Republican California Rep. John Duarte unveiled his plan to save American farmers from possible financial ruin due to long-standing Chinese tariffs in an exclusive interview Wednesday with the Daily Caller News Foundation.
China launched retaliatory tariffs against a slew of American agricultural products during a trade war escalation with the Trump administration in 2018, resulting in plummeting exports to the country and a glut of American inventory that has weighed on domestic commodity prices. Now Duarte — a fourth-generation farmer who represents one of the country’s most productive agricultural regions — is looking to reel American growers from the brink of bankruptcy through a roughly $6 billion subsidy program amid the continued knock-on effects from the Chinese economic blockade.
“[Following the retaliatory tariffs] farmers started building up large inventories of products that weren’t being shipped overseas,” Duarte explained to the DCNF. “Initially, this was met with the Trump administration’s initial market facilitation program, which allocated about $23 billion to farmers to offset some of the impacts of the retaliatory [agricultural] tariffs in the general trade war that took place.”
China launched tariffs on roughly $22.5 billion worth of agricultural products in July 2018 in retaliation for tariffs levied by former President Donald Trump on steel and aluminum in a bid to have China crack down on intellectual property theft. Trump then launched a “market facilitation program” that distributed $23 billion in 2018 and 2019 to counteract farmers’ losses.
“To some extent, [the market facilitation program] was great in the short term, but it caused the industry to fail to respond to market conditions for another year or two, so capacity stayed up,” Duarte continued. “Farmers kept producing, and inventories got larger and larger because the pain wasn’t felt of the initial trade impacts. Now, inventories are high and commodity prices are falling, forcing farmers to borrow against their property and operations at a time of elevated interest rates, which has brought agricultural debt to an all-time high.”
Net farm income is projected to fall nearly 40% from 2022 levels this year, with farm operating debt surging roughly 15% year-over-year in the first quarter of 2024, American Farm Bureau Federation economist Samantha Ayoub told Michigan Farm News in August. The reductions in the financial well-being of farmers come as global supply chains have adjusted to a decline in Ukrainian exports, causing many agricultural commodity prices to cool, with average nominal corn and soybean prices sitting at their second and fourth lowest levels since 2006 in February when adjusted for inflation, respectively.
Duarte has seen many of his own personal friends pushed to the brink of bankruptcy amid current stressors like low commodity prices, elevated interest rates and inflated fertilizer costs, including farmer and former California assemblyman Bill Berryhill.
“Bill Berryhill is a best-of-breed farmer. He’s innovated. He’s adopted technology. He’s mentored other farmers over generations to be more efficient, to learn the market, to make valid decisions. And even he and his family are in their last year,” Duarte told the DCNF. “I’ve sat with bankers and best-of-breed farmers all through my community. People who are not buying vacation homes or fancy airplanes. Farmers who invest in their operations, innovate, take time to talk and learn from each other. It has become structurally impossible with the current inflation and commodity pricing situation to sustain ourselves, and we’re hearing this in aggregate from the banks.”
However, Duarte believes he can stave off economic disaster for U.S. farmers, telling the DCNF he wants farmers to continue exporting goods to China at competitive prices, with the Commodity Credit Corporation (CCC) — a government-owned corporation that provides financing to support the U.S. agriculture sector — paying for up to a quarter of the tariff costs in order to make it financially feasible. He argues the move would allow farmers to offload their glut of inventory, thereby boosting commodity prices.
“What I believe is at hand for the [Biden-Harris] administration to do is put about $6 to $7 billion from the CCC towards a market facilitation retaliatory [agriculture] tariff supplement and basically backfill up to 25% of the value of the retaliatory tariffs that farmers are getting hit with out of China.”
The congressman also hopes the subsidy program will help prevent countries like Brazil and Australia from strengthening their agriculture industries and taking market share from the U.S. in the coming years.
“China is looking to replace American agricultural commodities where they have good alternatives,” Duarte told the DCNF. “We’re seeing other countries, namely Australia and Brazil, scale up their agricultural industries to fill the void [left by the decline in U.S. exports]. These capital investments are going to be fairly static, meaning we’ll have to compete against these countries in the future, so even when prices or retaliatory [agricultural] tariffs are relieved, we’ll still have the challenge of well-capitalized, established players to compete with who may not have been there had we not been disadvantaged by tariffs over the last seven or eight years.”
Brazil saw a nearly $4 billion increase in soybean subsidy exports to China in 2018 — the year the tariffs were levied, according to a January 2022 report from the U.S. Department of Agriculture. Meanwhile, U.S. cotton exports to China declined by $400 million, with the study finding competing exporters such as Brazil and Australia were filling the gap.
“There’s a lot of criticism of China ever being allowed into the World Trade Organization (WTO). We had this kind of glowy feeling that if we made them rich, they would demand freedom and achieve a more free society,” Duarte told the DCNF. “Things didn’t play out that way, so we spent five years fighting China in court and won the case. They were then directed to drop the retaliatory [agriculture] tariffs in the World Trade Organization courts and have not done that.”
The WTO ruled on Aug. 16, 2023, that China’s retaliatory tariffs were “inconsistent” with international trade rules, but the country has refused to walk back the policies. An analysis from the Economic Policy Institute found the U.S. trade deficit resulted in the loss of 3.7 million American jobs between 2001 — the year China joined the WTO — and 2018.
“China shouldn’t have been let into the WTO in the first place, and they’ve manipulated world trade, currencies and access to their markets in every way possible since,” Duarte told the DCNF. “Now American policymakers need to take the gloves off.”
Featured Image Credit: Fruitman cz
