26 July 2018
New U.S. Farm Subsidies Seek to Address Retaliatory Tariffs on U.S. Exports
The USDA has announced its intention to authorise up to US$12 billion under three separate programmes to help farmers deal with the trade damage associated with the “unjustified retaliation” by various U.S. trading partners to the recent tariff actions taken by the Trump administration. These programmes, which have attracted criticism from a number of U.S. lawmakers, are expected to be up-and-running by early September.
U.S. Secretary of Agriculture Sonny Perdue announced on 24 July that his department will help farmers deal with the trade damage associated with the “unjustified retaliation” by various U.S. trading partners to the recent tariff actions taken by the Trump administration. Secretary Perdue insisted that this is “a short-term solution to allow President Trump time to work on long-term trade deals to benefit agriculture and the entire U.S. economy.” In the meantime, the USDA will authorise up to US$12 billion under three separate programmes in an effort to assist farmers.
The USDA press release noted that trade damage from such retaliation has impacted a host of U.S. commodities, including field crops like soybeans and sorghum, livestock products like milk and pork, and many fruits, nuts and other specialty crops. The agency is using the authority under the Commodity Credit Corporation to establish three programme by early September: a Market Facilitation Program, a Food Purchase and Distribution Program and a Trade Promotion Program. The USDA believes these programmes would fall under certain legal provisions allowed under WTO rules. In a 24 July speech, Trump personally said in discussing his trade policy that “the farmers will be the biggest beneficiary; watch, we are opening up markets, you watch what is going to happen, just be a little patient.”
Reaction to the announcement was mixed, both among associations representing farmers and members of Congress. The aid "will provide a welcome measure of temporary relief to our farmers and ranchers," said Zippy Duvall, president of the American Farm Bureau Federation, the largest American farmer group. “But we cannot overstate the dire consequences that farmers and ranchers are facing in relation to lost export markets, and we will continue to push for a swift and sure end to the trade war,” he added. Several Republican members of Congress from farm states (as well as Democratic members) decried the use of government subsidies that will increase the deficit. For example, Sen. Bob Corker (Republican-Tennessee) blasted the administration for implementing “a terrible policy that sends farmers to the poorhouse, and then you put them on welfare, and we borrow the money from other countries.” Sen. Rand Paul (Republican-Kentucky) agreed, saying “if tariffs punish farmers, the answer is not welfare for farmers – the answer is remove the tariffs.” Sen. Ron Johnson (Republican-Wisconsin) emphasised simply that farmers “want trade, not aid.”
The plan does not require action by the U.S. Congress and was announced two days before Trump is set to travel to Iowa, the top U.S. soybean-producing state. The United States exported US$138 billion worth of agricultural products in 2017, including US$21.5 billion worth of soybeans, the most valuable export. Canada, mainland China and Mexico are the three biggest buyers of U.S. farm goods, accounting for 43 percent of total purchases in 2017, and the United States has trade issues with all three of these trading partners. Mainland China alone imported US$12.3 billion worth of U.S. soybeans last year, according to the USDA.