Economy

Farmers Say Trump’s Trade War Will Kill Business in 2019

JM Ashby
Written by JM Ashby

The past year has not been a good one for farmers who've lost access to the biggest foreign market in the world because of Trump's trade war, but farmers say next year is going to be much worse.

Sales were down in 2018 for obvious reasons, but farmers benefited from the fact that Trump's trade war didn't hit the books until halfway through the year. Farmers will begin the next growing and harvest season without access to the biggest market.

Moreover, in addition to losing market access, Trump also imposed tariffs on the fertilizer that farmers use for growing.

The Agriculture Department’s Economic Research Service has estimated that 2018 net farm income will be $9.8 billion, or 13 percent, lower than the year before. Adjusting for inflation, farm income is barely above the lowest level since 2002. If current trends continue, some agriculture economists predict that farm income will fall again in 2019.

Bill Gordon, a farmer in southwest Minnesota, said his 2,000-acre, family-run operation was on track to break even in 2018 before crop prices went south amid worries of the effect of the trade war. Now, Gordon said, he’s looking at losses as high as $100,000, which he says he’ll offset by taking out equity to cover costs from bank interest payments to fertilizer and seeds.

Gordon, a member of the American Soybean Association Board of Directors, estimated fertilizer costs in spring 2019 will be 15 percent more than this year for him. Fertilizer prices have jumped since spring, due in part to lower production levels in China.

With absolutely no indication that Trump's trade war will end anytime soon, it was reasonable to assume that Trump's bailout for farmers would be inadequate and that we could see more bailouts in the future.

To wit, Representative Ralph Abraham (R-LA) says he's going to introduce another bailout when Congress returns to Washington.

Abraham has said he’ll introduce an emergency spending bill aimed at throwing farmers a lifeline when Congress returns after the Nov. 6 midterm elections.

“We’re having to really shore up what we can… to keep our farmers bankable for next year,” Abraham said. “They’re not going to make any money. They’re going to actually lose loads of money this year.

“What we want to do is just make them survivable, so they can go to the bank and maybe get a loan for next year,” he added.

Make them "survivable" so they can get a loan for next year.

And then what? What happens after that?

A year from now I expect we'll be reading stories about family-owned farms that have permanently shut down because they couldn't survive Trump's trade war. Loans and bailouts are not an adequate substitute for actual business. These family farms can't leverage themselves into the next century like major corporations can. They're going to run out of equitable assets, the value of which has already been reduced.

  • And then what? What happens after that?

    Then a Democrat wins the White House and the Republicans blame him or her.

  • Badgerite

    This will ripple through state economies like Wisconsin’s as well.

  • muselet

    Ken Morrison, an agriculture commodities market expert, said China is unlikely to back down over Trump’s trade demands on issues like intellectual property and technology transfers. Like other trade experts and market watchers, Morrison thinks retaliatory tariffs are here to stay.

    “I spent four years in China, long enough to know not to underestimate their willingness to endure economic pain, especially when their sovereign goals are threatened,” he said.

    Yes, that’s what sane people were saying back when Donald Trump first threw his hissy fit over China.

    I note with interest that Ralph Abraham intends to introduce an emergency spending bill to make farmers “survivable” and not a bill to amend or clarify Section 232 of the Trade Expansion Act of 1962, the section authorizing tariffs for national security reasons (in other words, take Trump’s toy away from him). He seems to be saying he’s fine with eternal trade wars with every other country on the planet, but he’ll toss a (small) bone to farmers.

    As ever, I have great sympathy for those farmers caught up in this tariff madness who didn’t vote for Donald Trump. The others got exactly what they voted for.

    –alopecia

  • Draxiar

    It must be nice to make terrible decisions that you never have to feel the consequences of much less empathize with. The other side of the coin is that it must be terrible to have voted for the thing that has dumped those terrible decisions at your feet that you’ll feel the consequences of.