‘Working Big Time’ or a Disaster in Process

 President Trump lavishes praise on his trade policies, which he says are “working big time.” Linfield agricultural economist Eric Schuck disagrees and says Trump tariffs will plummet US farmers into economic oblivion.

President Trump lavishes praise on his trade policies, which he says are “working big time.” Linfield agricultural economist Eric Schuck disagrees and says Trump tariffs will plummet US farmers into economic oblivion.

President Trump has tweeted that his tariffs are “working big time.” A Linfield professor who specializes in agricultural economics offers a different verdict.

“American farmers are going to suffer losses. How large those losses will be remains an open question,” writes Eric Schuck in a guest editorial published by the News-Register in McMinnville. “The end result is this: A multitude of growers are either playing without a safety net or facing a long fall to reach that net.”

According to Trump’s tweet posted over the weekend, “Every country on earth wants to take wealth out of the U.S., always to our detriment. I say, as they come, Tax them. If they don’t want to be taxed, let them make or build the product in the U.S. In either event, it means jobs and great wealth.”

Schuck paints a starkly different picture. “The U.S. exported about $12 billion worth of soybeans to China in 2017. That represents about half the total soybean exports from the United States and almost a third of all US farm receipts for soybeans. So US soybean trade with China is a big deal. Unfortunately, China recently canceled about a million tons of orders.”

Domestic soybean producers have avoided disaster by ramping up exports to Brazil, which has picked up the slack in selling soybeans to China, Schuck explains.

“On the surface, that would seem to mean U.S. growers aren’t taking a hit from our nascent trade war with China,” he wrote.” But that couldn’t be further from the truth.  China has been our best customer in part because it pays the best price. While our soybeans are now finding an outlet in Brazil, they are doing it at a price that has tumbled nearly 20 percent in the last 90 days.”

 Linfield College agricultural economist Eric Schuck takes issue with President Trump about the impact of tariffs on US commodity producers.

Linfield College agricultural economist Eric Schuck takes issue with President Trump about the impact of tariffs on US commodity producers.

The Trump administration has acknowledged tariffs are hitting US farmers hard. Their solution is a $12 billion one-time financial bailout. Schuck thinks the tonic is as bad or worse than the tariffs. Here is his explanation:

“To add insult to injury, the proposed remedies actually make things worse down on the farm. The US Department of Agriculture has announced its intention to use the Depression-era Commodity Credit Corporation to backstop falling prices. The mechanics are convoluted, but the CCC will basically act as the buyer of last resort for crops that no longer have a market.

“This leads to the federal government holding larger stores of surplus crops, most of which will wind up going into food banks or school lunch programs. While that can be helpful in some respects, the pressure of large domestic surpluses and demand diversion through food aid programs tends to drive crop prices down even further. And that drives up the cost to US taxpayers even more.”

While tariffs may not make economic sense, compensating US growers for their impact may violate international law, according to Schuck. “Any action to aid farmers beyond current levels would most likely expose the United States to lawsuits by both China and Brazil under World Trade Organization rules. And because the trade fiasco was triggered by US actions, we would most likely lose.”

Soybean producers aren’t the only US agricultural commodity to face repercussions from Trump’s tariffs. “Cherry growers witnessed tariffs rise as much as 50 percent while their crop was in transit to China,” Schuck says.” Unable to adjust, the price paid by Chinese consumers has held steady, while the price paid to American growers has fallen through the floor. Other commodities, notably apples, pears, chicken and pork, will soon suffer similar trauma.”

Trump thinks the US Treasury will reap the benefit of his tariffs. Schuck says, “As a result, the Chinese treasury stands to be the primary beneficiary of US tariffs on Chinese goods.”

Schuck claims, “None of this needed to happen. While China can be a frustrating trading partner, especially in terms of intellectual property, there were other ways to manage the problem. The Trans-Pacific Partnership offered to collectively exert leverage over China, in concert with the rest of our trading partners, but has been cast aside by the new administration. Instead, we find ourselves adrift with virtually no international support, because we’ve simultaneously started trade wars with everyone else who might share an interest in confronting China, including Canada, the European Union and Japan.”

Somewhat futilely, US Secretary of State Mike Pompeo promoted a $113 million Indo-Pacific infrastructure initiative last week, even as Asian leaders are forging ahead on a multilateral trade arrangement that reportedly would include China, but not the United States.

That provides interesting context for Schuck’s conclusion: “There’s only one way out of this: Declare victory and try to get back to the status quo. Unfortunately, that may no longer be an option.”

[The impacts from Trump tariffs continue to ripple outward, including a significant delay on a key traffic signal in Clackamas County.]