As Trade War Begins, Feds Eye $30 Billion Bailout Fund For Farmers Facing Losses

America steels for major fall­out as it offi­cial­ly launch­es its trade war with China on Friday.

President Donald Trump’s trade war was offi­cial­ly launched at 12:01 Friday morn­ing as U.S. offi­cials were already strate­giz­ing a con­tro­ver­sial move to use emer­gency funds to mit­i­gate the dam­age to farm­ers fac­ing pun­ish­ing retal­ia­to­ry tar­iffs.

The Trump admin­is­tra­tion offi­cial­ly levied tar­iffs on $34 bil­lion worth of Chinese prod­ucts at the start of a major trade bat­tle pre­dict­ed to exact sig­nif­i­cant costs on con­sumers and busi­ness­es. China was expect­ed to announce its own com­pa­ra­ble tar­iffs on $34 bil­lion of U.S. goods Friday. Chinese offi­cials had said they would not announce the tar­iffs until after the U.S. did so. The Chinese tar­iffs, includ­ing a 25 per­cent charge on soy­beans, are expect­ed to hit U.S. farm­ers par­tic­u­lar­ly hard, since the coun­try cur­rent­ly buys near­ly two-thirds of the soy­beans pro­duced by U.S. farm­ers.

But Trump, who has attacked Harley-Davidson for plans to move some pro­duc­tion to its over­seas plants to avoid retal­ia­to­ry European tar­iffs, is look­ing to save “my farm­ers” from the trade war he launched. Rural sup­port was crit­i­cal to his pres­i­den­tial vic­to­ry. Unhappy farm­ers could spell trou­ble for midterm elec­tions.

Agriculture Secretary Sonny Perdue said last month at a Chicago con­ven­tion that the Commodity Credit Corporation is a “tool” he’s con­sid­er­ing to com­ply with Trump’s instruc­tions to “craft a strat­e­gy to sup­port our farm­ers against retal­ia­to­ry tar­iffs. The pro­gram, which was start­ed to help farm­ers dur­ing the Great Depression, allows the Agriculture Department to bor­row as much as $30 bil­lion from the U.S. Treasury that could be used to buy crops from farm­ers that would go unsold in a trade war.

It’s a whole lot eas­i­er not to wreck the car in the first place than it is to think about what a repair might look like.American Soybean Association

Rep. Collin Peterson (D‑Minn.), the rank­ing Democrat on the House Agriculture Committee, has said using the funds would set a bad prece­dent by politi­ciz­ing farm pay­ments, Bloomberg report­ed.

I am against a one-time bailout of a sit­u­a­tion cre­at­ed by the admin­is­tra­tion,” Peterson said ear­li­er this year. Farmers “want their mar­kets left intact and not screwed up by some pol­i­cy. Giving them mon­ey isn’t nec­es­sar­i­ly going to buy them off.”

Even Republican farm state Sen. Chuck Grassley (R‑Iowa) said last month in a call with reporters that sub­si­dies are “not what farm­ers in Iowa want — help from the fed­er­al Treasury,” the Des Moines Register report­ed.

Critics say that spend­ing the mas­sive fund is a waste of pub­lic mon­ey to mit­i­gate a Trump bun­gle. It would also be a sig­nif­i­cant expen­di­ture just as the U.S. debt is on track to be the biggest in his­to­ry due to cor­po­rate tax cuts and spend­ing hikes.

Former USDA chief econ­o­mist Joseph Glauber told The Financial Times ear­li­er this month that many farm­ers already have some safe­guards from gov­ern­ment-backed price and income sup­ports and insur­ance.

As for using CCC mon­ey, Glauber added: “I just don’t like the idea of the gov­ern­ment com­ing up with some balm to spread over wounds that are self-inflict­ed. It seems to be a huge moral haz­ard prob­lem.”

Even those who sup­port using the funds say they won’t be enough to save farm­ers grap­pling with decreas­ing demand trig­gered by retal­ia­to­ry for­eign tar­iffs. Farmer also risk los­ing key mar­kets in the long term even as they’re sub­si­dized. Farmers in Brazil are boost­ing soy­bean pro­duc­tion to scoop up the Chinese mar­ket.

Brian Kuehl, exec­u­tive direc­tor of Farmers for Free Trade, called the trade war “down­right scary.”

When American soy­beans and corn become more expen­sive, South America wins,” Kuehl said in a state­ment.

Farm lob­by groups had been bat­tling against the impo­si­tion of the U.S. tar­iffs, argu­ing instead for nego­ti­a­tions over spe­cif­ic issues.