Risk of negative effects from trade aid to farmers

NEW YORK — For US farmers affected by the trade war unleashed by President Donald Trump, the $12 billion in emergency aid from his administration is a temporary remedy, and it comes with several potential negative side effects.

The Agriculture Department announced the aid on Tuesday to help farm producers hurt by retaliation by major trading partners against US tariffs on steel, aluminum and tens of billions of dollars in Chinese products.

USDA said it would use a Depression-era farm support fund to make direct payments to producers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs.

The size of the aid program is “unprecedented”, said Joseph Glauber, a former USDA economist now at the International Food Policy Research Institute.

But its effectiveness will be limited, he said, and it creates a “moral hazard”.

And ironically, depending on the criteria used, some of the benefits could go to Chinese-owned companies.

“The pork industry is dominated by very large corporations,” said Chris Hurt, agricultural economist at Purdue University, in Indiana. “The largest hog producer in the US, Smithfield, is owned by a Chinese company.”

Agriculture Secretary Sonny Perdue said the new aid will not need congressional approval, but the program drew sharp criticism from many legislators, including Republicans.

National Farmers Union President Roger Johnson said crop prices are falling and farmers’ “livelihoods are on the line with every tweet, threat or tariff action that comes from the White House”.

Republican Senator Ben Sasse said in a statement: “This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again.”

But after the US economy grew 4.1 percent in the second quarter, and the European Union agreed to a ceasefire in the trade confrontation with the US, Trump declared it a victory for his tough policies.

Another question remains how the program will impact falling crop prices and even the cost of farmland, once the payments begin, which the USDA said should be in early September.

“The land market could get distorted. Crop farmers are often willing to invest the extra money in land, that would hike the prices,” Purdue University’s Hurt said.