The escalating trade dispute with China is past the shock stage and now in the negotiation and reaction stages.
It is hoped that China will move toward normalized and balanced trade with the United States, but that is yet to be seen. President Donald Trump is crowding the country hard on steel, aluminum, general trade deficit and unfair practices with United States companies doing business in China regarding intellectual property. In other words, it is complicated.
The victims are the Chinese people, United States consumers and U.S. businesses, like farmers. Talk about compensating farmers for their losses, if the dispute disrupts trade, circulates around Washington, D.C.
A University of Illinois agricultural economist’s response to the obscure law, which would provide farmers disaster payments with funds accumulated from tariffs.
AUDIO: Profit Matters 4-11-18
President Trump has asked United States Secretary of Agriculture Sonny Perdue to protect U.S. farmers from blowback of the trade dispute with China. However, the Secretary does not have many options.
Perdue travelled across farm country last week for his second “Back to Our Roots” RV tour. During his first tour, last summer, Perdue told producers he would be their salesman to the world. Now, he is being asked to be their protector in the face of trade restrictions, as the President sets about rectifying what he sees as unfair trade with China.
However, Perdue is not saying what he will do for farmers. University of Illinois agriculture policy specialist Jonathan Coppess says there might be a good reason, if that is the case.
“There are not a lot of options for the Secretary when it comes to covered commodities,” Coppess said. “What lawyers will explain, within USDA and elsewhere, we have a lot of flexibility in the original CC Charter Act and general powers to improve prices and help with exports and markets. Because Congress has stepped in time-and-time again and directed spending for commodities in certain ways, i.e. ARC and PLC, then that kind of limits the creativity that you can have.”
Coppess says Congress would need to implement actions to protect farmers from a trade war.
Here is a twist: If farmers are damaged in the trade war with China, compensation may come from tariffs generated from sales of chinese products to the United States. There is an obscure law which allows the United States Department of Agriculture (USDA) to take money from customs duties and use it for several purposes, including disaster payments.
There used to be a cap on it, but that went away in the 2018 spending bill.
All Sonny Perdue has to do is advise the Appropriation Committees two weeks in advance of spending. Tariffs on China, collected from those who buy Chinese metals, may be rerouted to United States farmers, due to China’s imposed duties on imports of U.S. farm products.