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Trump's Plan to Bail Out Farmers During the Trade War Could Backfire

Corn and soybeans—the crops that have been hardest hit by the tariffs—are typically used for animal feed, not human consumption.
A farmer harvests soybeans in Owings, Maryland.

A farmer harvest soybeans in Owings, Maryland. The majority of Maryland's soybean crop is sold to the state's chicken industry.

President Donald Trump escalated the United States' trade war with China over the weekend, sending markets into a tailspin and alarming business and agriculture leaders. After trade talks broke down last week, the Trump administration increased tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent. By Monday, China had retaliated in kind, raising tariffs on nearly $60 billion of American goods.

Recent analysis has shown that the costs of Trump's tariffs fall on domestic consumers, as household goods become more expensive. The trade war has also hit the agriculture, retail, and manufacturing industries, all of which rely on China's goods or its business: In 2017, the U.S. exported 60 percent of its soybean crop to China, the world's largest importer of soybeans.

Now, Trump's plan to deal with this loss—subsidizing the crops China refuses to buy and sending them to "needy countries"—has provoked almost as much ire as the continued onslaught of tariffs.

Trump's Plan Involves Humanitarian Aid

Trump has proposed using the excess crops as a form of humanitarian aid, a plan that critics warn could backfire for both U.S. farmers and those in developing countries. The U.S. will "spend (match or better) the money that China may no longer be spending" on American agriculture commodities "and distribute the food to starving people in nations around the world!" the president said in a tweet on Sunday.

Realistically, the administration could use two federal programs aimed at fighting famine abroad to pass off these crops to developing countries, Reuters reports. But in the 2018 budget, the Trump administration already proposed cutting funding for one of these—Food for Progress—and entirely eliminating the other, Food for Peace, a program dedicated to ending world hunger.

Moreover, the crops that have been hardest hit by the tariffs, corn and soybeans, are typically used for animal feed, not human consumption. According to experts at the Michigan State University Extension, 98 percent of U.S. soybean meal goes to feed poultry, hogs, and cattle—and only 1 percent goes to humans. Most of the country's corn is used for ethanol, feed, or high-fructose corn syrup.

Dumping Grains in Developing Countries?

While the U.S. gave $2 billion in international food aid in 2017, almost half of that was wheat, according to the most recent U.S. Department of Agriculture report. Much of this went directly to school children in Bangladesh, refugees in Yemen, and others in countries facing widespread famine.

The countries receiving aid are generally not equipped for livestock agriculture on an industrial scale, meaning the influx of grain is not the kind of boon Trump imagines. "You are literally then dumping the grains into local markets in less developed countries, bringing cheap foodstuffs that then harm the local farm production sector," agricultural economist Chad Hart at Iowa State University told the South China Morning PostWhile China imports soybeans to sustain its expanding livestock industry, other countries would have little use for the feed.

Even before this plan, international partners were critical of the U.S. using its aid programs to offload surplus: As agriculture policy specialist Randy Schnepf wrote in a 2016 report for the Congressional Research Service, the U.S. continues to donate massive amounts of its own commodities, whereas other countries donate cash to reduce food insecurity.

This imbalance, Schnepf writes, "has engendered international concerns from key trade partners—in particular, the European Union and members of the Cairns group [an interest group of 19 countries that export major crops]—that the U.S. uses international food donations as part of a domestic supply-management, price-support policy." Critics argue this practice violates trade agreements and interferes with commercial markets.