Farm Land

Having lost large profits, many farms had to seek help from government subsidies.

The U.S.-China trade war, initiated by former President Donald Trump, promised farmers long-term benefits through better trade terms but had dire short-term costs. Trump enjoyed consistently strong support from farmers in office after putting rural America front and center during his campaign, but many economists believe his trade war with China backfired.

Chinese purchases of U.S. agricultural goods remain below the $36.5 billion promised in the Phase 1 trade deal announced in late 2019. The U.S.’s trade deficit with China narrowed, but its overall deficit widened. Long before the pandemic, U.S. agricultural exports to China fell 63% to $5.9 billion in 2018 from $15.8 billion in 2017, according to Econofact, which also noted that farm debt levels hit record highs in 2019 as farm bankruptcies rose to the highest level since 2011.

As the U.S. hit China with tariffs — taxes that make imported goods more expensive — China predictably retaliated with harsh counter-tariffs on U.S. farm goods, and the government was forced to prop up an industry that saw billions in lost production in recent years. The tariffs have since scaled back, but the damage has been done.

Trump’s administration compensated for the loss of agricultural exports with government subsidies, which hit an all-time high of $51.2 billion ahead of the 2020 presidential election, according to Reuters. Payments to farmers rose every year under Trump and heavily targeted Midwestern states, which are perennial political battlegrounds. Meanwhile, farmers in California led the nation with $6 billion in agricultural losses but received just $106 million in payments — far less than the $2 billion in taxes Californians paid to the program, nonprofit research site The Conversation noted.

Government subsidies made up more than a third of farmers’ income last year, according to Reuters, up 21% of farmer income four years ago.

“Some of the farmers were making more money the way I was doing it than working their asses off, all right?” Trump said during a rally in Iowa on Oct. 14, 2020. “They were very, very happy.”

John Allen, who runs Fresh Branch Farm in Chesterfield, Virginia, with his wife, Chris, isn’t one of those farmers. He said the trade conflict didn’t significantly impact his 57-acre farm or its input costs, though he’s not a fan of government subsidies for farmers.

“I’m fiscally probably fairly on the libertarian side of things, so I don’t think there should be government subsidies for a failing business,” John said. “Essentially, [that’s] what it’s coming down to. Now if the business failure was due to political action, OK, maybe that needs to be looked at, but I don’t really support the political funding to try to boost agricultural commodity production.”

Many economists despise tariffs, which are believed to have drawn out the Great Depression in the 1930s, because they create inefficiency, lower competition and hurt both producers and consumers in the affected countries. Consumers in the U.S. and China were forced to pay higher prices for farm goods from the other country, and farmers in both countries saw less revenue as a result.

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Better long-term trade terms with China was the best-case scenario from the trade war, but business-as-usual was probably the best alternative. Not only was the trade war costly for consumers, producers and the government with no clear victory, but it inadvertently strengthened U.S. farmers’ rivals. 

China dramatically decreased its reliance on U.S. farm goods after imposing 25% tariffs, but it didn’t stop importing agricultural products. Instead, China turned to Brazilian farmers, who are enjoying record revenue and profits because their goods were far cheaper without the harsh trade restrictions their U.S. counterparts faced.

But while some farmers soured on Trump, most maintained their strong support, as the former president’s approval rating held steady between 82% and 85%, according to polls from the Farm Journal last August and September. About 56% of farmers said they supported Trump’s tariffs on Chinese goods, according to a poll from The Conversation, even though retaliation tariffs crippled their sales, likely believing that the short-term pain would pay off.

Large farms, which produce a majority of food for both the U.S. and its trade partners, were disproportionately affected by the trade war and therefore enjoyed a lion’s share of the government subsidies from it. Some farmers came out wounded amid the political crossfire, but others emerged stronger after receiving government checks.

“It’s artificially inflating these larger farms, to me,” John said. “They wouldn’t be able to afford the capital to expand or the loan to expand if they didn’t have this guaranteed income. Again, I don’t think it’s the government’s place to do that, and I think it will probably hurt some big farms in the long run if those programs go away. If a farm receives a guaranteed payment, there’s probably some trade-off there.”

Smaller farmers, including those trying to get off the ground, have been underserved by government programs and direct payments, John said. Combine that with the outsized advantage in money, resources, land and equipment that large farms enjoy, and small-time farmers are left wondering how they can compete as the industry consolidates.

“Large farm operations, they get a guaranteed check; it’s just a tough one to swallow,” John said. “Even if it has the best of intentions, it’s certainly not delivered equally across the farming community. I think that’s where it misses its mark.”

James Faris is a senior media arts and design major. Contact James at farisja@dukes.jmu.edu.