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Trump’s tariffs seen delivering a repeat blow to US farm exports

House farm bill would prohibit use of CCC to soften retaliation blow to farmers

President-elect Donald Trump's proposed tariffs are expected to bring similar retaliation from China that dealt a heavy blow to exports in 2018 and 2019.
President-elect Donald Trump's proposed tariffs are expected to bring similar retaliation from China that dealt a heavy blow to exports in 2018 and 2019. (Bill Clark/CQ Roll Call)

President-elect Donald Trump’s pledge to levy hefty tariffs on imports is expected to result in retaliation that hits farmers hard, repeating events of his first term, when Washington spent tens of billions of dollars to ease the pain on the agriculture sector. 

Trump has proposed a blanket 10 percent to 20 percent tariff on all goods imports, a 60 percent or higher tariff on goods from China, and up to 100 percent on goods from Mexico. His tariff proposals come even as House Republicans seek to prohibit the mechanism Trump used to aid farmers in 2018 and 2019.

“Why would a country not retaliate?” asked Brian Kuehl, executive director of Farmers for Free Trade, a nonprofit organization that advocates free trade. “Everybody’s going to look out for their interest, and if you start hitting them with tariffs, they’ll start hitting you back. That’s what a trade war is.”

A trade war in the second Trump administration could again bring a steep drop in U.S. corn and soybean exports to China. The National Corn Growers Association and the American Soybean Association said in an October study that soybean exports could fall nearly 52 percent and corn exports about 84 percent if China responds in kind. The forecasts are against expectations for exports. 

China retaliated with high tariffs in Trump’s first term, but, after signing a new trade pact, granted waivers to U.S. producers. Beijing could lift those waivers at any time.

Soybeans and soy products could see tariffs of 30 percent to 35 percent, up from 3 percent to 9 percent now. Corn exports below a 7.2 million-ton quota could see a 1 percent tariff rise to 26 percent. Corn exports above that quota could see tariffs rise from 65 percent to 90 percent, the study said.

The two groups warned that a shift away from soybean and corn exports could have long-term consequences on the global supply structure and allow competing countries to step up. 

“If we lose soybean and corn exports for a year or two years, what that means is Brazil and Argentina are going to put more acres under the plow,” Kuehl said. “China will buy its soybeans from Brazil and Argentina, since it feels like it can depend on those countries more. So there’s long-term impacts.”

Trump and lawmakers could also face a choice between watching U.S. farmers take the hit or using fiscal policy to soften the blow. Washington spent almost $30 billion to do so last time.

The Trump administration in 2018 imposed tariffs on China and other major trade partners — using Section 301 of a 1974 trade law and Section 232 of a 1962 law — on a range of imports, including steel and aluminum. Not only China, but also Canada, the European Union, India, Mexico and Turkey retaliated.

The Agriculture Department estimated that the retaliation delivered more than a $27 billion loss in U.S. agricultural exports, or $13.2 billion annualized, from mid-2018 to the end of 2019. China accounted for about 95 percent of the loss, it said.

Soybeans took the biggest hit — $9.4 billion annualized — and in the absence of U.S. supply Brazil gained about $4 billion in agricultural export to China in 2018. The losses were felt primarily in Midwestern states like Iowa, Illinois and Kansas. 

China had an alternative source in Brazil, said Jeffrey J. Schott, a senior fellow at the Peterson Institute for International Economics.

“Like most countries, when you feel you have to retaliate, you look at what is going to impose the most pain to your trading partner and impose the least pain to your own economy,” Schott said. China “wanted to target political constituencies that support President Trump, and might be able to tell him to, you know, ease off.”

Trump and Chinese Vice Premier Liu He signed a so-called Phase One agreement in January 2020 in which China agreed to buy an average of $80 billion in agricultural and food goods in 2020 and 2021. In effect, China kept the tariffs in place but used the waivers to lower them. 

But the USDA said the U.S. share of China’s market remained below pre-retaliation levels a year after the deal. 

‘Slush fund’

Trump’s first stab at tariffs had a fiscal cost of $12 billion in federal farm aid in 2018 and $16 billion in 2019, funded using Section 5 authority of the Commodity Credit Corporation, according to the Congressional Research Service. 

“In the past, there really had never been any sort of use of the CCC like this,” said Stuart Anderson, the executive director at the National Foundation for American Policy. 

The CCC, overseen by the secretary of Agriculture, is a tool to provide income and commodity support for natural resources conservation, export promotion, international food aid, disaster assistance, agricultural research, bioenergy development and other purposes.

“What I think is significant here is that there was something unique about the CCC that allowed it to operate, essentially, almost like a slush fund, which the executive branch was able to help alleviate the pain of the trade policies for farmers because of the way the CCC worked,” Anderson said.

House Republicans are potentially working to remove the use of the CCC for the purpose by suspending Section 5 authority in their five-year farm bill. House Agriculture Chairman Glenn “GT” Thompson, R-Pa., said he wants to enact the bill in the lame-duck session, but it isn’t yet clear he’ll be able to. 

The current farm bill expired on Sept. 30, but funding for most programs will be available until Dec. 31.

A committee aide confirmed that the provision would prohibit the incoming Trump administration from using the CCC to buffer farmers from retaliatory tariffs. 

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