Elephants in the Room
Trump’s Trade Wars Have Made Bad Agriculture Policies Worse
From suffering U.S. farmers to the pain inflicted on the developing world, everything about U.S. agriculture policy is dysfunctional. The next administration can do better.
Recent years have been tumultuous for American farmers and ranchers. Thanks to advanced technologies and generous subsidies, their products have become so abundant that the United States usually ends up exporting about 20 percent of its agricultural output abroad. To keep growing, U.S. farmers and ranchers need better access to markets abroad. But U.S. agriculture and trade policies run counter to the more liberalized and open markets that would benefit U.S. farmers. These obstacles didn’t originate with President Donald Trump. He’s raised them higher, to be sure, but only within a system that was already deeply flawed.
One of Trump’s first actions as president was to make good on a campaign pledge to withdraw the United States from the Trans-Pacific Partnership (TPP), a promising free-trade agreement with Pacific Rim nations signed in early 2016. No one would have gained more from the TPP than U.S. farmers and ranchers, who would have seen significantly improved access to the notoriously closed agricultural markets of Asian countries such as Japan. Following the same refrain, Trump then threatened to withdraw the United States from the Clinton-era North American Free Trade Agreement (NAFTA) with Canada and Mexico, before settling on minor revisions of the 25-year-old pact.
When it comes to U.S. producers, however, the damage from Trump’s actions on these agreements pales next to the damage done by his tariffs and trade wars. In early 2018, Trump invoked highly dubious national security concerns in order to slap tariffs on steel and aluminum imports from virtually every country in the world, including long-standing allies. Predictably, the United States’ trading partners retaliated with their own tariffs, including on a number of U.S. agricultural products.
Trump’s aggressive trade war with China took things from bad to worse for U.S. farmers. Over the course of about 18 months, Washington and Beijing engaged in a back-and-forth volley of escalating trade restrictions, including Chinese retaliatory tariffs on more than 1,000 categories of U.S. agricultural products such as pork, soybeans, dairy products, and nuts. In January 2020, the two sides signed a detente, but it’s only a temporary reprieve to a conflict that continues to fester and is likely to resurface in the near future. As part of the so-called phase one agreement, Beijing agreed to purchase about $40 billion worth of U.S. agricultural products over two years, but as of September, China’s agricultural purchases were barely half of what they’d need to be to reach the agreed target for 2020. Meanwhile, heavy tariffs remain in place on both sides.
With American agriculture caught in the middle of Trump’s trade wars, the sector has predictably suffered. Farm bankruptcies are soaring as farmers lose market access abroad. To help mitigate the fallout from his trade wars and combat the financial toll of COVID-19, the Trump administration has shoveled tens of billions of dollars to farmers, ranchers, and companies in the sector—a key electoral constituency for Trump’s reelection prospects. In 2020 alone, the Trump administration will have paid an estimated $45 billion to the agricultural sector. This has increased net farm income, which is up sharply since 2016, mainly thanks to Trump’s subsidies. But the bulk of these payments went to wealthy farms and well-connected corporations while providing little relief to the neediest farmers and ranchers. It is estimated that a staggering 40 percent of the sector’s income this year will come from government subsidies.
As the election nears, many are wondering about Trump’s political calculus. The Office of Special Counsel recently chided Agriculture Secretary Sonny Perdue for violating federal law by using his official position to campaign for Trump, promising a North Carolina crowd in August that subsidies will continue for “four more years … if America gets out and votes for this man, Donald J. Trump.”
The Trump administration’s aggressive foray into protectionism has been costly to farmers, but misguided agricultural policies obviously predate the trade war. Every five years in an overwhelmingly bipartisan fashion, the U.S. Congress doles out billions of dollars in subsidies to the U.S. agriculture industry in a hodgepodge of various programs. Like the Trump administration’s bailouts, these policies aren’t just expensive. They also largely benefit wealthy farms and corporations while failing to provide an adequate safety net for family farms. This inequity extends beyond U.S. borders: Domestic subsidies hurt farmers in developing countries who cannot compete with heavily subsidized agriculture from the wealthiest country in the world.
Despite the enormous setback for American farmers due to Trump’s tariffs and trade wars, a reversal is possible. That the U.S. public has soured on foreign trade is a popular political narrative, but it’s unfounded. In fact, more Americans support trade than any other time in the last quarter century. Policymakers in Washington can capitalize on this enthusiasm to expand market access for American farmers and ranchers by unwinding Trump’s tariff wars and rejoining the TPP to improve access to vital Asian markets. Finally, and perhaps most critically, the United States should use its biggest bargaining chip—reining in domestic subsidies—to jumpstart multilateral negotiations at the World Trade Organization, where agricultural subsidies and tariffs have long been a major stumbling block.
Trump deserves a lot of blame for his misguided trade and agriculture policies. But many of the excesses in the U.S. system—sold to the public as a safety net for family farms but largely a system of corporate welfare for the largest producers—have a long bipartisan history. The next administration can and should do better.