Bail outs are not the answer
Hours after President Trump tweeted on Tuesday morning that “tariffs are the greatest!,” his Administration announced a $12 billion aid package for American farmers to offset the harm from the Trump trade wars.
If you’re confused, join the White House. The Trump Administration is trying to fix an economic problem of its own making by putting the victims on the federal dole. Perhaps this is what White House trade adviser Peter Navarro meant when he said the trade harm was merely a “rounding error.”
In May the U.S. imposed tariffs on steel (25 percent) and aluminum (10 percent) using a preposterous claim of harm to national security. Earlier this month it put new duties on $34 billion of imports from China. It has also been threatening to blow up NAFTA. Canada, Mexico, the European Union and China have retaliated by imposing new tariffs of their own on exports they know are crucial to U.S. producers, and by strengthening trade relationships with suppliers from other countries.
This is hurting U.S. businesses, and nowhere more than in highly efficient U.S. agriculture. American farmers need access to foreign markets for output they can’t sell domestically. When their exports get hit with higher tariffs, they become less competitive against growers that don’t face those tariffs.
The upshot is a glut of American food, from soybeans to pork, beef and corn — and falling farm prices. The right solution would be to end the trade war and restart the flow of American products to foreign customers.
Instead the USDA announced it will use the Commodity Credit Corporation, born in the Great Depression, to buy surplus farm goods that are driving down commodity prices. Tapping the CCC means that the program doesn’t need congressional authorization. If the surpluses are never sold, the losses will be piled on taxpayers at a later date.
But don’t worry: U.S. Agriculture Secretary Sonny Perdue says this is only a “short-term solution.” Tell that to the farmer who took years to cultivate a customer a half a world away. As Nebraska Republican Senator Ben Sasse put it, “This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again.”
The Iowa Corn Growers Association said on Tuesday that, given the circumstances, the government ought to help. But it added: “Ultimately, resolving trade differences and repairing relationships with our trading partners must be our top priority because much of the demand for our corn lies outside our state and our country’s borders” and so “fair and open trade remains the key.”
American farmers won’t prosper on welfare. They need access to customers abroad. Mr. Trump may think that his farm tariff bailout will get Republicans past the November election, but sooner or later bad economic policy becomes bad politics.
The Wall Street Journal