As you’re probably aware, farmers aren’t exactly enamored with Donald Trump’s trade war.
From apples to orangesÂ to soybeans to pork, the agricultural community is finding out the hard way that Peter Navarro’s protectionism doesn’t pay, and you can take that both figuratively and literally.
Trump has been at pains over the past couple of weeks to explain that prices for some crops, like soybeans, were falling before the tariffs, but that’s small comfort.
Recently, the BloombergÂ agriculture subindex (see chart below) fell to a record low amid a broader slump in commodities and there are a lot of reasons to believe things could get worse before they get better.
China has demonstrated beyond a shadow of a doubt that they understand how politically sensitive this issue is for Trump, which is why Beijing has targeted the farm belt with some of its retaliatory measures.
â€œWhile [soybeans] initially appear to satisfy the conditions of a rational target for a tariff (the US exports more soybeans to China than anywhere else), it is actually Chinaâ€™s most economically vulnerable import as there is no â€˜spare capacityâ€™ in global trade which can be rerouted towards China to compensateâ€, Goldman wrote last week, on the way to saying that despite the lack of sourcing options, soybeans are a good choice from Beijingâ€™s perspective precisely because they are a â€œpolitically relevant good, given the importance of the farm belt in US politics.â€
Apparently at wit’s end with the criticism and fearing for the fate of the GOP in the midterms, the administration is now set to try and shield U.S. farmers from the pain with what Politico says will be “billions of dollars in aid to farmers hurt by tariffs”.
The administration’s plan will use two commodity support programs in the farm bill, as well as the Agriculture Departmentâ€™s broad authority to stabilize the agricultural economy during times of turmoil.
The plan has been in the works for months. It seeks to ensure U.S. farmers and ranchers â€” a key constituency for President Donald Trump and Republicans â€” donâ€™t bear the brunt of an escalating trade fight with China, the European Union and other major economies as the administration pursues an aggressive course to rebalance America’s trade relationships.
So basically, Trump will subsidize U.S. agriculture in an effort to ensure that voters don’t abandon the GOP ship in November.
Needless to say, this is the kind of thing that’s rife with moral hazard and it speaks to the spiraling consequences of going down a path that the world abandoned decades ago.
But what do I know, right? I’m not the “stable genius” around here.
Oh, and to America’s farmers who might be starting to get the feeling that things are going off the rails, remember what Trump said last year inÂ Cedar Rapids, Iowa about how you’re probably too stupid to understand all of this because you’re “poor”…