Farmers fear Trump trade war squeeze
Growers in the corn belt agree Nafta needs fixing but foresee lost markets
It’s been a long, strange summer for America’s corn belt. The weather has been perfect. Farmers are expecting a record soybean crop. But at the world’s largest farm show in Boone, Iowa, last week the talk was of where they will sell it, tariffs and Twitter.
For months America’s farmers have been “at the spear point” of an international trade dispute started by the Trump administration, says Davie Stephens, a Kentucky farmer and vice-president of the American Soybean Association. Last week there were signs of a breakthrough as Canada and Mexico got closer to cutting a deal with the US.
Even before he started running for office, Donald Trump railed against Nafta – the 25-year-old North American Free Trade Agreement that guides trade relations between the US, Canada and Mexico – calling it “the worst trade deal ever”. While farmers at Farm Progress have their issues with it and many voted for Trump, what they really want is certainty. Corn, and soy, doesn’t grow in a day. Sadly, for them, certainty is not a Trumpian trait.
Stephens is hopeful about the tentative deal with Mexico, and is impressed with Trump’s team. “The hope is that we are closer to a resolution. They can call it Nafta or whatever, doesn’t matter to us,” he said.
Stephens’s sentiment was echoed across the 32 hectares of Farm Progress, which ended last Thursday. Chatting beside the 600-plus exhibits of farming equipment – the site is punctuated by colossal spiky harvesters and other machines that look more suited to space exploration than food production – farmers seem cautiously optimistic Trump has their back.
It helps that the Department of Agriculture has drawn up a $12bn aid package for farmers to help offset losses from retaliatory tariffs on American exports. But “trade, not aid” is what most farmers say they want. And they want a deal now. Harvesting has begun in parts of the country. Soon seed sellers will be calling and farmers will have to start planning how much – and what – they will grow next year. Commodity prices have collapsed, thanks to the tariffs and oversupply. Loans need to be renegotiated. Farming is a slow business and planning is everything. Disquiet now could soon become something closer to panic if a deal isn’t done. “We need a deal sooner rather than later. A deal that will be good for everybody,” says Rich Schwemen, a local crop consultant.
Iowa farmers alone are facing a $2bn loss from tariffs, so last Monday’s announcement that the US had reached a tentative agreement to resolve its differences with Mexico was a big deal. But last Friday Chrystia Freeland, Canada’s foreign minister, who had cut short a trip to Europe this week to try to broker a deal with the US, said talks had hit an impasse, and Trump continued to threaten to kill Nafta and go it alone with Mexico.
That threat may be bluster. Canada is the largest market for US exports and Nafta has allowed the three countries to work in unison in industries, particularly auto manufacture, that will suffer mightily if a three-way pact is not agreed. Even if Trump does get a deal, it is not yet clear whether it will have to go through Congress or if Congress would approve it.
The tariffs have been terrible for business, says Dennis Slater, president of the Association of Equipment Manufacturers (AEM), and the consequences are spreading far beyond farming. Trump’s steel tariffs, which started the disputes, added 10%-20% to the cost of manufactur- ing the huge machines baking in the Iowa sun. Given that those machines can cost $500,000 and up, that’s a lot of money. “Even if we used American steel, prices are still up,” he says. “The economy has been strong, there’s no supply, everyone upped their prices.”
About 1.3 million people are employed by AEM members, 350,000 in making agricultural equipment. The losses farmers face will hit the entire manufacturing sector and people who rely on them. “If you lose your job tomorrow, you’re not buying another car,” says Slater. “There’s no dispute Nafta needs updating and we need a better deal with China,” he says. But the industry needs certainty, or “Americans are going to get laid off ”.
Day one of Farm Progress ended early as thunderstorms turned the site into a slick, black mudbath and organisers asked visitors to go home. The next day the sun was out again and with it came Sonny Perdue, Trump’s avuncular secretary of agriculture. In a softball question-and-answer session he praised farmers (“they embody that great American spirit, risk taking, entrepreneurship, hard work, the values of faith and family that are inspiring to me wherever I go”) while skirting around the hard questions.
He acknowledged that farmers have told him they want trade, not aid. But the markets are unfair to exporters. Trump said “enough is enough. We are going to have free trade and fair trade,” said Perdue.
Many farmers at the show worry that Brazil and other South American suppliers could step in and permanently erode their markets in China and elsewhere as the dispute continues. A third of US soy ends up in China at present and those “unfair” trade practices – and China’s booming economy – have allowed soybean exports to grow from $400m in 1997 to $14bn in 2017. Perdue said he doesn’t believe the dispute has done irreparable damage long term. But he did concede that it could take “a little while to get those markets back”.
One farmer who didn’t want to be named (“I don’t want to get into a Twitter war”) said he was sceptical and worse news could soon come. “What’s the plan? Piss off our biggest trade partners? Shout at them? I don’t know that’s the best way to get things done. Today things look better but who knows what’s going to happen tomorrow. We could get screwed by some 6am tweet.”
International visitors were less bullish too. Lu Tan, who works for corn producer Dekalb in China’s Hunan province, had travelled 30 hours to see the show. (“A lot of China’s farming is smallholders. We’d need smaller machines,” he observed.) The trade dispute isn’t good for anyone, he said. A Canadian visitor, who wanted to remain anonymous for fear of losing customers, was more blunt. “Trump is a menace. You can’t trust a word he says. Sure there are things that need sorting out, but who says he’ll keep his word? The guy’s a liar.”
But if farmers blame anyone, it’s Washington, not Trump. The other big topic at Farm Progress was the farm bill. The massive bill that covers agricultural and food programmes is renegotiated every five years and expires at the end of September. It is always a political hot potato and now more than ever, adding another layer of worry for already fretful farmers.
‘Things look better, but who knows? We could get screwed by a 6am tweet’
A display at Iowa’s Farm Progress show. Tariffs have already pushed machinery prices up by 10-20%