Trump gives farmers $16 billion in aid amid prolonged China Trade War

Progress toward a trade agreement between the United States and China collapsed after U.S. negotiators accused Beijing of reneging on terms it had previously committed to. Significant differences remain over how tariffs should be rolled back between the countries, and whether the negotiated provisions must be enshrined in Chinese law.

While both sides initially suggested they would continue talking, Beijing has also begun bracing for a long trade fight. In a defiant statement this week, China’s president, Xi Jinping, called for the Chinese people to begin a modern “long march,” invoking a time of hardship from the country’s history, which many China watchers viewed as a hardening of Beijing’s trade stance.

“I am growing more and more skeptical that there is a place where the two sides can come to a deal,” said Edward Alden, a fellow at the Council on Foreign Relations. “If I look at the positions the two sides have taken at the moment, I do not see a path to a deal.”

Trump on Thursday once again suggested that he was happy to keep his trade fight going indefinitely.

“I remain hopeful that at some point we’ll get together with China,” he said. “If it happens, great. If it doesn’t happen, that’s fine. That’s absolutely fine.”

More companies have been pulling back from doing business with Chinese firms, especially multinationals that provided services to Huawei, the telecommunications equipment giant. The Trump administration announced last week that it would blacklist Huawei over national security concerns, prompting Google and mobile carriers to say they would no longer do business with it. The benchmark index of American semiconductor stocks fell 1.7%, as investors continued to grapple with the administration’s efforts to restrict sales to Huawei.

On Thursday, the president called Huawei “very dangerous” but said it was “possible” that an arrangement involving the company could be included in a China trade deal.

“If we made a deal, I can imagine Huawei being included in some form or some part of a trade deal,” he said.

More restrictions on dealing with Chinese tech companies could come soon. The New York Times reported on Tuesday that the Trump administration was considering another ban on American companies supplying components to Hikvision, a Chinese surveillance camera maker that has been criticized for playing a role in the Chinese government’s monitoring and repression of Uighurs, a mostly Muslim ethnic minority.

The crackdown on Chinese technology, coupled with Trump’s decision to raise tariffs on $200 billion worth of goods and begin the process to tax another $300 billion, has exacerbated tensions with Beijing. The Chinese government has accused the United States of bullying China and vowed to further retaliate on American products, particularly agricultural goods.

In a note Wednesday, analysts from Nomura Global Markets Research said their baseline scenario was that Trump would put a 25% tariff on all Chinese exports to the United States by the end of 2019, most likely after he is scheduled to meet with Xi at the Group of 20 summit in late June.

Trump has been fighting several trade wars at once, wielding tariffs against metals from Europe, Japan, Canada and Mexico as well as goods from China. In response, trading partners have hit back at American farmers, imposing punishing tariffs on items such as peanut butter, soybeans and orange juice.

Over the last week, the Trump administration has moved to resolve or delay trade conflicts on other fronts, to better focus its efforts on Beijing. While Trump has insisted any pain will be short-lived and worth the price, administration officials have grown concerned that the president could lose the support of farmers, an important political constituency, before the 2020 election.

China’s tariffs against products like soybeans and beef and a recent move to cancel a major pork order have hit swing states, including Iowa, Ohio and Wisconsin, especially hard.

“Farmers are becoming increasingly anxious over their future financial performance,” said James Mintert, the director of Purdue University’s Center for Commercial Agriculture and the principal investigator in a survey of 400 American farmers.

The survey — by Purdue University and the CME Group, a global markets company — showed that sentiment plunged in April, stemming from concerns about worsening tensions with China. Only 28% of farmers surveyed said they believed a soybean dispute with China would be resolved by July 1, down from 45% in March, while 74% said that now was a “bad time” to make big farm investments.

Those worries helped spur Trump last week to suddenly drop steel and aluminum tariffs on Canada and Mexico, which agreed in turn to withdraw stiff levies on American farm goods.

On Thursday, the Agriculture Department said it would provide up to $16 billion in aid to farmers hurt by trade retaliation. The amount “is in line with the estimated impacts of unjustified retaliatory tariffs on U.S. agricultural goods and other trade disruptions,” the department said in a statement. The financial support came after the administration handed out $12 billion in emergency relief for farmers last year.

The new program will make $14.5 billion in direct payments to producers, channeled through the Commodity Credit Corporation, a program that helps shore up American farmers by buying their crops. The payments will be made to agricultural producers for a wide range of products, from soybeans and cotton to chickpeas and cherries, in up to three tranches, beginning in late July or early August.

The government will also put in place a $1.4 billion program to purchase surplus commodities affected by the trade war and distribute them to food banks, schools and other programs for the poor, as well as put another $100 million toward developing new export markets for American farmers.

In his remarks on Thursday, the president said that China would foot the bill for the program by paying hundreds of billions of dollars in tariffs to the U.S. government. Economists have disputed that, saying the administration has no way to determine who ultimately pays the cost of the tariffs — Chinese businesses, American businesses or American consumers — but that the cost is falling heavily on those in the United States.

The Federal Reserve Bank of New York said on Thursday that Trump’s tariffs will cost the average American household $831 annually.

Despite the economic pain from his trade war, many farmers continue to support Trump. But some are not happy about the financial bailout, saying they would prefer freer markets rather than subsidies and tariffs.

“It’s still just a Band-Aid,” said Bret Davis, a fourth-generation soybean farmer in Delaware, Ohio. He said he had received roughly $150,000 of bailout money last year, but estimated that his losses due to the trade war were almost $250,000.

The trade clash has pushed China, which formerly bought about one-third of American soybeans, to purchase from other markets instead and caused soybean prices in the United States to slump. At the current market price, Davis said, “I cannot produce a bean and make a dime on it.”

“I would lose money on every acre I plant,” he added.

Brody Stapel, the president of the Edge Dairy Farmer Cooperative in Green Bay, Wisconsin, said Thursday that farmers appreciated the financial assistance, but recognized that it would provide only partial and short-term relief. “We much prefer trade over aid,” he said.

Republican lawmakers were more supportive. Sen. Kevin Cramer, R-N.D., said he was taken completely by surprise when Trump signaled this month that he would allocate the new farm money — and was optimistic the president would steer more money to farmers if enough Republicans called him directly to make the request.

“It’s a good start,” Cramer said Thursday. “If we need more later, we will go through the fight again. We got $16 billion, but maybe we’ll need $20 billion.”