US Offers Farmers Up to $9.4 Billion to Ease Brunt of Retaliatory Tariffs

August 27, 2018 Updated: August 27, 2018

The United States will pay farmers as much as $9.4 billion to offset the estimated losses from retaliatory tariffs by foreign nations, Secretary of Agriculture Sonny Perdue announced on Aug. 27.

President Donald Trump had ordered Perdue to study a short-term strategy to protect U.S. farmers while the White House negotiated better trade deals. In response, the Department of Agriculture (USDA) announced a $12 billion package in July that will pay cash subsidies to the farmers of crops and livestock directly impacted by tariffs, purchase surplus food for distribution to food-assistance programs, and help farmers market their goods to new customers.

A secondary dimension to the subsidy package is the need to signal to America’s trade partners that the Trump administration is serious about securing better trade deals and is willing to shoulder the temporary damage from retaliatory tariffs, senior administration officials say.

That strategy appeared to bear fruit on the same day as Perdue’s announcement, with Trump revealing that the United States and Mexico have reached a major preliminary trade deal that is set to replace the North American Free Trade Agreement, also known as NAFTA.

“After careful analysis by our team at USDA, we have formulated our strategy to mitigate the trade damages sustained by our farmers. Our farmers work hard and are the most productive in the world, and we aim to protect them,” Perdue said.

The bulk of the $12 billion package will be distributed as cash to farmers and producers of goods directly hit by foreign tariffs, including cotton, corn, dairy, pork, soybeans, sorghum, and wheat. Half of the $9.4 billion that is dedicated to the direct payments program will be distributed starting Sept. 4, according to a USDA press release. The other half will be distributed if the USDA determines that a second round of payments is warranted.

More than 77 percent of the cash will go to soybean farmers, who have been hit by retaliatory tariffs imposed by China. Soybean farmers will be paid $1.65 per bushel for up to $3.6 billion during the first round of payments. Beijing levied a 25 percent duty on soybeans as part of a $50 billion retaliatory tariff package on 106 American imports.

“President Trump has been standing up to China and other nations, 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,” Perdue said. “In short, the president has taken action to benefit all sectors of the American economy—including agriculture—in the long run.”

“It’s important to note all of this could go away tomorrow if China and the other nations simply correct their behavior,” Perdue added. “But in the meantime, the programs we are announcing today buy time for the president to strike long-lasting trade deals to benefit our entire economy.”

Trump struck a tentative long-lasting trade deal with Mexico shortly before the USDA announcement. The deal includes provisions that will benefit American and Mexican farmers, according to the White House. Trump said that Mexico “has promised to immediately start purchasing as much farm product as they can.”

“Our farmers are going to be so happy,” Trump said. “The farmers have stuck with me.”

The United States will spend an additional $1.2 billion purchasing surplus fruits, nuts, dairy, beef and pork for distribution to food programs, including the National School Lunch Program and The Emergency Food Assistance Program. The USDA is coordinating with private and public partners to sort out the logistics, including trucking, inspection, and staffing.

The USDA has also dedicated $200 million to a separate program dedicated to helping farmers market their products to new overseas destinations, though the agency provided no specifics.

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