Tuesday morning began with United States President Donald Trump tweeting about trade and his desire to punish unfair trade partners with tariffs. The U.S. strategy on trade has been to use a big stick with Canada, Mexico, the EU and China.
Tariffs are the greatest! 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! Remember, we are the “piggy bank” that’s being robbed. All will be Great!
— Donald J. Trump (@realDonaldTrump) July 24, 2018
To combat the impacts of a trade war that appears to be settling in for the long term, President Trump announced US$12 billion dollars in compensation for U.S. farmers.
According to Jim Wiesemeyer of Pro Farmer, the money will be distributed in three prongs under the Commodity Credit Corporation Charter Act:
- A market facilitation program which would result in farmer payments.
- A food purchase and distribution program which would purchase surplus goods to go to nutrition programs.
- A trade promotion program to provide private sector assistance to new markets.
There is skepticism regarding the White House’s intention to compensate farmers for the trade war impacts at this time with a mid-term election approaching in the fall. At this point there is no clear breakdown of how the US$12 billion is to be distributed among the three prongs.
Longtime ag economist Bob Thompson says the $12B aid package ‘should be viewed for what it is–an excuse to pump cash into rural America just before an election … will do nothing to rebuild trust and confidence in the U.S. as a reliable ag supplier.’
— Philip Brasher (@PhilipBrasher) July 24, 2018
Kevin Skunes, president of the National Corn Growers Association (NCGA) feels that this is not the preferential path. “NCGA’s grower members are confronting their fifth consecutive year of declining farm incomes while facing high levels of uncertainty due to ongoing trade disputes and disruptions in the ethanol markets. Corn farmers prefer to rely on markets, not an aid package, for their livelihoods.”
There was criticism from both Republican and Democrat lawmakers to the proposed plan to rectify a situation the administration created. “This trade war is cutting the legs out from under farmers and White House’s ‘plan’ is to spend $12 billion on gold crutches,” said Sen. Ben Sasse (R-Neb.). “This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again.”
President Trump himself has been asking for patience from the agriculture community to rectify the trade issues with China and others.
Wiesemeyer feels, “The timing of this payment gives an indication that this issue with China will not be solved in the short term.”
There could be trade consequences to this announcement today. Other countries watching the China-U.S. trade dispute will likely question Tuesday’s announcement and whether it is compliant with the WTO.
On the question of whether the Canadian government will provide aid to its farmers that are negatively impacted by the U.S.-China trade battle, there is little discussion at this point.
Last week, when asked whether the agriculture ministers worked on a contingency plan to support Canadian farmers if the U.S. government follows through with its promise to compensate its farmers for the impact of Chinese tariffs, Agriculture Minister Lawrence MacAulay referred to existing programs under the Canadian Agricultural Partnership, which include AgriStability, AgriInvest and AgriRecovery.
Regarding the U.S.-China trade issues, Ron Bonnett, president of the CFA, said “this is like standing at the side of a fist fight and getting hit by an errant punch.”
One of the challenges for the Canadian government is that, although they support dealing with China’s trade practices, the Trudeau government is not directly responsible for the U.S. strategy nor the resulting drop in commodity prices.
More details to come…