25 Jul 2018 --- President Trump has pledged a US$12 billion emergency bailout package for US farmers hit by escalating trade disputes. Much of the aid will be directed towards payments to farmers of soybeans, sorghum and wheat. The US also plans to buy crops like fruit and nuts where they will be distributed to food charities and government-backed nutrition initiatives. Masses of farmers, a crucial voting block for President Trump to target, continue to feel the pinch of the ongoing trade disputes between the US and China, the European Union, Mexico and Canada.
As the US is embroiled in different trade battles with several key allies, it’s affecting several different industries across the food and drink supply chain – and there are no real negotiations on the horizon.
The US Department of Agriculture says the emergency aid measures will be designed to help those farmers affected by tariffs. The government says the US$12 billion package is in line with the estimated US$11 billion hit to farmers from the ongoing trade disputes.
Aside from the food purchase program and direct payments to farmers, another measure, there will also be a program in partnership with the private sector to help create new export markets for US goods.
Details on how farmers will be able to apply for the payment are still to be thrashed out, however, the US$12 billion emergency package does not need Congressional approval and the first assistance is expected to be distributed by the beginning of September.
“This is a short-term solution that will give President Trump and his administration time to work on long-term trade deals that benefit agriculture and all sectors of the economy,” says US Agriculture Secretary Sonny Perdue.
Trade disputes hurt farmers
A large proportion of the US agricultural industry, approximately 20 percent, draws income from exports and the ongoing trade disputes are hurting demand for some products and causing instability in markets.
This all began in March when the US, which imported around US$46 billion of the metals, announced tariffs on foreign steel and aluminum, kicking off the so-called trade war with China.
China quickly retaliated by raising duties worth around US$3 billion on a raft of US products. The country has suspended tariff concessions, some reaching up to 25 percent, on a wide range of US food products, including frozen pork, almonds, pistachios, wine, soybeans and fresh & dried fruit.
China seriously upped the severity of its sanctions against the US when it targeted US soybeans for a 25 percent retaliatory tariffs, after initially not including the commodity on its list of items impacted. As the trade war between the two countries intensified, China added soybeans to a long list of food products that are subject to tariffs.
Prices for soybeans have already fallen by more than 15 percent since April.
In June, the European Union imposed tariffs on a range of US consumer goods in response to steel and aluminum tariffs from the White House. Referred to as “rebalancing measures,” the EU has adopted a regulation that puts in place the tariffs targeting a list of products worth €2.8 billion (US$3.2 billion). There are charges on a range of products including bourbon, cranberries and peanut butter.
The move shows how the trade war is escalating as European Trade Commissioner Cecilia Malmström says President Trump’s tariffs left the Union with no alternative option.
The Trump Administration now has a second proposed list of tariffs of more than US$200 billion which is still awaiting public comment, expected to be completed at the end of this month.
President Trump described his tariffs as “the greatest” in a tweet earlier this week.
“Most farmers in Trump country don’t think tariffs are 'the greatest.' Crops don’t grow overnight. Farmers and producers need time and long-term certainty to do their jobs, not constant chaos created by haphazard trade policy,” says a statement from Farmers for Free Trade Executive Director Brian Kuehl. “Despite what President Trump tweets, his harmful trade policies are hurting farmers and families across the country.”
Kuehl also urges the administration to take immediate action to stop the trade war and get back to opening new markets.
An in-depth special report examining the ongoing trade war and its impact on the food industry can be read here.
By Gaynor Selby
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