If the Trump regime moves ahead with an additional $16 billion bailout for the American agricultural industry, it may be an illegal subsidy under World Trade Organization (WTO) rules.
WTO rules agreed to by the United States and other trade blocs do not prohibit members from stimulating their own industries, however the size of Trump's proposed bailout would be bring the yearly total above what's permitted.
At least 34 members of the WTO including the European Union have filed a complaint alleging that Trump's second bailout could be illegal.
The EU asked the U.S. for details on the timing and eligibility criteria for the U.S. subsidies and questioned whether the U.S. measures would qualify as WTO-permitted subsidies or subsidies that distort international trade.
China went a step further and alleged that the U.S. program would exceed America’s WTO limits for trade-distorting subsidies if current prices and volumes remain stable.
It could be possible for the U.S. to craft its agricultural purchasing program in a way that adheres to WTO rules as long as the U.S. subsidies don’t exceed America’s WTO commitment to cap trade-distorting subsidies at $19 billion per year.
Trump's first bailout for the agricultural industry totaled $12 billion and his second proposed bailout could total $16 billion. That's far more than the limit the United States has agreed to at the WTO.
Now, obviously, I don't expect the Trump regime will give two shits what the WTO says unless the WTO rules that it's not illegal. In that case they'll scream the WTO's name from the rooftops.
The real danger here is that the Trump regime will ignore the WTO and move ahead with the full bailout. That could prompt other nations to ignore the WTO as well and pursue their own stimulus programs that could distort the value of commodities and disrupt global trade.
The possibility for unintended consequences for American businesses is very high. A world in which American businesses are the enemy is not a good world for any company looking to improve their sales.