A $12 Billion False Diagnosis for Trade Wars

Call it what you want, but to us the $12 billion that Agriculture Secretary Sonny Perdue says USDA will spend to help farmers affected by tariff wars looks an awfully lot like the first installment in a series of “Emergency Payments.”   ake no mistake about it. If we were seeing $5.50 corn along with $14.00 soybeans and China threatened to levy tariffs on soybeans, we would not be reading an announcement about $12 billion in emergency payments to farmers. There would be lots of posturing by various market actors, but certainly not $12 billion. The reality is that the tariff announcement by China was the straw that broke the camel’s back. With the recent years of below-the-cost-of-production prices for most crops and the expectation for continued losses—even in soybeans—for the current crop marketing year, the announcement of the imposition of tariffs by the largest international market for U.S. soybeans sent a shiver down the backbone of US farm country. There is no doubt about it, retaliatory import tariffs on U.S. soybeans by China are unwelcome news, but the underlying price problems farmers are facing in the summer of 2018 are not the result of Chinese tariffs. They are the predictable consequence of two decades of failed US commodity policy.