Friday, July 27, 2018

Trump's $12 Billion Bailout For Farmers Is Not A Good Plan

(This image of a soybean field is from

Donald Trump thought he could bully other nations into giving the United States more favorable trading terms. He did this by imposing tariffs on foreign products entering the United States and threatening to impose even more tariffs if those nations don't bend to his will. Unfortunately, his trade war is not going well.

The first hits were taken by American farmers. A perfect example is the farmers who raise soybeans. China buys about 30% of American-grown soybeans. But instead of giving in to Trump, they just cancelled their orders for U.S. soybeans. Instead, they are growing a million new acres of the plant themselves, and have signed contracts to buy the rest of what they need from South America and Russia.

And soybeans aren't the only product affected. The longer the trade war lasts, the more damage will be incurred by American farmers and factories -- and consumers, who will have to pay higher prices for many goods.

Trump realizes that he's losing support among farmers (who in 2016 were among his most loyal supporters), so he has devised a bailout to help the farmers. He's borrowing $12 billion to give farmers some aid. But this plan has some serious flaws, and I believe will not be workable as a solution. Here's why:

1. It is a short-term bailout. It is only for the rest of this year. What about next year?

2. Trump had already overseen a ballooning deficit that's approaching a trillion dollars a year. Borrowing $12 billion more is not going to help that.

3. The bailout assumes that Trump will be able to negotiate new trade deals in a short period of time. There is no evidence that is possible. While Trump has bragged about being a great negotiator and dealmaker, in the first 18 months of his term he has not been able to make a single new deal. He has trashed some agreements, but been unable to negotiate any new ones.

4. Even if Trump was to end his trade war now, there is no reason to believe that the countries that found other places to buy needed goods would return to the U.S. market. Why would they when Trump has shown he cannot be trusted to keep those markets stable.

5. Trump seems to think that a trade war is easily won because other countries need the United States. The truth is that the United States needs the markets and products of other countries as much as they need ours.

Trump's trade war was a very bad idea, and his bailout for farmers is equally bad. Neither will work. We live in an era where nations must respect the global marketplace -- even the United States. Trump's economic bullying might have worked 50 to 70 years ago, but not now.

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