President Donald Trump has promised to shield farmers from the sting of China’s trade retaliation, but that embattled portion of Trump’s rural base says they just want to sell on the open market, without tariffs slapped on their products amid escalating tensions.
In interviews with POLITICO this week, several farmers across the country said they don’t want a trade war and they want to avoid having their income tied to government support to make up for losses created by one.
“We want our living to come from the marketplace,” said Mark Recker, a corn and soybean farmer in northeast Iowa.
But the threat of a trade war now looms as declining farm incomes have already forced farmers to delay major equipment purchases, diversify into other activities like livestock or even take second jobs.
China has threatened to impose duties on the $14 billion worth of soybeans it imports from the U.S. every year and a host of other farm goods as well as airplanes, chemicals and other U.S. goods in response to Trump’s recent trade actions. The most recent was the March 22 announcement to consider a 25 percent tariff on $50 billion worth of Chinese goods to punish China for its intellectual property practices.
Trump upped the ante on Thursday in response to China’s countermeasure by asking administration officials to identify another $100 billion in Chinese imports to put on the firing line.
Knowing that China — the second-biggest market for U.S. agricultural exports — will likely respond by continuing its assault on Trump’s rural base, the president, in a statement, said the administration “will use all of our authorities to ensure that we protect and preserve our agricultural interests.”
Support payments may remove some short-term pain, but farmers say the real damage would come in the long term.
“When we become a supplier that’s not reliable, countries look elsewhere,” said Recker, who currently serves as president of the Iowa Corn Growers Association. “This will embolden South America — Argentina and Brazil — to expand their acres and just make them even more of a competitor.”
Brian Duncan, who raises hogs and cattle and grows row crops in Ogle County, Ill., and is vice president of the state’s Farm Bureau, told POLITICO that while he appreciates the president acknowledging that agricultural producers are going to take a hit, he is skeptical of the assistance being promised.
“We’ve spent decades trying to work ourselves away from government assistance,” Duncan said. “Part of that has been the development of foreign markets.”
He echoed Recker’s concerns about losing markets that the U.S. has spent years developing due to all the trade uncertainty, saying that the effects of a tit-for-tat dispute could ripple across generations.
Former USDA chief economist Joseph Glauber said the whole idea of paying off farmers to compensate for a trade action creates a “moral hazard.”
“To sort of buy them off, it almost gives free rein to pursue other trade wars, and I think that’s a real mistake,” said Glauber, now a senior research fellow at the International Food Policy Research Institute.
Pumping more financial support towards farmers could also fuel even more trade skirmishes as other countries challenge U.S measures at the World Trade Organization, he said.
The Agriculture Department last paid out ad hoc subsidies in the billions in the late 1990s and early 2000s. That resulted in a yearslong dispute with Brazil over U.S. cotton subsidies that ended with a major legal defeat for Washington and hundreds of millions in payments, Glauber noted.
While offering help to farmers, the Trump administration has revealed few details on what form it might take. A little-known agency called the Commodity Credit Corporation is a likely source of funding for the Trump administration’s farm sector rescue mission.
The Agriculture secretary has broad authority to support the farm sector using the CCC, which was created in the 1930s for the sole purpose of stabilizing and protecting crop prices and farm income. The financial institution has $100 million on hand that it borrows from Treasury, but can borrow up to $30 billion at any one time.
USDA, which already uses the CCC to fund farm subsidies and loans, resource conservation and emergency disaster programs, can essentially carry out any assistance using the CCC as long as it supports agriculture.
Congress in recent years has restricted this authority after appropriators raised concerns about USDA issuing nearly $350 million payments to certain industries in 2009. But that changed this year, when lawmakers lifted those restrictions in the most recent budget-busting $1.3 trillion omnibus spending deal — which Trump threatened to veto before declaring he’d never sign another one like it.
Agriculture Secretary Sonny Perdue, during a tour through Ohio this week, has been reassuring farmers and ranchers that the Trump administration won’t leave them to bear the brunt of retaliation alone. In a statement to POLITICO on Thursday, Perdue said he “stands ready to defend agricultural producers who may be harmed” and he will use all his authorities to protect their interests.
While on the road, Perdue said Congress may have to take some “extraordinary measures” in the farm bill based on what happens in the trade dispute with China. The USDA has not shared details about what the secretary is considering.
Lawmakers are trying to pass a farm bill before a Sept. 30 deadline, though in the House a partisan fight over proposed changes to the food stamp program — which accounts for 80 percent of cost of the legislation — has upended what once expected to be a bipartisan process and cast uncertainty over whether it can attract enough votes.
Sen. Jerry Moran (R-Kan.) told Reuters on Friday during a commodities conference that he assumed the Trump administration would try to use the farm bill to help farmers withstand market slumps, though no specific proposals have been suggested yet.
The farm bill doles out between $5 and $7 billion a year in commodity payments in response to price and revenue drops, while also subsidizing about 62 percent of farmers’ crop insurance premiums. Congress also recently approved $3 billion in ad hoc disaster assistance to help producers recover from hurricanes and wildfires last year, which the USDA is expected to begin sending out this summer.
Duncan, the farmer from Illinois, pointed out that lawmakers are having a tough time as it is writing a farm bill because they can’t spend any additional money beyond what current law is projected to cost over a decade. So sending out potentially billions of dollars to producers could be a tough sell.
Sen. Joni Ernst (R-Iowa) said Trump “gets the importance of agriculture."
“When we actually sat down with him and talked about these issues, it was like a lightbulb came on when he saw our market was dipping,” she told reporters in Iowa this week, recounting a White House meeting she and other senators had with Trump in December.
“I laid out a graph that showed every time he talked about tearing NAFTA up what it did to our hog markets and that he got and he was like, whoa. So he understands that,” she said.
But even as Trump recognizes the need for supporting U.S. farmers, the government does not “have enough money” to compensate every company that would be hurt in a trade war with China, said Rick Helfenbein, president and CEO of the American Apparel & Footwear Association.
“It’s not something that can be subsidized. In the short term you might handle the farmers, but should everybody else get in line with their hands out and we can become the welfare state of exporters? It’s an almost childish idea that we’re going to pay the farmers to be quiet,” Helfenbein said.
China currently supplies more than 40 percent of all apparel imports into the United States. So APFA member concerns are not being hit with new Chinese tariffs, but whether Chinese clothing and footwear appears on future U.S. retaliation list. The apparel import sector breathed a big sigh of relief when it was left off Trump’s initial list, but fears it won’t be so lucky if USTR has to come up with $100 billion more product.
“What [Trump] did last night was outlandish,” Helfenbein said. “Enough is enough. Let’s sit down and talk. Let’s not threaten any more.”
The U.S. chemical industry is also caught in the crossfire of the escalating trade dispute. Nearly 40 percent of the $50 billion worth of products on China’s initial retaliation list are chemicals, threatening an important sector of the U.S. economy that currently runs about a $32 billion trade surplus with the rest of the world.
Like farming, the U.S. has developed a competitive advantage with its chemicals industry over the past 10 years as the shale gas revolution has turned it from a high-cost producer to a low-cost producer, which appears to have caught Beijing’s attention.
“I think China is also seeing that we have this global competitive advantage and we’ve become a target,” said Cal Dooley, a former member of Congress who now heads the American Chemistry Council.
He said it’s frustrating that Trump is imposing tariffs to support less competitive sectors like steel and aluminum, while exposing more competitive sectors like agriculture and chemicals to China’s retaliation.
“It’s absolutely not a realistic policy that the administration has the ability to make farmers whole or to make the chemical industry whole,” Dooley said. “The bottom line is the U.S. chemical industry is not looking to the government to provide a handout or support. We are fully capable of being made whole by being competitive in the global market place.”