Trade War Tension Weighs Heavy on American Farmers
The Trump administration has set a rapid pace to rewrite the rules of trade between the U.S. and many of its closest trading partners. We have declared a trade war with China over a number of issues including protection of technology and intellectual property. We have argued over manipulation of currencies and access to markets. We saw our trade deficit soar to $57.6 billion in February 2018 as tariff and non-tariff barriers of our trading partners grew in retaliation to the same tariff and non-tariff barriers we imposed to demand fair trade. Have we seen impacts from these actions? We have — most of it damaging to all parties involved.
How bad is it? It is bad enough that our own lawmakers are implementing a $12 billion aid package for our farmers to counter the losses they have sustained over these growing trade barriers.
How big is $12 billion? It is a large sum of money no matter how you look at it. The federal government spent nearly $19 billion on agricultural support programs in 2017. That support is expected to grow to $27 billion in 2018 according to estimates of the Office of Management and Budget. Those monies are used to provide payments to farmers when their incomes fall below legislatively mandated targets; to subsidize crop insurance premiums intended to protect farmers from natural and market-driven disasters; to help train beginning and low-resource farmers; and to fund market promotion programs that are attempting to keep our products in international markets even during the heat of a trade war.
How is the money going to be spent? Wisely, we hope. The monies are intended to be spent three different ways as a result of the trade war:
- Direct payments to farmers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs — products suffering the direct consequences of the trade war.
- Purchases of foods including fruits, nuts, rice, legumes, beef, pork, and milk for distribution to food banks and nutrition programs. These purchases will go to worthy causes and will also help support the sagging markets for these products.
- Trade promotion programs to grow our international markets and to replace markets lost.
What happens next? Who knows? Trade wars cause chaos in the marketplace and affect every man, woman, and child in every nation of the world. Consumers pay more for goods and services. Technology development slows, and producers and manufacturers suffer losses. Those being protected by trade barriers survive to fight the next battle, but the trade war will not change the allocation of scarce resources that determines competitiveness in markets. Finally, those individuals and countries most at risk will suffer, and that suffering can lead to even larger consequences around the world as they define their means of retaliation.
How do we survive? Two answers in response to this question. First, it has never been more important to invest in technology development. When the dust settles from this conflict, the survivors will be those who best manage scarce resources. The best way to manage those resources is to keep our growers at the cutting edge of technology. Second, stay informed and promote your cause. Understand your issues, and make sure your lawmakers know you are holding them accountable.
There are imbalances in trade that can be corrected through negotiation. We can hope our leaders prioritize our needs without escalating this conflict. We are a great nation, and our farmers serve a noble purpose in making it an even greater nation. All they need is a level playing field where they can utilize their scarce resources and American ingenuity to get the job done well.