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Top Economist: Why Farmers Have The Most To Lose From Trump’s Trade War

Mark Zandi
July 27, 2018
Fortune

War is messy, and President Trump is quickly figuring out that this also applies to trade wars. The president has incited a trade war that is taking the entire global economy, including ours, down the rabbit hole. Our farmers will be the most serious casualty if he doesn’t figure this out, and soon.

Farmers already know how messy the trade war can be. They are big exporters, shipping some $150 billion in agricultural products overseas each year. Well over one-third of everything they grow or raise is consumed by foreigners. The U.S. also imports a lot of food, but agriculture is one of the few industries that runs a sizable trade surplus. The industry is uber-productive and competitive. American farmers produce something everyone on the planet wants.

Nothing could be worse for farmers than a trade war. If other countries impose tariffs on U.S. soybeans, pork, or orange juice, it is a dagger in the heart of the business of being a farmer. This is exactly what China and our other trading partners are doing in retaliation to Trump’s trade war.

The president understands the economic and political fallout of his war on agriculture, and his response is to cut a $12 billion check to farmers. The emergency bailout from taxpayers will become available in September, and does not need approval from Congress. Some farmers will get direct payments, but the money will also go to fund a program already in place to purchase surplus farm products and distribute them to food banks. Marketing efforts to promote U.S. agricultural products overseas may also get more funding.

To get a check, farmers will likely have to go hat-in-hand to Washington. This is what manufacturers are doing now to get relief from Trump’s steel and aluminum tariffs. They are in the awkward position of trying to convince Trump-appointed bureaucrats that they deserve a reprieve from the tariffs. Farmers will love that (not), particularly since the money they ultimately pry from Washington will be way too little, too late.

Complicating things for U.S. farmers is that they are convenient political targets for our aggrieved trading partners. Rural America tends to be Trump country, voting in high percentages for the president in the election. Other countries rightly figure there is no better way to gain leverage with Trump than to make life difficult for those who vote for him.

The strategy is working. Trade groups looking out for the farmers’ interests are complaining increasingly loudly about the tariffs. They may be politically sympathetic to the president, but they need the trade war to end.

Adding to their angst, the nation’s farm belt is already struggling financially. Even before the trade war broke out, prices for most agricultural products were down almost 20% from the peaks of a few years ago. Farmland values reflect the stress; they have gone nowhere over the last four years. If farmers export less of what they produce because of the tariffs, their financial problems will quickly mount.

Hopefully our farmers won’t be silenced by $12 billion and keep the pressure on Trump to end his trade war. They may be the only reasoned voice he will listen to.

Mark Zandi is chief economist at Moody’s Analytics.

To access the op-ed, click here.

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