With the China-U.S. trade war deepening, President Trump pointed to billions of dollars in stopgap trade aid flowing to US agriculture, and said he would continue the payments next year if necessary. Farmers and ranchers are steadfastly optimistic of winning the trade war. Seventy-eight percent said in a Purdue University survey they expect the conflict to be resolved to their advantage.
The Trump administration spent $10 billion to defray the impact of tit-for-tat tariffs on 2018 U.S. agricultural production and says up to $7.25 billion will be paid to farmers and ranchers this month out of a maximum $16 billion available on this year’s production. Cash payments to producers would account for the bulk of trade aid, but USDA would also purchase and donate surplus foods, along with providing cash-share funds to develop new markets overseas.
Economist Joe Glauber of the IFPRI think tank said producers may receive close to $20 billion dollars in direct farm program payments this year. The total would include traditional farm subsidies, the final round of trade aid for 2018 production and this month’s trade-aid payments. The USDA has said additional trade-aid payments are possible in November and January.
“If price levels remain low and exports stagnant, pressures for another round of trade aid will be hard to resist in 2020, particularly in an election year,” wrote Glauber, former USDA chief economist, in an essay published by The Hill newspaper. “While such aid may help producers in the short run, the long-term harm in world markets could well prolong problems for the sector.” Large payments expose the United States to a possible WTO challenge for trade-distorting subsidies and the risk of having to make trade concessions or revamp its farm subsidies if it loses a case, he said.
Trump appeared ready for a long-running and bruising conflict with China. “We are in a very strong position,” he said on social media.”Massive amounts of money from China and other parts of the world is pouring into the United States for reasons of safety, investment, and interest rates!” Beijing rejected the U.S. label of currency manipulator and warned that “arbitrary, unilateral and protectionist” acts by the United States “will significantly impact the global economy and financial markets,” reported the Xinhua news agency.
“As they have learned in the last two years, our great American Farmers know that China will not be able to hurt them in that their President has stood with them and done what no other president would do – And I’ll do it again next year if necessary!” tweeted Trump.
If trade aid is offered in 2020, it would be the third year in a row. A USDA spokesperson was not immediately available for comment on Trump’s statement.
U.S. farmers waver little in their expectation of winning the trade war, according to the Ag Economy Barometer produced by Purdue. Its nationwide poll of 400 producers in mid-July found that 78 percent of respondents thought “the trade dispute with China will ultimately be resolved in a way that benefits U.S. agriculture.” Purdue began asking the question in March and belief in a successful outcome has never dropped below 65 percent. In a related question on the July survey, only 15 percent said they expected the trade war to be resolved by September 1.
The Ag Barometer, a gauge of farmer confidence, soared to a reading of 153 in July, tied as the barometer’s highest reading ever with the “Trump bump” of optimism when the president took office in January 2017. Purdue economists James Mintert and Michael Langemeier said the barometer’s rise “coincided with the completion of a long, drawn-out spring planting season and an improvement in crop conditions.” The July survey of producers was conducted before the USDA announced that enrollment for trade aid would open on July 29, with payments to begin this month.