President Trump announced Thursday that he would extend $16 billion in aid to farmers harmed by his trade conflict with China. The politics of that move are clear, but it sends yet another message that farmers count while the rest of us don’t. That special status isn’t going to hold if the trade war with China persists.
Farmers are already one of the most subsidized and protected groups in the United States. According to Vince Smith, a noted agricultural economist and director of the American Enterprise Institute’s agricultural studies program, soybean farmers are already eligible for government aid under three separate programs. They can purchase subsidized crop insurance to protect them against crop losses, and they participate in government programs that protect them against declines in farm revenue and in the price of soybeans. Trump’s new aid comes on top of that.
It’s not going to take long for others hurt by Chinese tariffs and retaliatory measures to ask for their fair share. Many manufacturers depend on Chinese steel imports to make their products. They don’t have government subsidized insurance to protect them when their sales drop. They will rightly ask why they should have to bear the cost of a trade war while soybean farmers don’t. What will Trump and Congress say to them?
Retail stores such as Walmart also have reason to complain. Retailers whose business models depend on selling relatively inexpensive imports from China will have to raise their prices if their imports are subjected to tariffs. The alternative is to cut profits, reduce wages or fire workers. Retailers don’t have three standing government programs to protect them in the face of business downturns. Why should retailers suffer while soybean farmers cash checks that retailers’ taxes pay for?
Consumers could also get in line for aid. The Trade Partnership estimates the average household will pay an extra $767 next year because of the new tariffs on Chinese imports. That amount is equal to or greater than the size of the tax cut they received from Trump’s signature tax bill. Will working-class families whose budgets are stretched to cover ordinary expenses get an extra $500 or $1,000 rebate to cover their added costs?
The cries for more government aid will grow louder the longer the trade war lasts. Now that Trump has set a precedent that Americans shouldn’t have to sacrifice during the conflict, it will be politically hard for him to resist calls for potentially hundreds of billions in extra spending.
That’s just not tenable. We are already on track to borrow more than $1 trillion just to cover normal government spending. Budget negotiations underway are likely to result in more spending hikes, which mean more borrowing. Congress and Trump will be caught between legitimate political demands for fair treatment and budgetary realities. Something will have to give.
The something that should give is the special aid to farmers. They won’t be made completely whole, but then again, neither will anyone else. Their existing government programs will help them avoid the worst damage from the conflict. Cutting or eliminating aid to the farmers covered by the existing programs will send a message that the trade conflict is in the national interest, and everyone needs to sacrifice something so we all will be better off in the long run.
Trump is absolutely right to have started this conflict. China has been manipulating trade rules for decades, putting millions of Americans out of work and placing China on a path to surpass the United States as a global power by mid-century. But wars, whether fought with guns or with tariffs, cost money and demand sacrifice. In this war, everyone has to pitch in and do their part — including soybean farmers.