First Round of Trump Tariff Payments Could Top $4 Billion
Farmers and ranchers would receive more than $4 billion in the upcoming first round of Trump tariff payments for this year, based on Agriculture Secretary Sonny Perdue’s description on Tuesday. Perdue discussed compensation to farmers for trade-war losses moments after a speech in which he lauded exports as a way to boost farm income.
President Trump pledged up to $16 billion in agricultural aid for this year’s production, on top of roughly $10 billion spent to mitigate the impact of the Sino-US trade war on 2018 crops and livestock. The stopgap payments are much larger than the forecast of $6 billion a year for farm subsidies when Congress passed the 2018 farm bill or the projected $7.8 billion a year for crop insurance.
“We will get the Market Facilitation (Program) details out this week,” Perdue told reporters. “We’re anticipating, right now, three tranches with about 50 percent or a minimum of $15 an acre initially. The other two tranches would be anticipating any market changes or looking at market changes going forward.”
Two dozen field crops, from corn and soybeans to cranberries and chickpeas, are eligible for payment based on plantings this year, according to USDA. Some 277 million acres were planted to those crops, according to an analyst. At $15 an acre for 277 million acres, first-round payments would be $4.15 billion.
The figure could be much larger, considering the first tranche may be half of all of USDA’s trade payments to growers. The administration says it will pay up to $14.5 billion in cash to producers. Field crops are likely to get the lion’s share but the USDA said some of the money would go to dairy and hog producers and some would go to producers of tree nuts, fresh sweet cherries, cranberries and fresh grapes. Half of $14.5 billion is $7.5 billion.
Economists such as Joe Glauber of the think tank IFPRI and Scott Irwin of the University of Illinois say USDA might pay growers $50 an acre if it concentrates payments on field crops and spends the full $14.5 billion.
During a speech to a Farm Credit legislative “fly in,” Perdue said larger agricultural trade would boost farm income, in a rut since the collapse of the commodity boom early this decade. Farm exports, which generate about 20 cents of each $1 in US food and agricultural sales, are forecast to fall by 4 percent this year due to low prices and the Sino-US trade war.
“Trade is really important,” said Perdue, urging prompt congressional approval of the United States-Mexico-Canada Agreement. “We cannot afford for this to be drug into the 2020 presidential races and all the races that will come about in November of 2020.” Congress is unlikely to act before fall.
Negotiations could begin shortly with Japan on a bilateral trade agreement that would allow US agriculture to catch up to the tariff and market access concessions that Japan gave to members of the Trans-Pacific Partnership and to the EU, said the secretary. “China – who knows?” US trade officials are expected to go to Beijing “very soon” to resume face-to-face negotiations, said Perdue. A resolution of the trade war would include “immediate increase in agricultural purchases” by China.
US officials, including Trump, have said repeatedly China would purchase large volumes of US ag exports in conjunction with the trade war negotiations. “Some of them materialized but not enough,” said Perdue during a brief session with reporters. By his count, China bought 13.7 million tonnes of a promised 20 million tonnes of soybeans. “We’re holding them accountable for that.”
Trump has prodded China to buy ag exports since he and President Xi Jinping agreed in late June to re-start trade talks that stalled in May. “I don’t think we look weak” by issuing reminders in public, said Perdue. “It think it’s really a determination that is what our expectations are. That’s what will guide our direction going forward.”
Before the trade war, China was the No. 1 customer for US ag exports with purchases around $21 billion. This year, China is forecast to rank fifth with purchases of $6.5 billion. On August 29, the USDA is scheduled to update its forecast of fiscal 2019 exports and make its first estimate of exports in fiscal 2020, which opens on October 1.