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Farmers are losing patience with Trump’s trade war

“We don’t want another check from the government.”

Farmer Terry Davidson walks through his soy fields July 6, 2018, in Harvard, Illinois, the same day China imposed retaliatory tariffs aimed at the US soybean market.
A farmer walks through his soy fields on July 6, 2018, in Harvard, Illinois, the same day China imposed retaliatory tariffs aimed at the US soybean market.
Nova Safo/AFP/Getty Images

Farmers in the Midwest are losing a lot of sleep these days.

A recent flare-up in the US-China trade war has them panicking that much of their crops may rot for a second year in a row. Some are even worried they may lose their farms if the international spat continues much longer.

“We don’t want to be collateral damage,” Kevin Paap, a corn and soybean farmer in southern Minnesota, told me. “If they don’t reach a conclusion soon, it’s going to be really somber times.”

After launching a two-year trade war with China, the Trump administration seemed close to reaching a deal with Beijing to reopen commerce between the world’s two largest economies. But earlier this month, those talks collapsed, and everything has gone downhill since then.

Last week, the president raised an existing 10 percent tax on many Chinese imports to 25 percent. China retaliated by adding higher tariffs on many American imports. Now Trump has been talking about taxing an even wider range of Chinese products.

Trump insists that his trade war will benefit farmers, but it’s actually crushing them. It seems unlikely that China will scrap the 25 percent tariff on American soybeans anytime soon, and now it’s adding higher taxes on American apples, oranges, pork, and almonds, too.

That’s why farmers are freaking out. Some are facing financial ruin now that millions of Chinese consumers, who once bought about 60 percent of American agriculture exports, have stopped buying their products. Exports to China from Minnesota dropped about 25 percent after the first round of tariffs went into effect last year, said Paap, who is president of the Minnesota Farm Bureau.

“The patience of American farmers has worn very thin,” Shayne Isane, who is borrowing money to keep his pork and soybean farm running in northern Minnesota, told me. “If a trade deal can be reached then it was all worth it, but if it doesn’t getting settled soon, it will be disastrous for American farmers.”

Isane, who voted for Trump, told me that the president may lose political support from farmers if the trade dispute continues. “Rural Americans were some of his biggest supporters,” he said. “Now that support is a little tenuous.”

Trump seems to be acutely aware of this, and has taken steps to help farmers who have been hurt by the trade war — and shore up their support going into the 2020 election campaign. Last year, Trump created a $12 billion bailout program for farmers, and on Monday, he outlined another plan to give them an additional $15 billion.

But it’s not clear if those bailouts will be enough to keep farmers happy. “We don’t want another check from the government,” Isane said. “People don’t realize that once you lose a market, it’s hard to get it back.”

Farm bankruptcies are on the rise

Every year before planting season, US farmers take out loans to cover operating costs. But lately, farmers have been defaulting on their loan payments, and many went out of business last year.

A total of 84 farms in the upper Midwest filed for bankruptcy between July 2017 and June 2018, according to the Federal Reserve of Minneapolis. That’s more than double the number of Chapter 12 filings during the same period in 2013 and 2014 in Wisconsin, Minnesota, North Dakota, South Dakota, and Montana.

Farms that produce corn, soybeans, milk, and beef were already suffering due to low global demand and low prices, according to economists, but Trump’s trade war is ruining them. The problem got so bad that the Trump administration launched a $12 billion aid package for US farmers coping with retaliatory tariffs that foreign countries have imposed on their products.

But that bailout has not been enough to keep farms open. Paap, one of the Minnesota farmers I spoke to, said the money they got from the government last year was barely enough for his family to get by on.

Another bad harvest season would send farmers over the edge. Not to mention the other industries that are getting hit too.

Trump’s tariffs on Chinese imports hurt American businesses

Over the past year, the US has placed about $200 billion in tariffs on Chinese goods, in part to make Chinese products more expensive so Americans don’t buy them. The administration has also placed steep tariffs on all imported steel, angering other major US trade partners.

The idea was to level out the trade deficit and make China buy more US goods, but, as expected, China responded by slapping its own tariffs on American imports. And Trump’s steep tariffs on all imported steel and aluminum, which went into effect in March 2018, have led other US trading partners to add their own retaliatory duties on American goods, including dairy, pork, apples, and potatoes.

Auto manufacturers and appliance makers in the US are fuming about the cost of paying more for steel. A few sectors, like the American steel industry, are thrilled about the new taxes on steel from foreign competitors.

But the impact of tariffs on the US agricultural industry is no joke. Prices for agricultural products like soybeans have dropped to a 10-year low since Trump imposed sweeping tariffs. And farmers across different markets have grown increasingly nervous about how their businesses will fare if the trade war continues.

That’s why Trump in July proposed the idea of a government program to stabilize the agriculture industry in three ways: by giving farmers direct cash assistance, buying surplus crops and giving them to food banks, and a vague trade promotion program.

The administration used a Depression-era program to borrow up to $30 billion from the Treasury without congressional approval, according to the Washington Post. In September, the Agriculture Department sent farmers about $12 million in aid.

On Monday, he announced plans for another round of aid — $15 billion this time. But Trump was either badly mistaken or lied when he said China would pay for the bailout with money from the tariffs. It’s actually businesses and consumers who will end up paying.

But even if these bailouts do keep some farms open, they don’t address the fact that Trump’s trade policies just aren’t working.

The trade war hasn’t reduced the trade deficit with China

Trump has repeatedly stated that most of his trade policies are meant to target China, which sells more goods to the United States than it buys from the country.

But as Vox’s Alex Ward points out, the US has a lot more to be angry about:

Among other indiscretions, Beijing has stolen US technological and personnel secrets for its own advantage, antagonized US allies in the South China Sea, killed or imprisoned more than a dozen American informants, and taken millions of US jobs over the past 15 years.

Trump’s strategy has focused on efforts to weaken the Chinese economy at all costs, while disregarding the impact on the US economy.

But Beijing has responded with its own tariffs on American goods, and the country has stopped buying as much from US manufacturers. So the trade imbalance between both countries is now worse.

In 2018, America’s trade deficit with China reached an all-time high: $419 billion. That’s a 13 percent increase compared to the previous year. Ford, America’s second-largest car company, said in August that Trump’s tariffs cost the company $1 billion, and the company now expects massive layoffs. GM made a similar announcement a few months later.

This impact of Trump’s trade policies is striking, considering how often he repeated that his goal is to boost US manufacturing. His trade war might help the small US steel industry, but it’s hurting nearly every other sector of the US economy. And now taxpayers are stuck with the bill of Trump’s latest $15 billion bailout.

Still, Trump insists that somehow this is all good for rural America. “Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now,” Trump announced on Twitter Monday.

So far, though, they’re the biggest losers.