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Trump's massive farmer bailout failed to make up for the 'self-inflicted' trade damage

Adriana Belmonte
·Senior Editor
·8 min read

The U.S.-China trade war caused deep damage to many American farmers and their livelihoods.

And while President Trump directed the U.S. Department of Agriculture (USDA) to distribute billions of dollars in aid to farmers across the country, mostly through the Market Facilitation Program (MFP), that historic bailout did not make up for the significant drop in business that many farmers experienced.

“It will be difficult for us to get back to the levels of agricultural exports to China that we saw before the trade war began,” Mike Stranz, vice president of advocacy for the National Farmers Union, told Yahoo Finance. “Many of the crises that we faced, particularly on trade, were self-inflicted by the Trump administration, whether it was throwing NAFTA into jeopardy by our trading relationships with Canada, Mexico, by dismantling NAFTA and rebuilding USMCA, or taking us in the go-it-alone approach with China. Those crises came from within. Our administration chose to do that.”

US President Donald Trump gestures as he delivers remarks on Farmers to Families Food Box Program Distribution in Mills River, North Carolina on August 24, 2020. (Photo by Brendan Smialowski / AFP) (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)
US President Donald Trump gestures as he delivers remarks on Farmers to Families Food Box Program Distribution in Mills River, North Carolina on August 24, 2020. (Photo by Brendan Smialowski / AFP) (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)

‘Shoot first, think later’ approach

President Trump directed roughly $24.5 billion to American farmers through the MFP since 2018, with about $23 billion distributed as of early January 2021. USDA confirmed in a statement to Yahoo Finance that there would be no more payments during the Trump administration.

“Ultimately, my bottom line looks about the same as it did pre-Trump trade war, but much of that ‘income’ came in the form of Trump’s bailout,” Scott Blubaugh, an Oklahoma-based farmer and president of the Oklahoma Farmers Union, told Yahoo Finance. “Those are subsidies that I wouldn’t have needed if the trade war hadn’t happened. I’m grateful for the dollars to keep my farm afloat, but I’d much rather earn those dollars than be given them. The trade wars limited my and other farmers’ ability to earn.”

Blubaugh added that while he wasn’t wholly opposed to tariffs, “it seemed like Trump thought that was the only reasonable answer to solve our trade discrepancy issues. Every tariff imposed on an import will have a counter tariff imposed on one of our exports.”

Corn and soybean farmer Don Swanson prepares to harvest his corn crop as he and other Iowa farmers struggle with the effects of weather and ongoing tariffs resulting from the trade war between the United States and China that continue to effect agricultural business in Eldon, Iowa U.S. October 4, 2019. Picture taken October 4, 2019. REUTERS/Kia Johnson
Corn and soybean farmer Don Swanson prepares to harvest his corn crop as he and other Iowa farmers struggle amid the trade war, in Eldon, Iowa on October 4, 2019. (REUTERS/Kia Johnson)

The trade war began in earnest in March 2018 after President Trump had the U.S. impose a 25% tariff on all steel imports and a 10% tariff on aluminum imports.

China retaliated by slapping tariffs on products ranging from pork to fruit and aluminum. One day later, the U.S. announced 25% tariffs on roughly 1,300 Chinese products, worth $50 billion. China, in turn, imposed 25% tariffs on more products, including soybeans.

“When you take a ‘shoot first, think later’ approach,” Blubaugh noted, “the industry at large is going to suffer.”

And while the total cost of Trump’s farmer bailout was more than $8 billion more than the auto bailout of 2008, the distribution of funding was uneven.

Farmers received more than $23 billion through the Market Facilitation Program. (Graphic: David Foster/Yahoo Finance)
Farmers received more than $23 billion through the Market Facilitation Program. (Graphic: David Foster/Yahoo Finance)

According to a report from the Environmental Group, between 2018 and 2019, “the top 10% of recipients — the largest, most profitable industrial-scale farms in the country — got half.” Three of these farms received more than $1 million each. The bottom 80% of MFP recipients, which includes small farmers, received an average payment of $5,136.

“I’m sure there were farmers who suffered losses who didn’t feel they got adequate compensation,” Joseph Glauber, a senior research fellow for International Food Policy Research Institute and former chief economist for USDA, told Yahoo Finance. “There were some farmers who, because there were payment limits and other things that limited the amount of money that could go to those farms, they felt like they weren’t adequately compensated.”

‘The trade policy has been a disaster’

In January 2020, after more than a year of painful tit-for-tat tariffs, the U.S. and China reached a phase one trade agreement. China promised to buy an additional $12.5 billion worth of American agricultural goods that year “based on market conditions.”

But by the end of November 2020, amid the ongoing coronavirus pandemic that dominated the last 12 months, China’s purchases were only at 56% for Chinese imports of U.S. goods, according to calculations by the Peterson Institute for International Economics (PIIE).

China didn't fulfill its trade commitments in 2020. (Chart: Peterson Institute for International Economics)
China didn't fulfill its trade commitments in 2020. (Chart: Peterson Institute for International Economics)

Other international trade choices also hurt American farmers.

“The trade policy has been a disaster,” said Glauber, the former USDA chief economist. “From almost the first day of him being in office, he pulled out of the Trans-Pacific Partnership and then spent a lot of the energy that he put into bilateral agreements with Japan and bilateral agreement and renegotiations of NAFTA. The big changes for agriculture were to put a lot of the provisions and TPP into those agreements.”

On top of those issues, Glauber added, “you have the trade wars which caused some very large disruptions in markets, not just in soybeans but in a variety of other markets. Not just with China, but also the EU and Canada had tariffs against our products. Our markets suffered because of that.”

Farm bankruptcies in the U.S. increased by 20% in 2019, according to U.S. Courts data, reaching an 8-year high after 595 Chapter 12 bankruptcies were filed by family farms.

“The biggest problem we have going forwards towards the future is the disruption that the president did when his trade policies really weakened our voice and our trust with our trading partners around the world,” Gary Wertish, a Minnesota-based farmer, told Yahoo Finance. “The ‘America First’ — it sounds good but you do have to work together with other countries to have a mutual relationship, cause they’re going to want to be able to trade stuff back to us.”

Farm bankruptcies reached an 8-year high in 2019. (Map: American Farm Bureau)
Farm bankruptcies reached an 8-year high in 2019. (Map: American Farm Bureau)

Decades of both Republican and Democrat leadership ignoring us’

President-elect Joe Biden vowed to repair America’s trading relationships with their major trade partners, and Biden’s pick for secretary of agriculture, Tom Vilsack, previously served in the same role during the Obama administration.

Farmers are hopeful that Vilsack will restore stability to their industry, though trust is low.

“We have a broken, dysfunctional industry that favors ever-increasing corporate consolidation,” Blubaugh said. “That’s reality, regardless of which side of the aisle you sit on... Out here in the countryside, agriculture consolidation is the topic that unites us all. We have decades of both Republican and Democrat leadership ignoring us.”

Anne Weir-Schechinger, a senior analyst of economics at the Environmental Working Group, noted that Vilsack’s ties to large industries could mean smaller farms get left behind.

“From what we’ve seen when he was the [agriculture] secretary under Obama, he really promoted these farm subsidy programs,” Weir-Schechinger told Yahoo Finance. “Obviously, MFP wasn’t around, but there are other farm subsidy programs and he promoted those quite a bit that sent money to the largest farms. So we really don’t see Vilsack being any different this time around. We think he’ll keep these subsidy programs going, which are sending more and more money to the larger and larger farms and not helping these smaller struggling farms.”

Democratic 2020 U.S. presidential candidate and former Vice President Joe Biden shakes hands with former Iowa Governor Tom Vilsack during a campaign event in Newton, Iowa, U.S., January 30, 2020. REUTERS/Mike Segar
Democratic 2020 U.S. presidential candidate and former Vice President Joe Biden shakes hands with former Iowa Gov. Tom Vilsack during a campaign event in Newton, Iowa, January 30, 2020. REUTERS/Mike Segar

One thing is clear: The international trade policies championed by President Trump created serious problems for American farmers. Thomas Donohue, CEO of the U.S. Chamber of Commerce, recently lamented the effects of these tariffs during his 2021 State of American Business Address.

“For America to remain competitive and expand our potential for sustainable growth and prosperity, we must re-engage with the world through a bold trade agenda,” he said. “Yes, let’s make more products in America, but let’s also sell them to the rest of the world. We must extend our reach to the 95% of the world’s customers who live beyond our borders. We must catch up to the countries that are inking new trade deals left and right. And we must lift the tariffs that have hurt American manufacturers and farmers and have been paid by American companies and their customers.”

In hindsight, Blubaugh’s biggest disappointment in Trump isn’t necessarily the trade war itself but that the president ignored underlying problems and only focused on the numbers.

“In the end, that approach helps corporate farming more than it helps anyone else,” he said. “The failure of Trump, Obama, their Secretaries of Agriculture, and several administrations that came before them is all the same — they failed to revive and enforce antitrust laws. They didn’t restrict corporate monopolies, antitrust behavior, or multinational food corporations in agriculture and our food supply.”

Adriana is a reporter and editor for Yahoo Finance. She can be reached at adriana@yahoofinance.com. Follow her on Twitter @adrianambells.

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