In a frantic effort to counter the effects of its trade wars, the Trump administration let it be known on July 24 that it planned to spend $12 billion on farmers hurt by foreign retaliation in response to Trump's tariffs. Agricultural products are often a prime target in trade wars, both for the headline value and because a small percentage drop in farm sales typically causes a much bigger percentage drop in farm prices. US soybean prices, for example, have been down 17 percent since China's 25 percent tit-for-tat tariff on US soybeans came into effect.
The central political question is whether the promised $12 billion package (with disbursements beginning around Labor Day in September) is large enough to keep farm states voting Republican in November. In fact, it's doubtful that the package is large, or timely, enough to repair the economic damage that farmers will feel in 2018 because of Trump's tariffs, actual and threatened. The loss of foreign markets for American farm products could be permanent even if tariffs are lifted.
Average prices farmers received in May 2018, compared with a year earlier, are down about 4 percent, while prices farmers paid for multiple inputs like farm equipment, seed, fertilizer, and pesticide are up about 3 percent. In other words, farmers took an income hit of about 7 percent, even before the full impact of trade wars. Not all of this income loss can be laid at the doorstep of trade wars, but that's where political blame will rest. The value of US crop and livestock production in 2017 was almost $300 billion, so a 7 percent hit by May 2018 amounted to a loss of around $21 billion, with more to come. On Trump's present course, farmers will lose much more than the $12 billion relief package by the time they vote in November. And the full relief package will not reach farm bank accounts until well into 2019.
Whether ideological commitment to Trump's style and agenda overcomes pocketbook pain will be a central question for farm states. The November vote promises an interesting experiment in political economy.