Trump Gets Mad; Farmers Get Hurt
One of the first things you learn in high school physics class is that every action has an equal and opposite reaction.
You can apply that law, loosely, to trade disputes, such as the one President Trump is starting with China. Put it this way: Every trade sanction the United States imposes on another country causes a retaliatory sanction — and the target is almost always agriculture.
This has happened again and again over the course of many years, and the benefits have never outweighed the detriments. This fact seems lost on Trump, who will soon decide whether to declare steel and aluminum imports from China and elsewhere threats to national security. The Commerce Department released a report this month saying he should do so and should impose high tariffs on those commodities.
Soon afterward, China announced it was considering anti-dumping tariffs on imports of U.S. sorghum and soybeans.
China buys 70% to 80% of all sorghum produced in the United States every year and about one-third of the soybeans. The United States is the world’s largest producer of soybeans, and China is the world’s largest buyer of them.
“U.S. sorghum farmers sell their product to our valued partners in China,” said a statement by the National Sorghum Producers, a trade association. “We appreciate our deep and longstanding relationships within these buyers, and the feed and livestock industries in China. U.S. sorghum farmers do not dump our products into China or elsewhere, and our products are not unfairly subsidized.”
Brian Kuehl, executive director of Farmers for Free Trade, said: “The agriculture sector knows from experience that our ag exports are the first to be hit by retaliation. The fact that China just targeted U.S. sorghum is only the most recent example. We urge the president to consider the very real price our farmers and ranchers would end up paying if we continue to escalate back and forth reprisals that close off global markets.”
Even Trump’s agriculture secretary, Sonny Perdue, counseled caution about tangling with China over steel and aluminum imports.
“It just shows you … how fragile and sensitive the ag economy and commodity prices are now to trade disruptions, and we need to be careful as we take actions there,” he said at a hearing of the House Agriculture Committee. “Agriculture is usually the tip of the spear of retaliatory measures.”
China seems to be using a carrot-or-stick approach; it has asked Trump to cool his ardor and try to resolve the issue through negotiation.
“We urge the United States to stop the strategic intention of deliberately distorting China and abandon the outdated concepts of Cold War thinking and zero-sum game, or else it will only harm itself,” a Chinese Foreign Ministry spokesman said. He said the Commerce Department’s recommendations were "completely groundless and unreflective of reality.”
The Commerce report is based on Section 232 of the Trade Act of 1962, which empowers the president to retaliate against imports that he deems a threat to national security. Unlike other U.S. trade laws, Section 232 doesn’t require him to ask the U.S. International Trade Commission for an independent analysis.
It’s not just China. Trump’s repeated threats to withdraw from NAFTA have led Mexican corn buyers to turn increasingly toward South American sellers. Reuters reported on Thursday that Mexico bought 583,000 metric tons of corn from Brazil last year – a 970% increase over 2016.
In January 2018, Mexico bought 100,000 metric tons of Brazilian corn, compared with zero in January 2017.
Farmers voted overwhelmingly for Trump in 2016, even knowing that he hated NAFTA and that he vowed to withdraw the United States from the Trans-Pacific Partnership, which he did. They considered these threats against his promise to do away with environmental regulations that have been costly and burdensome to them and decided the latter was more important than the former.
If Trump follows through on his threats against China and our NAFTA partners, farmers may abandon him.