Column: Trump’s trade war is wrecking America’s farm economy
Farm prices are down, bankruptcies are up, farm equipment is getting more expensive and export markets are fading away: Is there anything to like about the impact President Trump has had on the agricultural economy of the United States?
It’s no secret that the nation’s agricultural midsection has been a haven of support for Trump. But it also has been pummeled by his policies, not least among them his truculent trade war with some of the farm belt’s most important export markets, such as China. Over the last week, fears have risen that the trade war is entering a new long-term phase.
Last November, Chinese soybean imports from the U.S. fell to zero. That’s a big hit, since American soybean farmers export half their crop and China was their largest single market, buying $12 billion of the commodity in 2017.
We’re getting a little taste now of what soybean prices will look like if this trade deal doesn’t come to fruition, and it isn’t pretty.
Todd Hubbs, University of Illinois
China instead has been buying from Brazil, raising fears that a long-term shift in its import sourcing could leave U.S. producers permanently out in the cold. The result is that soybean prices have plunged, with futures closing at $8.025 a bushel for July delivery on Monday, after falling below $8, their lowest price in a decade.
“We’re getting a little taste now of what soybean prices will look like if this trade deal doesn’t come to fruition,” University of Illinois agricultural economist Todd Hubbs said in his weekly crop report last week, “and it isn’t pretty.”
Corn and other commodity prices are also taking hits, with Bloomberg’s grain total return subindex falling to its lowest level since 1977.
Farmers are afraid the tariffs could inflict “permanent damage … on agricultural export markets,” as foreign producers sweep in to serve Americans’ foreign customers, according to Roger Johnson, president of the National Farmers Union.
“China was our biggest soybean customer, and they’re not moving,” Jim Byrum, president of the Michigan Agri-Business Assn., said at a press conference in East Lansing. “China was the biggest opportunity for us to export pork, and they’re not buying because of the tariffs…. The new Chinese tariffs? Sure, it’s going to hurt even more.”
With farm equipment prices rising because of Trump’s tariffs on foreign aluminum and steel, he said, “We’re paying the tariff, and that’s harming every industry in the United States.”
The pain in the fields is biting deeper. Farm bankruptcies in Wisconsin, Minnesota, Montana and the Dakotas have surged in the last two years, reaching 103 in 2018, according to the Federal Reserve Bank of Minneapolis. That’s the highest level since 2010, during the post-recession hangover. “This trend has not yet seen a peak,” the Minneapolis Fed said in November.
One frustration for farmers and businesses suffering from the tariffs is that Trump appears to have no understanding of how tariffs work. In tweets, he has suggested that they’re paid by the exporting country — i.e., China, in the case of manufactured goods. They’re not. They’re paid either by American importers if they maintain their pre-tariff prices to customers, or by consumers, hit with higher prices for imported goods. Even Trump economic advisor Lawrence Kudlow acknowledged over the weekend that the tariffs are “in effect … a tax increase” on Americans.
Trump had promised to provide farmers with $15 billion in government relief, on top of the $12 billion he earlier pledged. But that could mean that American consumers pay twice for what appears to be Trump’s whim of iron on international trade — once in higher prices for foreign-made goods, and again to pay for the bailout for the agricultural sector.
To some extent, the struggles in the farm belt reflect years of low crop prices and high production costs, trends that predated Trump’s presidency. But his policies have done nothing to mitigate the crisis and instead have exacerbated the pain. By driving up steel prices — good for domestic steel producers, bad for the vastly larger category of domestic steel consumers — Trump’s trade war has widened the gap between crop prices and the cost of equipment.
“Producers are dealing with multiple years of economic pressure, and we are seeing more operations ‘throwing in the towel,’” the Minneapolis Fed quoted a rural banker in February.
Farms aren’t the only victims of Trump administration policies in rural areas. As Paul Krugman observes, his attack on safety-net programs is also taking a toll. Medicaid expansion under the Affordable Care Act has been a key to improving access to healthcare in rural and small-town America, even more than in urban areas, according to a study by Georgetown University’s Health Policy Institute.
“Medicaid covers a larger share of nonelderly adults and children in rural and small-town areas than in metropolitan areas,” the study says; “this trend is strongest among children.” That’s because “rural areas tend to have lower household incomes, lower rates of workforce participation, and higher rates of disability — all factors associated with Medicaid eligibility.”
Yet Trump’s forays against Medicaid and the ACA haven’t let up. The White House has thrown its weight behind a lawsuit by red states aimed at declaring the entire Affordable Care Act unconstitutional, which would end Medicaid expansion. Trump’s healthcare administrators are smiling on efforts in numerous states to saddle Medicaid with work requirements and premiums, which suppress enrollment.
It’s proper to note that Republicans who represent rural areas have been fully complicit in this assault on their constituents. Take House Minority Leader Kevin McCarthy (R-Bakersfield), for example. In his district, which covers most of Kern and Tulare counties, agriculture is the leading industry.
You won’t find much on his website acknowledging the effect of the trade war on his constituents, other than a supine statement of praise for the administration’s allocation of a measly $200 million for farm export promotion. Of that sum, California is to get an even measlier $8.9 million. McCarthy parroted the White House line that the pain being experienced by farmers was the result of “China’s trade retaliation against the United States,” which seems to be pointing the finger in the wrong direction.
This isn’t the only example of McCarthy neglecting his district’s interests. He has been a sedulous foe of Medicaid even though Tulare County has the highest percentage of residents dependent on Medi-Cal, the state’s Medicaid program, (55%), and nearly half the residents of Tulare and Kern together are enrolled. The state average is 34.5%. Whom does McCarthy work for, again?