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Trump will Pay for the Soybeans That Are Not Going to China

foodmate 2018-07-26
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China may be buying fewer American soybeans and fruits, but don’t worry: President Donald Trump is going to pay for them, out of Washington’s own pocket.

The Trump administration announced Tuesday that it would provide up to $12 billion in emergency relief to US farmers affected by retaliatory tariffs imposed by China and other countries.

The bailout package has been criticized by several Republican lawmakers as market intervention, and could prompt Beijing to offer more subsidies to Chinese industries in turn.

“The new subsidies will help Beijing make the argument that everyone uses subsidies,” said Ether Yin, a partner at economic research firm Trivium China. “But if Trump does not provide reassurance to his domestic producers, he will not be able to stay in the trade war.”

The Republicans, which advocate for a minimal governmental role in the economy, have traditionally opposed subsidies. And Trump himself has accused China of unfairly sponsoringits hi-tech and steel industries.

Trump administration officials say the aid, expected to take effect in September, is aimed at helping farmers bear the brunt of “illegal retaliation” by China and other trading partners of the US.

The payments will be calculated after the affected goods are harvested, and will be available in the following three forms:

1. Direct payments to producers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs.

2. Government purchases of fruits, nuts, rice, legumes, beef, pork and milk for distribution to food banks and nutrition programs.

3. A program to develop new export markets.

The government will use money from a Depression-era program, the Commodity Credit Corporation, which does not require approval from the Congress. Established in 1933, the program allows the Department of Agriculture to borrow up to $30 billion to protect farm incomes and prices.

Announcement of the aid boosted US grain prices and agricultural stocks on Tuesday. But it soon prompted criticism from farmers’ groups and pro-trade Republicans.

The American Soybean Association said that although it appreciates the immediate relief, the subsidies offer no long-term solution to an expected plunge in soybean exports to China.

“This is becoming more and more like a Soviet type of economy here: Commissars deciding who’s going to be granted waivers, commissars in the administration figuring out how they’re going to sprinkle around benefits,” said Senator Ron Johnson, Republican of Wisconsin. “I’m very exasperated. This is serious.”

By sending taxpayers’ money to his supporting base, Trump also risks further angering other industries hurt by the tariff war.

“What about the manufacturing sector? What about the energy sector? The oil and gas industries?” Senator Lisa Murkowski, Republican of Alaska, said on Tuesday. “wher do you draw the line?”

Despite the domestic outcry, Trump has showed no intention to retreat from the trade war. “Tariffs are the greatest!” the president tweeted on Tuesday.

His trade officials argue that after China and other countries eventually cave in to Washington’s demands, the long-term benefits will be worth the current damage to the US economy.

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