It’s no secret that one of the biggest losers in President Trump’s tit-for-tat tariff wars has been American agriculture. Since 2018, U.S. farm exports have been the favored target of retaliatory tariffs levied by trading partners in response to the administration’s unilateral tariffs on imported steel, aluminum and goods from China. A recent study  found that the average foreign tariff on U.S. agricultural and food products increased from 8.3 to 28.6 percent, resulting in a $15.6 billion trade loss for American exporters, with soybeans, pork and coarse grains among the hardest hit.
What’s frustrating is that, unlike the economic toll exacted on U.S. agriculture by the coronavirus pandemic and recent severe weather, these trade wounds are entirely self-inflicted. Instead of simply removing its tariffs—which would benefit agricultural exporters as well as American consumers of tariffed goods—the White House has opted for a “solution” more befitting of a command economy: A whopping $28 billion  in taxpayer-funded bailout payments  to select agricultural producers. Not only were these direct payments never approved by Congress, but they have also distorted agricultural markets, disproportionately benefited large producers and ultimately provided no long-term relief for the retaliatory tariffs which continue to erode American market share abroad.
Unfortunately, the White House was able to circumvent the congressional appropriation process to disburse its “trade aid” thanks to a Depression-era federal agency called the Commodity Credit Corporation (CCC). Originally established as part of President Franklin D. Roosevelt’s New Deal, the CCC is empowered to borrow up to $30 billion per year from the U.S. Treasury to fund a broad mandate  of supporting U.S. agriculture. As the nonpartisan Congressional Research Service notes , CCC spending from this $30 billion carte blanche has historically been specifically directed by Congress or limited to narrow remedies to address current events (to the tune of millions, not billions, of dollars). The Trump administration’s decision to exploit the CCC’s discretionary authority to unilaterally fund two trade bailout packages—$12 billion in 2018 and $16 billion in 2019—should concern taxpayers and Article I defenders alike .
What’s also troubling is the market-distorting manner in which these brand-new subsidies have been administered. According to an August report  from the Government Accountability Office, certain commodities such as sorghum, cotton and soybeans received the highest payments as a proportion of projected market price—56.3 percent, 40.0 percent and 25.3 percent, respectively. By contrast, corn growers were allocated only 4.2 percent of projected price and milk processors received 1.1 percent. A number of specialty and non-specialty crops facing foreign retaliatory tariffs were initially left out of the payments altogether , such as cranberries, tree nuts (except for almonds), rice and alfalfa. There is some evidence  that the disparate application of subsidies impacted planting decisions in 2019, with some farmers opting to plant certain commodities in order to be eligible for greater payments.
Finally, legitimate concerns have been raised that the administration’s trade aid has disproportionately subsidized large producers at the expense of family farms. According to a report from CNBC , two-thirds of the $28 billion in payments went to the top 10 percent of recipients, who received an average payment of $164,813 each. (By contrast, recipients in the bottom 10 percent received an average payment of $2,469.) In one highly publicized episode, USDA paid $67 million in aid to the U.S. subsidiary of JBS S.A. , a Brazilian meat-processing conglomerate whose owners last month pleaded guilty  to violating the U.S. Foreign Corrupt Practices Act by using American bank accounts to pay bribes.
The president’s tariff strategy has already selected winners and losers in the U.S. economy; now, his bailout program is doing the same for the American agriculture industry. Instead of unilaterally borrowing billions in taxpayer money to further subsidize an already heavily subsidized  industry, the administration would be wise to redouble its efforts on longer-term solutions that might actually work: The removal of tariffs and negotiation of trade deals that open new markets, not just prescribe unrealistic purchase requirements .
Image credit: Valentin Valkov
- “recent study”: https://www.nber.org/system/files/working_papers/w27147/w27147.pdf
- “$28 billion”: https://www.everycrsreport.com/reports/R46539.html
- “taxpayer-funded bailout payments”: https://www.fsa.usda.gov/programs-and-services/market-facilitation-program/index
- “broad mandate”: https://www.law.cornell.edu/uscode/text/15/714c
- “notes”: https://fas.org/sgp/crs/misc/R44606.pdf
- “should concern taxpayers and Article I defenders alike”: https://farmdocdaily.illinois.edu/2019/11/the-market-facilitation-program-a-new-direction-in-public-agricultural-policy.html
- “report”: https://www.gao.gov/products/GAO-20-700R
- “initially left out of the payments altogether”: https://crsreports.congress.gov/product/pdf/IF/IF11289
- “some evidence”: https://www.politico.com/newsletters/morning-agriculture/2019/07/03/big-farms-brazilian-firm-haul-in-trade-relief-funds-671430
- “report from CNBC”: https://www.cnbc.com/2020/09/02/as-small-us-farms-face-crisis-trumps-trade-aid-flowed-to-corporations.html
- “$67 million in aid to the U.S. subsidiary of JBS S.A.”: https://www.nytimes.com/2020/02/07/us/politics/farm-bailout-jbs.html?login=email&auth=login-email&login=smartlock&auth=login-smartlock
- “pleaded guilty”: https://www.wsj.com/articles/meat-giant-jbss-owner-settles-u-s-corruption-charges-11602707950
- “already heavily subsidized”: https://www.everycrsreport.com/files/2020-09-23_R46539_86c4cbdabf70b42bb2685f7b7bcc86617e164935.pdf
- “unrealistic purchase requirements”: https://www.piie.com/research/piie-charts/us-china-phase-one-tracker-chinas-purchases-us-goods