White House plans $16.36 billion in emergency aid to farmers caught in Trump's trade war

The Trump administration on Tuesday said it would provide up to US$12 billion (S$16 billion) in aid for US farmers to shield them from the repercussions felt by trade spats between the United States and China, the European Union and others.
A farmer walking through his soya fields on July 6, 2018, in Harvard, Illinois,
A farmer walking through his soya fields on July 6, 2018, in Harvard, Illinois, PHOTO: AFP

WASHINGTON (WASHINGTON POST) - The Trump administration on Tuesday (July 24) announced up to US$12 billion (S$16.36 billion) in emergency aid to farmers caught in an escalating trade war, seeking to temper growing Republican dissent over President Donald Trump's trade policies.

The aid is designed to help farmers facing tariffs in China, Mexico and other countries that imposed levies on US products in response to Mr Trump's new tariffs on imported steel and aluminium.

It is the latest sign that growing trade tensions between the United States and other countries are unlikely to send soon.

White House officials say farmers will begin seeing payments by September, and they hope the payments will quiet protests by farm groups and lawmakers - many of them Republicans - who contend that Mr Trump's confrontational trade policy is harming American farmers months before the 2018 mid-term elections.

Mr Trump defended his approach on Tuesday during a speech in Missouri, pleading with the public to "be a little patient" and arguing that farmers would eventually be the biggest beneficiary of his policies.

But many Republicans criticised the administration's aid package, saying the President should back off his trade war and help farmers regain more access to foreign markets, rather than offering them government payments.

"If tariffs punish farmers, the answer is not welfare for farmers. The answer is remove the tariffs," Senator Rand Paul, a Kentucky Republican, wrote on Tuesday on Twitter, echoing many Republicans.

"The trade war is cutting the legs out from under farmers and White House's 'plan' is to spend US$12 billion on gold crutches. America's farmers don't want to be paid to lose - they want to win by feeding the world," said Senator Ben Sasse, a Nebraska Republican.

The US$12 billion plan demonstrates Mr Trump's willingness to use his power to further influence the economy, first imposing tariffs and then bailing out people harmed by his approach.

In recent weeks, Mr Trump has taken steps to try to lower oil prices and has publicly criticised the Federal Reserve over planned interest rate increases, all actions taken with an eye to keeping up economic growth ahead of the mid-term elections.

But Republicans feared they could face a huge backlash tied to Mr Trump's trade approach, particularly among farmers.

Several key Senate races occur this autumn in states with strong ties to agriculture, including Missouri, North Dakota and Indiana. The outcomes of those races in November could determine control of the Senate next year.

 
 
 

The new package does not need approval from Congress. It would include direct payments to farmers, efforts to promote US goods abroad and an expansion of a programme that purchases surplus farm output and distributes it to food banks and other anti-hunger programmes.

Administration officials said the programme aims to compensate farmers for how much they would lose as a result of the trade war, in part because of lost sales and lower prices.

Mr Trump ordered Agriculture Secretary Sonny Purdue several months ago to begin work on the plan.

A handful of Democrats and Republicans backed the aid package.

"Our President stood up to a bully; now he's standing up for rural America," said House Agriculture Committee chairman Michael Conaway, a Texas Republican, referring to Mr Trump's trade struggle with China.

"This is the right fight to have, but in the meantime, our producers have got to... live, while this fight's going on."

The plan will rely in large part on a 1933 programme called the Commodity Credit Corporation (CCC), a division of the Agriculture Department created during the Great Depression to provide financial backup for farmers.

The Agriculture Department already spends more than US$10 billion annually on a range of farm supports under the CCC, including trade promotion for crops and purchases of surplus farm goods.

While such efforts are widely popular in rural states, some anti-spending Republicans and urban Democrats have said they unfairly prop up agribusinesses at taxpayers' expense. Mr Trump's proposed 2019 Budget also would have slashed funding for the CCC.

In the past four months, Mr Trump has imposed tariffs against steel and aluminium imports from China, Canada, Mexico, the European Union, Japan and other countries. He is threatening to extend the tariffs to cars, uranium and other imports.

Several of the countries have responded to Mr Trump's trade measures by imposing tariffs of their own, and farmers have complained that they are the victims of retaliation from other countries, on which they rely to sell their products.

China, for example, has announced it is imposing tariffs on imports of US soya beans, diverting some of its purchasing to Brazilian production.

While US farmers have complained for months about the brewing trade war, Mr Trump has shown no signs of backing down.

"Tariffs are the greatest!" he wrote on Tuesday morning. "Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It's as simple as that - and everybody's talking!"

Some White House officials had hoped that other countries would quickly offer concessions before Mr Trump's trade conflict escalated further. But conservative critics of the White House's approach said that Mr Trump's move suggests an open-ended conflict.

Former Congressional Budget Office director Douglas Holtz-Eakin said the emergency aid for farmers is likely to be considered Mr Trump's first taxpayer-funded bailout of private entities, an unusual occurrence during a strong economy.

Mr Holtz-Eakin, a Republican, is one of several conservative economists who have been sharply critical of Trump's approach to trade, and he said on Tuesday that the programmes the Agriculture Department will use to help farmers were not designed for this purpose.

"This is a terrible idea," Mr Holtz-Eakin said. "These programmes exist to insure farmers against the vagaries of nature and crop cycles. They are not there to offset bad policy. Two wrongs don't make a right. It's a misuse of the programmes."

It is unusual for the government to extend financial bailouts to US farmers on the basis of trade-related circumstances precipitated by the White House.

Other countries could try to bring a World Trade Organisation case against the United States for its aid to farmers, alleging that the Agriculture Department has created an improper subsidy.

Agriculture Department officials said they were confident the policy would not be vulnerable to such a challenge.

This week could prove crucial for Mr Trump's trade strategy. On Wednesday, he is to meet European Commission president Jean-Claude Juncker, who has criticised Mr Trump's use of tariffs to try to extract concessions from trading partners.

Mr Trump on Tuesday suggested that the Juncker visit should be seen as a sign that European officials are willing to bend to his demands, but European officials have cautioned that no major deals will be cut this week.

On Thursday, Mr Trump is to talk about the economy and his trade agenda during visits to Illinois and Iowa, states where the new package of federal funds for farmers are likely to come under close scrutiny.

Separately, House Republicans plan to meet one of Mr Trump's top trade advisers, Mr Peter Navarro, who has supported the tariff-driven approach used by the White House this year.