expanding tariffs to apply to $500-billion worth of Chinese imports. This move would double the level of tariffs that Trump recently imposed on Chinese goods. It would apply to nearly all of China’s exports to the United States.
To mitigate tariff damage to U.S. farmers, who are already facing rising input costs and reduced export markets, the Trump administration announced Tuesday that it would extend them $12 billion in aid.
I am a farmer and a Trump supporter. I agree that China needs to be punished for stealing patented U.S. technology. But opening a new front in this trade war, while trying to reduce the blowback on farmers with a Great Depressionera transfer program, is not the right approach. It is the economic equivalent of treating a hangnail by cutting off your finger.
As Trump’s aid package tacitly admits, tariffs hit farmers especially hard. With farmers already facing economic headwinds, including oversupply and drought, I predict that even with this aid, expanded tariffs will be the breaking point that puts some farmers out of business entirely. As the history of the Great Depression demonstrates, such federal and bureaucratic farm-support programs rarely compensate for the full burden of a trade war, while usually ushering in unintended consequences that distort the farm economy.
Farmers use a lot of steel, which Trump subjected to a 25-percent tariff in March. Combines, grain bins, fencing and cattle gating, which we are constantly upgrading and replacing, have become significantly more expensive as steel prices have jumped markedly because of the tariffs. This has taken a painful bite out of our already-slim profit margins.
Yet the most significant consequence of tariffs for farmers has been the inevitable tariff retaliation from trading partners, which reduces our export opportunities. For instance, China has targeted soybeans and hogs with steep retaliatory tariffs. These farm products are popular in China and fixtures on Midwest farms.
More than one-third of U.S. soybeans, the second-biggest crop in the nation, goes to China — about $12.4 billion worth. Since May, soybean prices have dipped about US$2 per bushel to about US$8.50 as export markets have dried up. For every dollar lower a bushel, farmers lose about 10 per cent of their revenue.
Meanwhile, pork exports to China are down nearly 20 per cent this year. China is an especially valuable market for pork farmers because it purchases the lower-value portions of the hogs, such as the tongue and ears, that are difficult to sell elsewhere. As a result of the limited export markets, meat is piling up in U.S. cold-storage warehouses. Since May, prices of lean hog futures have fallen by 14 per cent.
Many of Trump’s farmer supporters like me are holding out hope that these tariffs are part of a grand strategy to reduce trade barriers for U.S. exporters. But with each passing day, and each new tariff, we get more nervous. Surely there is a less destructive way to hold China accountable for its intellectual property offences without limiting U.S. export opportunities. This is where we could use a president who “makes great deals.”
Congress should rally behind potential legislation by Sen. Orrin G. Hatch (R-utah) that would give lawmakers more say in U.S. tariff policy, in line with the U.S. Constitution. This will give elected representatives from American manufacturing and farming communities an opportunity to make their voices heard and deliver the message that farmers want trade, not aid. It should be one of the few pieces of legislation in this politicized environment that garner bipartisan support. Such legislation would also return tariff power to Congress, whose enumerated powers under the Constitution include the “power to lay and collect taxes, duties, imposts and excises.”
Until then, Trump must listen to his manufacturing and farming constituents who put him in office and pursue trade agreements that help us increase our gross and net earnings without corporate welfare. That starts with shelving plans to open a new front in the trade war with China.