Will Agriculture Pay the Price for Trump's Trade War?

And, as is no surprise when a Republican-led Department of Agriculture is doling out the money, large corporate farms have been getting the bulk of the cash. Studies have questioned whether smaller family farms have received their fair share of the subsidies, as farm bankruptcies jumped 20% last year and loan delinquencies hit a record high in Q1 2020.

(This solution of buying your way out of a problem and the lack of concern for our national debt is no surprise for a Donald Trump-led entity. He was known as the king of debt when running his own company, which is what contributed to his multiple bankruptcies, the multiple bailouts by his father, his regular stiffing of contractors, and why he eventually had to go abroad to acquire his business loans.)

April 2018 - Despite having advocated some rather radical public policy ideas during the late 1800's and early 1900's, American farmers and ranchers today tend to be more conservative in their politics. More often than not they vote Republican. To a large extent they even supported Donald Trump (but only in the general election), a man of such questionable character and intellect that many Republicans refused to vote for him.

(Soybean Field - image from michiganfarmer.com)

But Mr. Trump's recent actions on trade are worrying many, if not most, Citizens who work in the nation's agricultural sector. Given his known lack of interest in public policy details, Mr. Trump probably does not realize how much of America's farm output is sold overseas, especially to China, the primary target of the Trump trade ire.

For example, according to the U.S. Department of Agriculture, China imports 60% of the U.S. soybean crop. The Kansas Grain Sorghum Commission believes at least half of Kansas' sorghum is purchased by China. Last year, Iowa's farmers sold $42 million of pork to China and the Nebraska Farm Bureau reports that 30% of total farm income in the Cornhusker State is derived from foreign trade.

So when Mr. Trump surprised his economic advisors in early March and announced an overall 25% tariff on steel imports and 10% tariff on aluminum imports (later modified to give exemptions to our western allies), and then followed that up a few weeks later with a broad-based $50+ billion set of tariffs specifically aimed at Chinese goods, China responded with trade sanctions of their own covering more than 120 US farm and manufacturing products. And in mid-April, they added sorghum to that list, with a 178.6% import duty.

(image from nationalhogfarmer.com)

China's response came as no surprise to America's agricultural communities. Our farmers and ranchers know their markets and they also know if foreign demand for their products starts to shrink, then the prices they receive for those products will fall. And, conversely, if the price of steel and aluminum rise as a result of the Trump tariffs, so will the cost of goods that use steel…like farm machinery.

Being caught in a vise of declining revenue and increasing costs is not a sustainable position for any business and certainly not a position American farm families want to find themselves in.

Consequently, it was no surprise to hear the immediate negative reaction from rural America to the Trump trade talk, most of which paralleled that of the letter to Mr. Trump penned by the Nebraska Farm Bureau:

"It has been very well documented that your historic path to the White House came directly through rural America. While your thoughts on trade were well known by farmers and ranchers, it would be very dangerous to assume it was the focus of their support. Mr. President, please do not turn your back on the farm and ranch families who depend on international markets and who rely on you to make wise decisions that don't put their economic future in jeopardy.",

(image from abcnews.com)

or that of Montana's Herb Karst, a grain farmer and representative of the Farmers for Free Trade, who put it even more bluntly:

"Coming from an agriculture state that supported Trump, it's certainly a disappointing development for Montana and the rest of rural America…It just seems that agriculture is going to be paying the price for the protection of the steel and aluminum industries."

Time will tell whether Mr. Trump will continue to back-track on his trade proposals and whether more Citizens will be helped or hurt by those policies. But you can bet our farmers and ranchers won't back down if they feel their livelihood is at stake.