American farmers are likely to bear the brunt of retaliatory measures on tariffs as Washington attempts to rebalance global trade.
China, for example, has blacklisted imports of U.S. soybeans and corn, bringing those exports to a halt. As in the 2018 trade war, it will fall to the American taxpayer to bail out the farmers whose revenues have plunged.
Now, a bailout appears to be coming together in Congress. Some Democrats recently signaled that they were open to providing aid to soybean farmers despite their objections to the tariffs.
Get Joe Brusuelas’s Market Minute economic commentary every morning. Subscribe now.
If tariff revenues or other sources of government revenue are used to compensate farmers and provide food stamps for agricultural workers, government finances will look a lot less promising and lead to higher yields on corporate and government debt.
In addition, it is highly likely that the attempt to rebalance global trade will outlive the current administration. In that case, a new cohort of welfare recipients will have been created, which will be difficult to terminate and will only add to the challenging fiscal outlook of the United States.
It is unrealistic to think there might be alternative buyers to replace lost soybean sales to China.
In the most recent market year, the U.S. shipped nearly 25 million metric tons of soybeans to China while only 4.9 million metric tons of U.S. soybeans were exported to the European Union, according to an analysis by the American Soybean Association.
The U.S. Department of Agriculture estimated that U.S. soybean farmers experienced $9.4 billion in annualized losses during the 2018 trade war, accounting for a staggering 71% of the $27 billion total loss in agricultural exports suffered by U.S. farmers during that time.
Of that $27 billion, China was the largest source of the decline, the USDA found.
Beyond soybeans, sorghum accounted for more than 6%, or $854 million, of the annualized losses, and pork nearly 5%, or $646 million.
As for China, it quickly found other sources for its lost soybeans, namely Brazil, which is now the leading exporter of soybeans.
