Will Trump heed the call of US farmers to reduce trade deficits?
The US farming sector is caught in the crossfire of an emerging trade war between the world’s top two economies. As US President Donald Trump considers increasing farm subsidies to compensate farmers for the expected decline in their exports and incomes once the US imposes the proposed tariffs on Chinese imports, representatives of the prime agricultural states and lobbying groups declared they prefer “trade to aid”.
On April 5, Trump proposed punitive tariffs on $100 billion worth of Chinese imports, in addition to the proposed tariff on $50 billion of Chinese goods two days earlier. In response, China announced 25 percent tariffs on imports of US airplanes, automobiles, and soybean, sorghum and other agricultural products.
Even before China’s announcement, US farm income had been “trending downward over an eight-year period”, as Trump put it last Monday. And US Senator Pat Roberts told PBS NewsHour on Thursday: “Mother Nature hasn’t been very good to us either.”
Overall, US net farm income is expected to drop by 6.7 percent to $59.5 billion this year, the lowest since 2006, according to a US Department of Agriculture release.
Roberts, who is also chairman of the Senate Committee on Agriculture, Nutrition and Forestry, was among a group of mostly Midwest lawmakers who met with Trump on the trade issue on Thursday. “There was a proposal that was at least floated … billions of dollars in aid to offset any tariff retaliation,” the Republican from Kansas told PBS after the meeting. “Everybody there insisted and really made their point to the president that we wanted trade, not aid.”
Another Republican senator, Ben Sasse of Nebraska, had issued a statement a day earlier on what he said were “misguided plans to spend billions of dollars on new subsidy programs during a poorly conceived, tariffs-first trade war”.
“This administration proposal is Saturdaymorning-cartoon central planning. We want more trade, not less,” Sasse said, adding that the farmers want to feed the world and win with trade.
And Iowa Governor Kim Reynolds was quoted by axios.com as saying farmers don’t want welfare; they want to “work and win”.
Moreover, a coalition of 107 trade groups spoke as one on the issue. In a letter to Capitol Hill on Wednesday, the business coalition, including the American Soybean Association, made it clear that subsidies are not a long-term solution. “While they may provide short-term relief — depending on existing legal authorities — the long-term costs of losing a market will be exponential,” the letter said.
Last year, the US shipped 32.85 million metric tonnes of soybean worth $12 billion — or 62 percent of its total soybean exports — to China, according to earlier media reports.
The letter also said the US farmers and exporters cannot easily find new buyers for their products: “Once a market is lost, and a buyer shifts to a foreign competitor, even if only for a short period of time, future US exports and sales likely will be lost as well.”
Compared with the unfavorable weather, the pressure of the looming tariffs and the unpredictability of Trump’s policies are a greater threat to the US farmers. Compounding the matter is the failure of the Trump administration to release any information on how Washington plans to help the farmers.
Interestingly, Trump has said US farmers are “great patriots” and he can’t tolerate the trade deficits with China. So wouldn’t it be good if the US farmers display their patriotism by helping to narrow the trade deficits with China?
That is also what is sought by John Heisdorffer, president of ASA, which lobbies for 21,000 US producers of soybean. “Soybean farmers want to be an essential part of helping lower our trade deficit with China,” Heisdorffer said at a congressional hearing on Thursday. “We believe that expanding market access can play a vital role in increasing our agricultural trade surplus.”
But will Trump pay heed to the call of US farmers?
“Everybody there insisted and really made their point to the president that we wanted trade, not aid.”