This morning we read two articles critical of Trump’s 12 Billion dollar farmer aid proposal, a response or sop to farmers as a result of the threatened response by other countries to impose or increase tariffs on American agricultural goods due to Trump’s trade posture.
For the record we do not think farmers need any more subsidies and while we don’t pretend reliable prognostication on futures markets and the like, we think it just as likely that ag profits, which also reflect the ability of other producers to produce and meet demand, will see positive countervailing effects to diminish the impact. After all, with such retaliatory measures those countries will now have to shop for their needs in a market of artificially restricted supply (by price).
It is inescapable that they just increased the average cost of the commodity because they just allowed American competitors to raise their prices. The result will be that they will likely be paying more for their foodstuffs to spite Trump. While our farmers and or grain merchants may be willing to offload at a lower price to buyers who are reselling to the tariff-hiking countries, that is pretty much how markets can work anyway. The price Americans will be able to get will stabilize unless other countries can grow more land overall.
Yes consumers are impacted because of these tariffs, on both sides, which is the lesson that our trading partners did not have to abide by under one-sided trade deals. Economic suffering can be traced to what our trading partners were imposing on us that is if employment and patriation of money, trade deficits count for anything. But by all means lower the barriers when appropriate.
My guess is that ~~soybean~~ futures markets are fungible (lets hope not fungous). Farmer income will not be impacted to the sky is falling degree claimed by the most self-interested or doctrinaire critics nor just plain obtuse as regards the big picture.
But Trump’s $12 billion proposal is not merely a political sop here, it sends the strong message to our “trading partners” as to what their penny antes are up against, that Trump means business, that they have more to lose and their hope that their tariff response putting political pressure on Trump will do the trick can be dealt with. We can ride them out. Their tit isn’t as big as our tat . . . and they have been abusing us for too long.
Critic David Harsanyi writing at The Federalist offers that:
No, Mr. President, Tariffs Are Not ‘The Greatest’
Bailouts for industry and new taxes on consumers is not a winning strategy (excerpt)
Trade wars have many victims, and few suffer more than those with lower incomes, who generally benefit the most from the low-cost consumer goods that free trade affords them. Tariffs are a regressive tax in a number of ways. But consumers, you’ll notice, are rarely mentioned by the protectionist. Nor are the thousands of companies that rely on affordable materials to produce their products. That’s because, in politics, middle-class shoppers and washing-machine manufacturers are a lot harder to romanticize than the steel worker.
In many ways, Trump’s trade rhetoric resembles the binary economic arguments of the progressive Left: soothing to the ears, a catastrophe in the real world. Framing trading partners as “foes,” for example, is misleading. That’s not because trade isn’t often a competition, but because it’s almost always mutually beneficial. Decry globalism all you like, the world’s economies are intertwined in ways that make trade wars mutually destructive.
First of all globalism as practiced should be decried for a host of national, cultural and economic reasons, as it does lead to one world government. But Harsanyi does not get at the crux of the issue – that the trade war has been ongoing with vital American industries taking a beating or being marginalized on the world stage, and utterly failing to take into account forgone income under the current regime which is derivatively lost to all Americans. Further that “the low-cost consumer goods that free trade affords them” is what fairer trade will afford better than what we have now which is not free trade. And apparently those countries imposing retaliatory tariffs on American ag goods want to pay more for soybeans and other foodstuffs by inflating the prices on them.
Authors writing at The Daily Signal, the estimable Heritage Foundation publication, get in on the decrying act
Trump Could Give Aid Money to Farmers Hurt by Tariffs. Here Are 5 Reasons That’s a Bad Idea.
Bakst and Whiting, while objecting to subsidies and costs from Trump’s policies would have made a contribution if they had at least summarized a solution to the lost income to Americans due to foreign barriers to trade that Trump’s policies are meant to alleviate. Without better deals we will continue to experience that forgone income and wealth. What other industries do they want to submit to foreign hegemony besides steel and aluminum? Trump is not after tariffs for tariffs’ sake. How do Bakst and Whiting propose achieving a natural equilibrium, asking the Chinese and others nicely? Negotiate nicely? Well this is negotiation.
Trump is a nationalist and I have sympathy given the ilk in Europe and despots in Asia we net subsidize with the way things are now.
R Mall
