By Steve Brawner, © 2018 by Steve Brawner Communications, Inc.
What will be the results of President Trump’s so-called “trade wars”? Maybe they will lead to better deals for Americans, or maybe they will slow the economy, and definitely they will cost future taxpayers $12 billion.
On Tuesday, the Department of Agriculture announced it would borrow that amount from the U.S. Treasury to subsidize producers of various agricultural products, including soybeans. It also will purchase surpluses of other products and distribute them to food banks and other programs.
The move is necessary because tariffs instituted by the Trump administration have been met by tariffs from other countries. The most important was China, which retaliated against Trump’s tariffs on $34 billion worth of Chinese imports with tariffs on $34 billion on American goods.
Agriculture is Arkansas’ indispensable industry, and soybeans are a vital export. Gov. Asa Hutchinson told CNBC July 9 that, “Farmers are always the first casualty in a trade war,” and that certainly has been the case this time.
The trade disputes have lowered soybean prices 18 percent as of last week, although that could change by the time you read this. Prices rose Tuesday on news of the $12 billion plan. Then last Wednesday, Trump and the European Union announced that the EU would be buying more soybeans.
Notwithstanding those negotiations, Trump’s policies have put a lot of Republicans in a tough spot. The traditional Reagan wing of the party – which until Trump was just about all of it – supports free trade. But Trump is extremely popular among the Republican base, and that’s who Republican officeholders fear.
No one’s been put in a more potentially awkward position than U.S. Rep. Rick Crawford, whose 1st District in eastern Arkansas includes a lot of soybean farmers but also some of the country’s biggest steel producers, who clearly benefit from the tariffs.
But if Crawford has been conflicted about the issue, he hasn’t shown it. He’s come down firmly on the side of the tariffs. He’s argued that soybean producers will find other markets and last month even tweeted that soybean exports have increased 21 percent “because of tariffs.” I’m not questioning Crawford’s sincerity, but there’s always this reality: He represents a district where Trump has a 97 percent approval rating among Republican primary voters, according to a recent Talk Business-Hendrix College poll.
Regardless of what you think about Trump, it was time for someone to at least question some of the past trade deals. In 2017, the United States imported almost $566 billion more than it exported, the biggest deficit in nine years. Last year, the trade deficit with China in goods not including services was $376 billion.
Trump might be able to create some more favorable terms, and if so, it would be a big win for him and for the country. On the other hand, even if he succeeds it may not matter, given Americans’ insatiable appetite for cheap goods made overseas. Worse, the trade war could slow the growth of an otherwise growing economy.
He’s a businessman and a risk-taker, so we’ll see how this all works out. The European Union announcement was encouraging.
Here’s my beef with the $12 billion. It will be generated by the Commodity Credit Corporation, which can borrow money from the U.S. Treasury to stabilize farm incomes. But the U.S. Treasury doesn’t have $12 billion to give. In fiscal year 2019, the federal government will spend $1 trillion more than it collects, so this additional subsidy will be borrowed from future taxpayers. A small part of it may even be borrowed from China. If that’s the case, we’ll be borrowing money, and paying it back with interest, from the same country on which we’ve levied the tariffs. Instead, a responsible government would offset that same amount with cuts elsewhere.
Of course, if Trump generates better trade terms, it will benefit the country, and future taxpayers, far in excess of $12 billion. It just seems like if we could find that amount to borrow, we could find that amount somewhere else to cut.