Free Trade

Stung by Tariffs, Farmers Seek Bailouts and More Protectionism

While Trump prepares another round of aid payments for farmers, Marco Rubio is pushing for tariffs on Mexican fruits and vegetables that will send prices soaring.

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They say that government policies never really fail; they just haven't been tried hard enough.

Libertarians know that's far from the truth, of course, but it's a cliche because it does reveal something about the way policymakers tend to view their pet projects. Bad policy begets bad policy in pursuit of ends that are always one step away—all we need is one more tweak, one more adjustment to correct an unintended consequence, one more intrusion into the marketplace.

So it has been with President Donald Trump's trade war. Last year, the president authorized $12 billion in emergency spending through a New Deal-era crop insurance program to subsidize some farmers against losses they accumulated after China slapped retaliatory tariffs on American agricultural goods.

Now, with China hitting back against Trump's latest escalation of the trade war by imposing more tariffs on American farm goods, the White House is preparing to double down on those bailouts—effectively paying farmers to grow crops they won't be able to sell with money generated from higher taxes on those same farmers (and all other Americans). And the increased interest in economic protectionism has created an opportunity for farm lobbyists to potentially score a somewhat unrelated victory by pushing for higher tariffs on Mexican produce.

On Friday, Trump ordered an increase in tariffs on $200 billion in Chinese imports, from 10 percent to 25 percent. Another $325 billion in Chinese imports could be subject to tariffs within weeks unless a trade deal is struck with China—an outcome that seems unlikely at the moment. On Monday, China retaliated by imposing tariffs on $60 billion of American imports, as well as hiking tariffs on farm products.

"This can't go on for an extended period of time. We need a trade deal done soon, and in the meantime, farmers are probably going to need another round of aid payments," Grant Kimberley, director of market development at the Iowa Soybean Association, told CNN.

On Monday, Trump promised to redistribute $15 billion in tariff revenue to farmers.

Those bailouts are a poor substitute for letting farmers have access to foreign markets. For one, that's because government handouts are rarely handled in an efficient way. Indeed, last year's $12 billion tariff bailout turned into a predictable mess, with hundreds of people living in big cities getting checks meant for farmers, according to one agricultural policy watchdog group.

While government bailouts might save farmers from some short-term pain, the trade war is doing other damage that can't be easily rectified.

"The soybean market in China took us more than 40 years to build, and as this confrontation continues, it will become increasingly difficult to recover," said Davie Stephens, a Kentucky-based farmer, and president of the American Soybean Association, in a statement. "What that means for soybean growers is that we're losing. Losing a valuable market, losing stable pricing, losing an opportunity to support our families and our communities."

Soybeans are particularly hard-hit by the ongoing trade war. About half the soybeans grown in America are exported, and the vast majority of the exports used to go to China. With China cutting off American soybean imports late last year, the market for the crop has crashed amid a huge surplus. Soybean futures dropped to their lowest levels in a decade on Monday, The Washington Post reported.

Still, perhaps the best indicator of how bad trade policy is encouraging more of the same is the fact that farming lobbyists are now asking for more protection from foreign agricultural goods, even as the same industry is pushing the Trump administration to end the trade war with China.

"President Trump's drive to raise tariffs on imports has shifted money from the pockets of consumers to the profits of producers in the manufacturing sector—notably steel, aluminum, and autos," write Gary Clyde Hufbauer, and Euijin Jung, researchers at the Peterson Institute for International Economics, a trade policy think tank. "These actions have now inspired farm state lawmakers, in alliance with local agricultural producers, to seek their own barriers, raising the price of tomatoes, bell peppers, blueberries, and other produce."

They point to two things. First, the Trump administration's decision last week to end a decades-long deal with Mexico that effectively raised tariffs on imported tomatoes. As I wrote last week, this means that the juicy red fruits coming across the southern border will now be subject to a 17.5 percent tariff. More than half of all tomatoes consumed by Americans come from Mexico, and the new tariffs could result in a price increase of as much as 85 percent, according to an analysis from Arizona State University. These changes will also jeopardize jobs in Arizona in order to protect farmers in Florida.

Second, there's a bipartisan proposal from Sens. Bill Nelson (D–Fla.) and Marco Rubio (R–Fla.) that would allow the executive branch to impose new import duties on Mexican-grown blueberries, bell peppers, and other produce if American growers complain about unfair competition.

"It would enable growers in a single region of, for example, Georgia or Florida, to raise national prices of bell peppers, blueberries, tomatoes, and other produce at a moment's notice," the PIIE analysts warn.

The rolling back of the free trade consensus in Washington is a sea change that goes well beyond the tariffs Trump has imposed on China, Europe, Canada, and elsewhere. Unfortunately, as this week has demonstrated, opposition to tariffs does not always translate into advocacy for free trade—but can easily morph into an argument for more protectionism, provided it's the right kind of protectionism.

There is no such thing, but as long as the president is determined to use trade policy to pick winners and losers, every industry has an incentive to try to be on the side of the winners.

NEXT: The Logan Act Is Awful and No, It's Not Going To Be Used Against John Kerry

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  1. As any libertarian understands, the government should let the Trump-supporting farmers eat their goofy red hats.

    I hope the buyers of farmland in bankruptcy proceedings pay a fair price and are good performers with those assets.

    1. Let them eat MAGA hats, yes!!! After Trump bankrupts us all, we will eat MAGA hats. I hope that we can at least still afford mustard, to give them at least a wee tad of flavor!

      (Didn’t Sting & the Police once sing a song, long ago, about “Mustard in my Butthole”? Or “Mouse-turds in a Bottle”, or “Massage my Butthole”, or, what WAS that song anyway? It had to do with mustard, right?)

      1. Relax. America has ample strength and momentum to withstand the current administration. We’re already halfway home.

      2. Only the yellow.

        You can’t even get the Chinese kind these days. I guess because of tariffs.

        Being patriotic I avoid the German or French varieties.

    2. What about the Trump opposing farmers? Do they get special treatment from the government?

      Or are you saying that the people who produce food are all Trump supporters and, if so, why aren’t you boycotting all of them?

      1. I am observing that farmers tend to be non-degreed white males from rural areas, the core of the Trump base.

        Votes for Trump should have consequences, in particular the fallout from Trump’s bad decisions, most especially when the alternative is an undeserved government bailout.

        When those folks, in general, turned hard toward backwardness and intolerance, I lost much of my interest in subsidized avoidance of the trend toward agricultural conglomeration.

        1. I love to sell “organic” food to Democrats like Kirkland.

          It covers my lowest prices in town for regular food.

          So I sell more and make more. Plus no exports needed.

        2. I’m pretty sure those folks don’t give two shits about your conceptualization of “backwardness” and “intolerance,” Fake Libertarian.

          1. The only thing bigots are good for is being stomped in the culture war, then replaced by their betters.

  2. Second, there’s a bipartisan proposal from Sens. Bill Nelson (D–Fla.) and Marco Rubio (R–Fla.) that would allow the executive branch to impose new import duties on Mexican-grown blueberries, bell peppers, and other produce if American growers complain about unfair competition.

    Obviously the best response to a problem caused by tariffs is more tariffs.

    1. Or we can just go back to the pre-Trump managed trade system for food.

      That was working fabulously for all those people on SNAP.

      1. News flash. They’re still on it.

      2. Are you saying that taxes (tariffs) on food is a way to get people off of SNAP? Because that’s what the quote says they want to do; increase the price of food (Mexican produce).

        Do you even think about the things you say anymore or is the defense of Trump simply a reflex?

        1. Poor guys.

          Lower trade restrictions with our trading partners makes it possible for more business opportunities.

          Which can get more people off SNAP.

          That or gutting the SNAP program.

  3. These policies are the same as the progressive movements many interventions in the free market by both Republicans and Democrats 100+ years ago. This demonstrates once again that both parties are basically the same.

    1. At the very least, both parties are capable of being equally stupid.

  4. Second, there’s a bipartisan proposal from Sens. Bill Nelson (D–Fla.) and Marco Rubio (R–Fla.)

    Millennial journalists

  5. — “Unfortunately, as this week has demonstrated, opposition to tariffs does not always translate into advocacy for free trade—but can easily morph into an argument for more protectionism, provided it’s the right kind of protectionism.” —

    And all of this because a few tikki-torch-wielding knuckle-draggers wanted a wall to protect them from brown people. Talk about the collapse of a society into barbarism.

    1. Is everything about the wall to you?

      I think this trade war is more about the what’s happened politically within the Democratic Party since 2008. As the social justice warriors took over the Democratic Party, they chased the white blue collar middle class into the arms of the Donald Trump. This was the same demographic that opposed GATT and NAFTA. These were the people who voted for Barack Obama, especially because of his support for the UAW, especially because of the Democrats’ criticism of Wal*Mart and trade with China. When all those anti-free trade Democrats came swarming into the Trump coalition, this is what you get.

      I don’t see what any of that has to do with building a wall.

      1. If only there were transcripts and recordings of hundreds of events that could indicate how important anti-immigrant sentiment was to the Trump campaign.

        1. Would these transcripts and recordings show the connection between anti-immigrant sentiment and being anti-free trade?

          Is it possible for non-racists to also be anti-free trade in your weird world? The whole Democratic Party is anti-free trade. The UAW, the AFL-CIO, the United Steel Workers, which one of these pro-Democrat organizations is pro-free trade?

          What about anti-free trade Latinos? Are they possible in your weird world?

          1. Is it possible for non-racists to also be anti-free trade in your weird world? The whole Democratic Party is anti-free trade. The UAW, the AFL-CIO, the United Steel Workers, which one of these pro-Democrat organizations is pro-free trade?

            What about anti-free trade Latinos? Are they possible in your weird world?

            While I know what you mean, Ken, I would not call any of those people non-racists. Racism underscores the left’s current obsession with identity politics.

            1. I was rhetorically asking whether it was possible for a specifically non-racist person to be anti-free trade, but I appreciate the opportunity to clarify that. Thank you.

  6. Check out this video from yesterday, starting about 13:09. Henrietta Treyz of Veda Partners gets it.

    https://www.bloomberg.com/news/videos/2019-05-13/-what-d-you-miss-full-show-5-13-2019-video

    Her initial point is that Trump isn’t motivated by what’s happening in the markets as much as he’s motivated by what this means for him politically. Libertarians understand that. That’s one of the fundamental reasons why we prefer participating in markets rather than politicians making choices for us. Anyway, point is, if you want to see what Trump is likely to do, look at what this means for him politically.

    She starts by pointing out that if Trump cut a deal just to calm the markets at this point, Biden (or the rest of the Democrat field) would pummel him for it throughout 2020. There’s nothing to gain from Trump’s perspective by subjecting himself to that. This is like people opposing some president’s war by making fun of it for being a failure and achieving nothing. That isn’t a reason for the president to stop fighting a war. That’s a reason for him to continue fighting it as if there were still some goal to be achieved in the future.

    Then she turns to the question of whether the hit to soybean farmers and others by China’s tariffs are likely to hurt Trump’s reelection chances eventually, and Treyz responds that, contrary to expectations, the areas of the country where the Chinese retaliation has hurt the worst are the areas of the country that continue to support Trump and his trade war the most.

    I don’t care whether it’s central planers telling markets how they’re supposed to feel or pundits and journalists telling voters how they’re supposed to feel, elitism makes everyone who’s guilty of it look stupid. That fact is that Trump sticking to his guns on the trade war appears to be popular with the people its hurting in important swing states that Trump needs to win reelection.

    I should say, the voters in these areas that are hard hit by the tariffs (either or both ways) aren’t necessarily being irrational–certainly just for being willing to make sacrifices. I suspect it reflects on the character of the chattering classes that they assume anyone who’s willing to suffer for a cause they believe in is irrational. That’s not how the Civil War was fought. That’s not how we won World War II. In World War II, the war might be especially popular with the soldiers on the ground who were most likely to pay the ultimate sacrifice for it. I suspect the journalists of today would make cheese eating surrender monkeys look brave by comparison.

    Giving up just because you got punched in the face is un-American. The good reason to give up is because the cause isn’t worth winning, and, no, I don’t think this trade war is worth winning, but I’ll continue to hope we win anyway–and hope that I’m wrong.

    1. I watched that clip yesterday on Bloomberg and yes she definitely hit the nail on the head, she totally gets it.

    2. People need to grow some balls. I’m not saying Trump is playing this smart, but the general concept is not wrong.

  7. No tariffs, no protectionism, no subsidies, and no bailouts.
    I don’t know why this is so hard to understand.

    1. Well, it’s not about memorization, right? We’re not the Moonies.

      People get hung up on the whys, and our job is to be ready to explain the whys to people.

  8. “Unfortunately, as this week has demonstrated, opposition to tariffs does not always translate into advocacy for free trade—but can easily morph into an argument for more protectionism, provided it’s the right kind of protectionism.”

    Opposition to tariffs? What opposition?

    Has anyone picked up on the soybean association’s complaints?

    Of Biden, Sanders, Harris, Warren, . . . who in the Democratic Party is opposed to Trump’s trade war with China? Did Nancy Pelosi voice her and the Democratic House’s opposition to Trump’s trade war with China?

    Where was the opposition this week? What opposition?

    What are you talking about?

    P.S. The S&P 500 is still up around 12% YTD. The unemployment rate is still 3.2%. Wage growth is at 3.4%. And inflation is at 2.0%. Reading some of the stories around here, you might think we were suffering the effects of a cost driven recession. Never forget, the economy is doing well DESPITE the foolish things Trump is doing. To pretend things are worse than they are–or about to get worse–is a great way to persuade people that libertarians are a bunch of chicken littles upset about their theories rather than the real world.

    1. “P.S. The S&P 500 is still up around 12% YTD. ”

      People who believe the stock market will be better during the Trump administration than it was during the Obama administration are also the audience that believed Trump not only would enable uneducated rural white males lacking marketable skills to prosper but indeed would arrange that economic miracle at the expense of the fancy “elites” those downscale voters resent.

      1. “People who believe the stock market will be better during the Trump administration than it was during the Obama administration are also the audience . . . “

        People who hear voices in their heads should seek professional advice from a psychiatrist.

        My point was that the economy is doing well–right now. And it’s doing so–despite the tariffs. And screaming about doom and gloom despite the fact that the economy is doing so well, right now, makes us look silly and stupid. What Trump is doing is awful and wrong, and according to estimates, it’s probably taking between two tenths and three tenths of a percentage point off of our GDP. If you keep telling people there’s a blizzard outside, and all they see is sunshine and not a cloud in the sky for days to come, after a while, they’re gonna stop believing you when you’re talking about the weather.

        Now go make that appointment with the shrink.

  9. The White House is preparing to double down on those bailouts—effectively paying farmers to grow crops they won’t be able to sell with money generated from higher taxes on those same farmers (and all other Americans)

    Excuse me, EXCUSE ME, thank you. The Fake News Media and that means you — you’re so rude, so rude — it’s not a bailout because we all know that Obama bailed out the banks, the banks that wouldn’t give me a loan, they gave Crooked Hillary a loan and we’re looking into that believe me, but frankly it’s not a tax it’s an investment and I know about investments believe me, it’s not a tax and by the way America’s beautiful farmers have told me, told me by the thousands that they want that wall built, that tariff, they want that tariff built that puts billions of dollars into the American treasury to put America’s Heartland back to work, but Crooked Hillary, we’re looking into that. We’ll see. We’ll see.

    1. The one that drives me crazy . . .

      On the one hand, they pay people not to farm because the putting more food on the market would make crop prices too low.

      On the other hand, 4.4 million households in California get SNAP because the price of food is supposedly too high.

      Only an extremely well educated person could come up with such a stupid system.

      1. Or… it could be a response to the fact that farmers and poor people on SNAP tend to vote in droves. So artificially inflate food prices, and use tax money to feed the poor while also subsidizing the farmers at inflated prices. It’s brilliant if garnering votes is your goal.

  10. The rolling back of the free trade consensus in Washington is a sea change that goes well beyond the tariffs Trump has imposed on China, Europe, Canada, and elsewhere.

    What free trade consensus in Washington? There are thousands of pages of legal, tariff and regulatory barriers to imports. The consensus was merely that everybody who mattered had optimized their results under the old system.

    Free trade consensus in Washington. Jaysus wept.

  11. There is no such thing, but as long as the president is determined to use trade policy to pick winners and losers, every industry has an incentive to try to be on the side of the winners.

    Here Boehm goes again with pre-Trump managed trade was fine. Its Trump’s plan for managed trade that is HORRIBLE!

    1. Here loveconstitution1789 goes again with the trope that all central economic planning prior to Trump was bad and that the proper solution to that is for Trump’s own brand of central economic planning.

      1. We had managed trade pre-Trump. You people are fine with that.

        Now trump wants to do managed trade HIS way and the claws come out.

        You’re so transparent Leo.

  12. FOR CRAPS SAKE! Lets try to at least get our story 1/2-True shall we? DEMOCRATS where the major supporter of farm subsidies. The original “Farm Bill” was passed during the Obama administration. The LAST “renewal” farm bill was voted against by 13-Republicans.

    So don’t sit there and pretend farm subsidies are a Republican pitch. That is obviously lying propaganda.

  13. Will someone explain why tariffs are more objectionable than sales or excise taxes?

    Thanks

    1. They wont.

    2. They’re not. Explain why they’re less objectionable?

      1. They’re not. That’s his point.

        Tariffs are no better or worse than any other tax. As with all taxes they distort the market in ways. In the case of tariffs since they’re mostly applied just at China in a major way right now it means we’ll be shipping back perhaps a few jobs, and importing cheap crap from other countries. If they were more broadly applied we’d be bringing back a lot more manufacturing jobs. We will also have higher consumer prices.

        That is the pretty obvious effect of tariffs. The question is do the policy goals line up with the costs associated, and do most people find it a favorable trade off. This is theoretically the question for any form of taxation once its distortions are factored in.

        Anyway, he’s just mocking the sky is falling attitude people have about tariffs. Frankly from a distortions standpoint, I think the USA would be better off if we cut income taxes by 50% and jacked tariffs to compensate… It would theoretically make zero difference on peoples bottom line if the numbers were exactly offset by each other… So no costs to people… So what’s the argument then?

        IMO the economic trade offs from that would make more sense than high income taxes with no tariffs… But the point is in a world that isn’t anarchist, it is legitimate to debate whether tariffs or income taxes are better overall for the economy etc. It’s not sky is falling shit either way.

  14. […] Stung by Tariffs, Farmers Seek Bailouts and More Protectionism – Reason […]

  15. As someone who has been a business owner for a long time, I find it hilarious how so many people are essentially TERRIFIED of “losing a deal” by playing hard ball. The notion seems to be that if you demand reasonable terms, instead of simply bowing down and agreeing to whatever scraps the other side wants, ZOMG it could be the end of the world if they turn you down!

    DUDE… Grow some balls. The fact is in a negotiation you will NEVER get more than you ask for… If you ask for nothing, that’s pretty much what you will get, NOTHING.

    This is what our pols did for decades, ask for nothing. So that’s what we got. The fact that we’re now asking for what are totally reasonable terms, and everybody is FREAKING OUT and afraid is insane. We have the upper hand. Note we’re slapping tariffs on 500 billion + of goods… China can’t even do 1/5th of that to us. We can replace most of their imports with other cheap imports too. We simply have the upper hand here.

    The truth is that pols in the 70s, 80s, 90s, 2000s, and 2010s SHOULD have never let the situation become what it is… That would have been the best option, but the second best is to straighten this shit out now. We have very little to lose. If you ever want to see freer trade, we’re going to have to bust open markets like China by force, because they will never willingly create a level playing field.

    1. +1000

      Like letting illegal immigration get out of control, horrible managed trade deals are out of control.

      I support playing a little hard ball and renegotiating to get lower trade restrictions with our trading partners.

      1. Pretty much.

        This country has been so horribly mismanaged on 1000 fronts that it seems an impossible task to fix it all… And it may be… But that doesn’t mean we shouldn’t at least friggin’ try!

  16. […] Eric Boehm reports on how cronyist tariffs engender more cronyism. […]

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