The Trump administration is planning to spend as much as $12 billion in aid to help farmers hurt by the administration’s tariffs.
By acknowledging the need for aid to farmers, the Trump administration is admitting that its tariff strategy is hurting Americans.
There are multiple reasons why providing aid to farmers to offset the effects of tariffs is a bad idea. Here are five.
1. Bad policy shouldn’t lead to more bad policy.
The administration shouldn’t implement additional bad policies to mitigate the harm caused by its own bad policies. If the harmful tariffs hadn’t been imposed in the first place, taxpayers wouldn’t be asked to spend billions of dollars to compensate them.
The administration’s tariff policy is wreaking havoc on domestic prices for steel, aluminum, and agricultural goods. The 25 percent tariff on steel has increased the domestic price of steel by as much as 40 percent since the beginning of the year. Prices for aluminum have soared to a four-year high as a result of the 10 percent tariffs on aluminum.
Meanwhile, U.S. agricultural exports have been targeted by other countries through retaliatory tariffs, making farmers and ranchers among the first casualties of the trade war. Canada’s tariffs hit orange juice, ketchup, and whiskey. Mexico’s hit cheese, pork, and various fruits. China has targeted soybeans and sorghum, two of America’s top agricultural exports.
2. Agricultural interests and leaders have consistently said they don’t want more handouts—they want more trade.
In general, agricultural producers are not asking for more handouts. Senate Agriculture Committee Chairman Pat Roberts, R-Kan., stated in April, “We don’t need another subsidy program. We need to sell our product. We need a major sale.”
Sen. Ben Sasse, R-Neb., has argued, “We want more trade, not less. Farmers want to feed the world and win with trade. Now, some in Washington instead want to pay them to lose. That’s a bad idea and not a real strategy to fight Chinese cheating.”
The announcement of additional tariffs on China is a move in the opposite direction. We’re focused on increasing trade opportunities and keeping the robust and growing Chinese market we have worked for decades to secure. Our message to the administration and lawmakers remains the same: these tariffs needlessly hurt soy growers and rural communities.
3. The government should not pick winners and losers.
Farmers are certainly not winners from the newly imposed tariffs, but with these “aid” measures, they would be getting favorable treatment over other interests and individuals who will be hurt by the tariffs.
Will the administration decide to spend billions of dollars to help consumers who are going to be hurt? What about low-income households? Once such assistance to farmers is provided, there is no logical stopping point. Not to mention the taxpayers who have to pay out this aid. What about them?
4. Any aid would be duplicative.
The administration has offered no justification for why the already existing subsidy programs—which are overly generous—are insufficient to provide the necessary aid for farmers.
Taxpayers spend about $15 billion a year on the so-called “safety net” for agricultural producers. Most of those subsidies don’t help farmers when they experience crop losses. Instead, they help insulate producers from having to compete in the market. This includes triggering payments when producers don’t meet revenue targets or when commodity prices decline. What is the need for additional aid on top of these subsidies?
Soybeans alone receive about $2 billion a year to address revenue/price issues from multiple programs, and receive the third-most farm program support of all commodities.
5. Aid to farmers could undermine agricultural trade in the future.
For many American farmers and ranchers, exports are a necessity. They produce more than they can sell domestically. The U.S. Department of Agriculture’s Economic Research Service explains, “With the productivity of U.S. agriculture growing faster than domestic food and fiber demand, U.S. farmers and agricultural firms rely heavily on export markets to sustain prices and revenues.”
Tariffs will make it more difficult for farmers to rely on export markets. This likely won’t just be a short-term problem. As the United States closes off opportunities, agricultural producers from other countries will be more than happy to meet global demand.
This could mean long-term harm that could undermine the trade gains that have already been achieved in the agricultural sector. Further, relying on aid to farmers to mitigate the harms caused by tariffs could create a justification for maintaining tariffs instead of opening up trade opportunities.
A Bad Solution to an Avoidable Problem
Throwing money at a problem the administration itself created will not increase the freedom to trade in America. In fact, the harm to American businesses, farmers, ranchers, and workers will only worsen as more tariffs are levied.
The best way to help American farmers and ranchers is to ditch the tariffs and focus on increasing access to new markets.