Trump’s Trade War is Killing the US Agricultural Sector

Since the trade war between the US and China began with the imposition of tariffs on Chinese steel and aluminum, US farmers have suffered immensely. Retaliatory measures by China have devastated the agricultural sector in the US. To give you an idea, China was a consumer of one-third of all American grown soybeans. This share of the market the US used to have is now gone. Other countries have taken it up after China’s withdraw from the US producers. This situation is beginning to harm American farmers to a great degree. Some US agricultural organizations are even predicting a catastrophe.

The US has placed tariffs on $750 billion worth of Chinese commodities. China retaliated by placing them on soybeans, grains, meat, and dairy. As a result, US farmers are seeing a large surplus of perishable goods building up. Because of Trump’s actions, the US production of agricultural goods is being seen as less attractive in the global economy. They’ve lost a huge share of the market for soybeans and other products. Already Brazil has stepped in and filled the Chinese demand for meat products. As it is, 1.7 million US jobs are being affected by China’s tariffs.

The lack of demand and high rate of production is causing a domestic market problem as well. With such an overstock of food, the domestical price of these goods has dropped dramatically. The sale prices of the goods are forced into a situation of competitive lowering, hurting the producers. The situation is so bad that the US Wheat President is saying that the US agricultural market is facing “imminent collapse.” Many farmers are saying that they can’t hold on much longer.

Many are calling on the US government to do something about the situation. Already they’ve received a $12 billion bailout from the federal government in July of last year. Unfortunately, it appears that Trump is unwilling to give up his trade war anytime soon. As it is, the agricultural industry in the US is heavily subsidized. Going back to the Great Depression the government began propping it up. Currently, the US spends $16 billion a year purchasing products from farmers just to keep them in business and stabilize the market.

Make no mistake the farmers are hurting. Crops are going rotten in fields because there is no one to sell the food to for a profit. Many more farms are not even turning a profit. Alarm bells are telling the agricultural sector that farm bankruptcies are surpassing Great Recession levels, primarily in the upper Midwest. Prices are down as much as 20%. Right now they stand at $8.30 a bushel, while $10 is needed to break even. Farm incomes are down %50 from where they were 5 years ago.

The irony is that these regions of the country were heavily in favour of Trump for president over Hillary Clinton. Add to this that fact that the bailout for farmers was only intended to last a week into a government shutdown, which means right now they’re not even receiving it.

Previous Trump political decisions have also affected the situation. As a result of the Trump refusal to sign the Trans-Pacific Partnership, Canadian and Australian wheat farmers will be selling more to Japan with reduced tariffs.

In this ongoing trade war, the US is losing the domestic political game. Recent polls show that Trump is seen unfavourably by farmers at 40%. 35% say they see him less favourably since the trade war began. By contrast, the Chinese public and producers seem heavily in support of the measures taken by the government. As it stands, it seems that the political will of the US will break long before the Chinese’s do. The Chinese see this as a matter of national pride, whereas the US farmers only see loses as a result of Trump’s ego. China is also turning to Russia seeking new deals over several items including fish. This will only strengthen Russian/Chinese ties.

Over the long term, it seems apparent that the US will not win the trade war.