U.S. handing farmers $16B in tariff relief

Program aims to ease harm from trade war with China

President Donald Trump answers questions Thursday at the White House after a news conference on a $16 billion bailout plan for U.S. farmers facing losses related to China’s tariffs. The Trump administration handed out $12 billion in emergency relief for farmers last year.
President Donald Trump answers questions Thursday at the White House after a news conference on a $16 billion bailout plan for U.S. farmers facing losses related to China’s tariffs. The Trump administration handed out $12 billion in emergency relief for farmers last year.

WASHINGTON -- President Donald Trump's administration on Thursday unveiled a new $16 billion bailout for farmers hurt by China's tariffs.

The amount "is in line with the estimated impacts of unjustified retaliatory tariffs on U.S. agricultural goods and other trade disruptions," the Agriculture Department said in a statement.

The new program will make $14.5 billion in direct payments to producers, channeled through the Commodity Credit Corp., a program that helps shore up American farmers by buying their crops. The payments will be made to agricultural producers for a wide range of products, from soybeans and cotton to chickpeas and cherries, in up to three tranches, beginning in late July or early August.

The government will also implement a $1.4 billion program to purchase surplus commodities affected by the trade war and distribute them to food banks, schools and other programs for the poor, as well as put another $100 million toward developing new export markets for American farmers.

The financial support comes after the administration handed out $12 billion in emergency relief for farmers last year, also funded through the Commodity Credit Corp.

"China hasn't played by the rules for a long time and President Trump is standing up to them, sending the clear message that the United States will no longer tolerate their unfair trade practices, which include non-tariff trade barriers and the theft of intellectual property," Sonny Perdue, the agriculture secretary, said in a statement.

Global markets tumbled as investors began coming to terms with the idea that Trump's trade war is here to stay. Benchmark indexes in China, Germany, France and the United States all dropped.

The Dow Jones industrial average plunged 448 points at its low before clawing back late in the day to finish at a loss of 286 points, or 1.1%, driving it into negative territory for the week. If the Dow were to finish in the red for the week, it would be the fifth week in a row and the first such slump in eight years.

"Investors are re-evaluating the economy, not just the U.S. but the global economy, with respect to new possibilities of restrictive trade and tariffs," said Howard Silverblatt of S&P Dow Jones Indices. "We are starting to see companies react to the possibility of higher tariffs and higher prices over the long term."

Hopes for a quick resolution to the China trade fight faded further this week, with Treasury Secretary Steve Mnuchin saying Wednesday that no additional meetings with Beijing are scheduled and that he is encouraging American companies to reorient their supply chains and source their products elsewhere.

President Xi Jinping of China this week called for the Chinese people to begin a modern "long march," invoking a time of hardship from the country's history as it braces for a protracted trade war with the United States.

"The tone of rhetoric that political leaders in both countries have adopted also suggests that it will take time to restore the U.S.-China relationship to where it was prior to the breakdown in talks, let alone to reach the point where a detailed agreement can be finalized," Goldman Sachs economists wrote in a research note on Wednesday.

"I am growing more and more skeptical that there is a place where the two sides can come to a deal," said Edward Alden, a fellow at the Council on Foreign Relations. "If I look at the positions the two sides have taken at the moment, I do not see a path to a deal."

More companies have been pulling back from doing business with Chinese firms, especially multinationals that provided services to Huawei, the telecommunications equipment giant. The Trump administration announced last week that it would blacklist Huawei over security concerns, prompting Google and mobile carriers to say they would no longer do business with it.

The Huawei ban, coupled with Trump's decision to raise tariffs on $200 billion worth of goods and begin the process to tax another $300 billion have exacerbated tensions with China.

It has vowed to further retaliate on American products, particularly agricultural goods.

In a note Wednesday, analysts from Nomura Global Markets Research said their baseline scenario was that Trump would put a 25% tariff on all Chinese exports to the United States by the end of 2019, most likely after he is scheduled to meet with Xi at the G-20 in late June.

More restrictions on dealing with Chinese tech companies could come soon. The New York Times reported Tuesday that the Trump administration is considering another ban on U.S. companies supplying components to Hikvision, a Chinese surveillance camera maker that has been criticized for playing a role in the Chinese government's monitoring and repression of Uighurs, a mostly Muslim ethnic minority.

The Commerce Department said Monday that it would allow Huawei to continue doing business with U.S. companies for 90 days to prevent disruption to mobile networks that use the company's equipment. But many companies are quickly announcing plans to exit their relationships with Huawei. In addition to Google, which announced that it would cut off support to Huawei for Android hardware and software services, as well as popular applications like Maps and Gmail, German supplier Infeon announced a similar ban. The benchmark index of U.S. semiconductor stocks fell more than 2% in early trading, as investors continued to grapple with Trump administration efforts to restrict sales to Huawei.

The Trump administration has been fighting several trade wars at once, wielding tariffs against metals from Europe, Japan, Canada and Mexico as well as goods from China. In response, trading partners have hit back at American farmers, imposing punishing tariffs on everything from peanut butter to soybeans to orange juice.

The American Soybean Association said the aid announced Thursday is necessary, but that farmers hope trade talks will continue.

"We just don't want the administration to use this as a reason not to be aggressive in talks," said Bill Gordon, vice president of the American Soybean Association.

Gordon farms about 2,000 acres with his dad near Worthington, Minn. He said he didn't change his planting plans this year because of the trade dispute.

Gordon said he'll want to see how the Agriculture Department plans to distribute the aid among farmers, but he appreciates having it even if the details aren't perfect.

"This helps and is needed in rural America right now," Gordon said.

Illinois Corn Growers Association President Ted Mottaz, a farmer from Elmwood, Ill., said a delay in the release of payment information from the Agriculture Department will simplify things for farmers who are still making final decisions about what to plant.

The wet spring and flooding on the rivers feeding the Mississippi River and in other areas has delayed planting in places, including Arkansas.

Mottaz said, "As we move toward turning the calendar from May to June, the decisions about what to plant and when are complicated enough. Adding a specific monetary figure in a trade-aid payment to the mix is a variable that likely would cause significant market implications. We have enough of that as it is."

Information for this article was contributed by Ana Swanson and Glenn Thrush of The New York Times; by Thomas Heath of The Washington Post; and by The Associated Press.

photo

AP/NATI HARNIK

A farmer plants soybeans Thursday in a field in Springfield, Neb. Farmers have been hit by punishing tariffs on everything from peanut butter to soybeans to orange juice.

A Section on 05/24/2019

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