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Two Sides of Washington: Trump Bailout and China Tariffs

The Trump administration will hear hours of testimony about its proposed 25% tariffs on $200 billion in Chinese products on Monday, overlapping with the expected USDA announcement of up to $12 billion in aid for U.S. agriculture to offset the impact of Chinese tariffs on farm exports. Soybean growers are likely to get the largest share of the spending since the oilseed is the largest ag export to China.

U.S. and Chinese officials made little headway in two days of talks last week.

Meanwhile, Mexico and the U.S. might wrap up a bilateral agreement on a new NAFTA as soon as Monday, sources told Bloomberg, allowing negotiations to widen to include Canada. China, Canada, and Mexico, in that order, are the three largest customers for U.S. farm exports and generate nearly 45% of sales.

The USDA intends to begin Trump tariff payments after Labor Day. Cash payments to producers would account for two thirds of expenditures, according to Secretary Sonny Perdue. A produce group says $2.5 billion would be spent to purchase, and give away, excess foods, and there are indications $200 million would go to trade groups to build new overseas markets for ag exports. When USDA officials unveiled the framework of the package in late July, they said it would be a one-time injection of assistance and would be based on production this year.

Payment rates and other details were not released in July. At that point, USDA officials said they expected $11 billion in damage from the trade disputes.

While exports loom large in the farm sector, accounting for 20% or more of farm income, they are a lesser part of U.S. trade flows. Agriculture is 6% of overall NAFTA trade, said economist Luis Ribera of Texas A&M University. “Basically, we are a smaller piece of the pie,” he said during a webinar last week. When there is agreement on major NAFTA issues such as automobiles and U.S. demands for a sunset clause, “I believe everything else will fall into place.”

The U.S. trade representative’s office scheduled six hours of testimony for Monday, the last of six days of public hearings on a tranche of tariffs that originally were pegged at 10%. The White House called for 25% tariffs, part of President Trump’s policy of trade confrontation, to increase pressure on Beijing to resolve disputes over steel and aluminum exports and intellectual property theft. A mixture of witnesses are on the agenda, representing furriers, home furnishing companies, and makers of office furniture.

Later this week, the USDA will make its first estimate of farm exports during the fiscal year that opens on October 1 and update its estimate of sales this fiscal year. It also will update its estimate of farm income, now expected to be the lowest in 12 years.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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