For the second time in 14 months, President Trump announced a multibillion-dollar government intervention to prop up the farm sector, a prominent casualty of the Sino-U.S. trade war. The first bailout, announced in April 2018, has sent around $8.3 billion in cash to growers so far; the new rescue will buy “agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance,” the president said on social media.
The trade war could continue into 2021, Trump said on Saturday, because China may wait to see who wins the 2020 presidential election. A new aid program for farmers would be a reversal of administration policy, made necessary by the impasse in negotiations. Agriculture Secretary Sonny Perdue, who had ruled out a repeat of the Market Facilitation Program of cash payments, said in Japan that Trump “directed @USDA to work on a plan quickly.”
While farm groups urged a resolution of the trade war, the National Pork Producers Council said, given the damage to the hog industry, “it is fair and right that the U.S. government purchase significant quantities of pork over the next 18 months.” The pork council says trade disputes turned 2018 into a money-losing year for hog farmers. “Farmers have been patient and willing to let negotiations play out, but with each passing day, patience is wearing thin,” said president Lynn Chrisp of the National Corn Growers Association.
If Trump’s proposal, part of a Twitter storm on Friday, is implemented, it would expand U.S. food donations 10 times or more from recent levels at the same time the administration wants to shut down the premiere U.S. food-aid program, Food for Peace. In its proposed USDA budget for the fiscal year that opens Oct. 1, the White House asked for no funding for the “inefficient food aid” approach of shipping U.S.-grown food to recipients overseas.
Also known as PL 480, Food for Peace was created during the Cold War in a combination of American humanitarian impulses and a cold-eyed attempt to dispose of price-depressing commodity surpluses. The program received $1.7 billion for food donations in 2018.
Trump suggested an elastic range for his plan to buy agricultural products. It could be “larger amounts than China ever did” or it could be $15 billion, “far more than China buys now.” In the past six years, the peak in sales to China was $25.7 billion in fiscal 2014. The USDA forecasts sale of $9 billion to China this year. A program of $15 billion in purchases would be nine times larger than Food for Peace and $25.7 billion would be 15 times larger.
A mammoth giveaway program could inspire a WTO complaint of dumping that would destroy the sales market for other agricultural exporters.
The farm package was broached on the same day that U.S. tariffs rose to 25 percent, from 10 percent, on $200 billion worth of Chinese products. Work was underway, said Trump, to set tariffs of 25 percent on an additional $325 billion worth of products.
Last summer, the USDA said it would spend up to $12 billion to mitigate the impact of Chinese tariffs on the agriculture sector. Expenditures are likely to total less than $10 billion. More than $8.3 billion has gone to producers of almonds, cotton, corn, dairy, pork, soybeans, sorghum, sweet cherries, and wheat. Producers are limited to a maximum of $125,000 each for grain, livestock, and fruits and nuts. The deadline to submit documentation for the Trump tariff payments is Friday.
In addition, USDA is spending $1.2 billion to buy and give away foods affected by the trade war. It also distributed $200 million in grants to develop new markets overseas.
Wheat, corn and dairy groups have said payment rates for their commodities were unduly low. The corn rate is 1 cent a bushel, wheat is 14 cents a bushel, and milk is 1 cent a gallon, while soybean growers were compensated at $1.65 a bushel. Some crops, such as canola, were affected but wrongly were left out of the program, according to some producers.
White House economic adviser Larry Kudlow said Trump and Chinese President Xi Jinping were likely to meet as part of the G20 meeting on June 28-29 in Osaka. During a Fox News interview, Kudlow also said China has invited U.S. trade representative Robert Lighthizer and Treasury Secretary Steve Mnuchin to Beijing for talks, but there are “no concrete, definite plans yet,” reported Politico.