Brief #19—Economic Policy
As the chaos and confusion of the trade war continue to prove problematic on both domestic and global levels, President Trump has attempted to offset the damage done to a critical part of the U.S. economy.
Last week, it was announced that the Trump administration would award $12 billion in federal aid for the American farmers who had been affected by the tariffs. The effects felt throughout the midwestern farming communities have been severe. Farmers across the rural midwest had been completely shut of the international markets that annually provide buyers for their crops, helping the U.S. economy to continue its healthy rates of productivity.
Trump ruled that such a maneuver was necessary without congressional vote. There is little question that these farmers are facing financial problems that are only going to get worse if the trade war continues. The response from the American people since the plan was announced, though has been primarily been less than enthusiastic.
It hasn’t only been the American taxpayers who aren’t happy about it. Speakers from many farming and agriculture driven communities across the midwest and southern parts of the U.S have also expressed fear and distain at the prospect of the bailout.
Even after it was announced that the European Union would begin purchasing more soybeans grown in the U.S, responses still remained primarily negative.
When we consider why American farmers have responded so negatively at the prospect of receiving government aid, there are several key factors that must be taken into account.
Firstly, it must be noted that the aid would not be needed if President Trump had not implemented tariffs that caused significant problems within the global agriculture markets in the first place. Products such as soybeans and grain as well as beef, pork, and chicken are often sold by American farmers through overseas markets. The retaliatory tariffs imposed by Canada and Mexico as well as Europe have resulted in them being shut out of these markets and the cost for the farmers doing the selling will likely be in the billions, as financial analysts have indicated.
The problems that Trump’s tariffs have caused within the agricultural commodities market cannot be overstated. For many of the farmers who operate small to mid size enterprises, the prospect of losing the market share of their crops and products is extremely frightening. Soybeans were among the first U.S. agricultural exports to be negatively effected by the trade war. According to the U.S. Chamber of Commerce, July 9th saw the price of soybeans fall to roughly $7.79 a bushel, the commodity’s lowest dip in almost a decade. Meanwhile in Brazil, soybean futures soared above those in the U.S. by $2.21 per bushel.
Commodity producers know just how difficult it is to recover a market share that has been lost. Soybean farmers saw something similar happen when President Richard Nixon imposed an embargo on American grown soybeans in 1978. Years later, in 1980, President Jimmy Carter imposed another on all U.S. goods being exported to the Soviet Union. Both policies proved problematic, negatively effecting the U.S. reputation as a reliable supplier within global trade markets, causing international buyers to quickly lose confidence in both American goods and producers.
Another problematic element of Trump’s plan to bailout America’s farmers is that it may cause problems within non-farming states. In the American north, many citizens, both liberal and conservative have expressed great concern for their rail transportation system. The proposed Gateway rail project would keep the Amtrak line, the New Jersey Transit and most of the Boston-Washington rail corridor from suffering further damages. People throughout the Northeast have raised their eyebrows at the fact that the farming states that would receive the federal aid package are predominantly red, while their states are primarily blue. While the necessary aid is being provided for people in communities that voted for Trump, the pressing need in their part of the country is receiving neither aid not attention from their government. This is not helped by Trump’s previous tax bill which largely effected blue states such as New York and New Jersey, nor by the fact that the aid for the farmers was generated by their own tax dollars.
Farmers across American have posed similar responses to Trump’s proposed aid for them, though, and the verdict seems to be that they do not want it. They want their market share restored and to have the same free market access and free trade options that they enjoyed before Trump’s tariffs were implemented. Those systems proved beneficial to small farming communities across the country and therefore to the entire U.S. economy. Trump’s tariffs have had exactly the opposite effect.
American farmers understand what is best for their businesses and they know that it is not Trump’s federal aid bailout. Their cries have been and remain for “trade, not aid.”
- Adopt-a-State is an organization dedicated to helping political activists and volunteers in blue states connect with each other.
- Policy Link is a research institute dedicated to helping advance economic and social policy.
- Organic Trade Association is a leading agricultural trade publication that provides resources for those within their community.
This brief was written by USRESIST NEWS Economic Policy Analyst S. O’Brient: Contact email@example.com