To be clear, the U.S. is going to subsidize an industry already subsidized by tax payers to protect it from a self-inflicted trade war? What's the public cost threshold before for government-controlled agriculture?
The explanation the administration will undoubtedly give is that the increased revenue for tariffs will justify $12 billion (predicted) in emergency farming aid. The problem is that most countries will only use a retaliatory tariff if they have a "close substitute."
Also, honest question, does this count as a federal bailout? One in the middle of the longest economic run of the modern era?
Here's the obvious problem with treating this as an emergency bailout, which theoretically is designed as short-term. China tariffed U.S. soybeans. Chinese consumers likely won't want to pay that self-imposed tax, so they'll look to get soybeans from elsewhere. Brazil.
So the question will be when this trade war subsidies (assuming it will), will Chinese consumers suddenly reverse course and drop Brazil as their supplier to return to the U.S.? If not, this $12B emergency bailout will have to be long-term as U.S. farmers rush to plant other food
Unfortunately, U.S. farmers can't just run out and undercut Brazil pricing as soybeans are essentially a commodity dictated by a whole host of factors. And even if they could, would they want to? Could they afford to?
This trade war theoretically could change the way farmers farm for, well, ever. Farm subsidies will be nearly $30B this year with this emergency bailout. That's an astonishing figure.
And here's how Michigan farmers were being impacted back in April.
crainsdetroit.com/article/201804…
crainsdetroit.com/article/201804…
INBOX: Statement from @MichAgBiz: “We are eager to hear the president’s plan to help Michigan farmers who have been negatively impacted by retaliatory tariffs. However, we believe farmers prefer to get their income from the market, not through federal aid."
