His comments appeared to surprise a number of administration officials, and they came amid growing signs that last month’s partial trade deal with China is falling far short of the levels initially promised by the White House. On Thursday, a senior U.S. Department of Agriculture official said China might end up buying just $14 billion in American farm products through the end of September, meaning the total sales for the year are likely to be much less than the $40 billion Trump had promised.
Trump’s political support among many farmers appears to be strong, but White House officials have long been worried about a backlash if prices remain low and bankruptcies continue. Democrats have been encouraged by the electoral inroads they made during the 2018 midterm elections, when they defeated numerous Republican candidates in farm districts.
The USDA said this week that total farm debt was expected to reach $425 billion this year, an all-time high. In 2019, there were 595 Chapter 12 family farm bankruptcies in the United States, almost 100 more than were filed in 2018.
There has not been a bump in commodity prices since Trump signed the China trade deal or a separate pact with Canada and Mexico. Trump recently promised a huge farming renaissance, telling farmers to buy a “bigger tractor” and more land.
“We are frustrated with the situation. We understand the broader trade implications but feel we have been targeted in a bigger political battle we did not sign up for,” said Jamie Beyer, a soybean farmer in Wheaton, Minn., and president of the Minnesota Soybean Growers Association. “We are all very excited about the USMCA and the trade deal with China. But we are all waiting for that to be reflected in commodity prices and orders. … It’s disheartening."
A third multibillion-dollar bailout could cast a shadow over Trump’s boasts about the “big, beautiful” trade deal he reached with China last month, an agreement expected to form a key part of his 2020 reelection message on the economy. The outbreak of the coronavirus has wreaked havoc on the Chinese economy, making it more difficult to forecast how many farm purchases China will ultimately make this year.
The farm bailout program began in 2018 as a way to address fury from farmers who said Chinese tariffs on their exports had pushed many to the brink of collapse. The program continued in 2019, but White House officials had suggested it would not be renewed in 2020, until Trump reversed course Friday.
“Farmers are no dummies. They’ve seen this get rolled out the past two years, programs invented out of whole cloth,” said Roger Johnson, president of the National Farmers Union. “The president is going to do whatever he can to appease the farmers because it’s an election year."
The political stakes for the president are enormous amid growing economic pain for America’s farmers under his administration. Trade wars, weather disasters and low commodity prices have created a farm environment that has dramatically increased bankruptcies.
The need for what would amount to a third round of bailout funding highlights the immense challenges Trump has faced in his international trade war. In his second year in office, he imposed tariffs on a range of Chinese imports, including steel, as a way to ramp up pressure on the Chinese government to boost U.S. imports. But China retaliated by targeting agricultural producers in politically critical Midwestern states.
Trump has repeatedly said the bailout would be paid for by tariffs imposed on foreign nations, a claim rejected by multiple nonpartisan and conservative budget experts. Tariffs are paid by U.S. importers and then often passed along to consumers in the form of higher prices.
“The president has wanted to act from the beginning that the trade war is nothing but rainbows and unicorns. The reality is that it’s not just us being tough on China; China and other countries are being tough on us,” said Rory Cooper, a former Republican aide who now works at Purple Strategies, a political consulting firm. “Trump is trying to spend now north of $30 billion to paper over those issues.”
Zippy Duvall, president of the American Farm Bureau Federation, said that he was optimistic that China would purchase more than $14 billion in agricultural products, based on conversations with China’s minister of agriculture, but that the final outcome was uncertain. “The difficult time farmers are having today are not getting any better because of slow implementation,” Duvall said.
Trump’s pledge of additional bailout money may be meant as a signal to China that the White House will not wait patiently for Beijing to comply with the new trade deal, Sen. Kevin Cramer (R-N.D.), a farm-state ally of the president, said in an interview.
He called Trump’s promise of additional bailouts a “sort of a shot across the bow at our trading partner” due to the slow uptick in purchases by the Chinese. Cramer said China’s pledged purchases of agricultural commodities were a crucial part of the trade deal.
While defending the bailout funding as potentially necessary to keep farmers afloat, Cramer acknowledged the frustration among farmers eager to sell their products to market rather than rely on a federal subsidy.
“What happens with subsidies is it distorts market price,” Cramer said. “If there’s no market, then having the certainty of an income is better than not, but it’s still not the preferred outcome.”
In private meetings, numerous congressional Republicans have also expressed frustrations about both the trade war with China and the growing size of the bailout for farmers, said Jason Pye, vice president for legislative affairs at FreedomWorks, a conservative organization.
GOP lawmakers believe that Trump’s trade war weakened the impact of their 2017 tax law, slowing economic growth in America to 2.3 percent last year. The bailout’s price tag is now more than twice the cost of the Obama administration’s auto bailout, which was criticized by conservative lawmakers. Unlike with many other government bailout programs, farmers are not required to pay any of the money back.
“The problem is few are willing to do or say anything about this,” Pye said. “At what point are they going to fight back? Do we need a recession before they do anything about this? How big is this bailout going to get? Nobody is willing to ask these questions.”
Democrats may be in a difficult position to exploit the intra-GOP rift on the issue. Congressional Democrats backed away from an opportunity last year to force Trump to scale back the program amid pressure from lawmakers in their own caucus representing farm states. And party leaders such as Senate Minority Leader Charles E. Schumer (D-N.Y.) have argued that the administration has not been tough enough on China, pushing for an even more adversarial approach.
The bailout was created by the Trump administration as a way to try to calm outrage from farmers who complained that they were caught in the middle of the White House’s trade war with China. In an attempt to pacify farmers, the USDA created an expansive new program without precedent that makes direct payments to farmers.
Senior administration officials previously expressed alarm about the administration’s legal justification for the maneuver, which they have based on a New Deal-era program. The program was modified from its initial form to include additional crops, among other changes.
“We all thought it was political, especially the changes for the second program,” said Theodore Covey, a former USDA agricultural economist who left midway through the implementation of the second bailout.