Trump’s $28 Billion Bet That Rural America Will Stick With Him

(Bloomberg Businessweek) -- U.S. Secretary of Agriculture Sonny Perdue was fielding questions at a farm show in Decatur, Ill., in late August when his boss rang his cellphone. Perdue put the call on speaker and placed it next to the microphone so the crowd could hear Donald Trump speak. During the almost seven-minute call the president defended his handling of the trade conflict with China, which has cut off American farmers from one of their most important export markets. Yet he was quick to remind them that he’s tried to salve their pain. “I sometimes see where these horrible dishonest reporters will say that ‘oh jeez, the farmers are upset.’ Well, they can’t be too upset, because I gave them $12 billion and I gave them $16 billion this year,” said Trump, who then added, “I hope you like me even better than you did in ’16.”

A couple of years ago, a pep talk from Trump might have drawn raucous applause from one of the president’s key constituencies. This time the crowd was subdued. “The aid package that has come in is a relief, and it softens the landing, but it’s not a solution, it’s a Band-Aid,” says Stan Born, a farmer who attended the event. When asked if the payments make him whole, Born, who grows 500 acres of soybeans near Decatur, responds, “Of course not.” He’d rather have free trade, he says.

China hawks in Trump’s administration want Beijing to quit subsidizing strategic industries, yet that hasn’t deterred the White House from doling out billions in aid to American farmers, who have become more dependent on government money than they’ve been in years. At $28 billion so far, the farm rescue is more than twice as expensive as the 2009 bailout of Detroit’s Big Three automakers, which cost taxpayers $12 billion. And farmers expect the money to keep flowing: In an August survey by Purdue University and the CME Group, 58% said they anticipate another round of trade aid next year.

Farmers became collateral damage in Trump’s tit-for-tat tariff war with China, which is being waged primarily for the benefit of such sectors as manufacturing and tech. Agriculture is actually one of the rare U.S. industries that consistently runs a trade surplus, and not just with China—testimony to the gains that have accrued to American farmers from globalization.

Efforts to cultivate China’s appetite for American soybeans stretch back almost four decades. China’s purchases exceeded $12 billion in 2017, according to U.S. Department of Agriculture statistics. But they’ve pretty much dried up since the end of 2018, when China made goodwill buys as the two countries appeared to be close to a détente. Trump slapped additional tariffs on about $110 billion in Chinese imports on Sept. 1, including footwear and apparel. China responded with tariffs on American-raised pork, beef, chicken, and other agricultural goods. Since then, the two sides have warmed. On Sept. 13, China’s state media reported that the country would exempt some American soybeans, pork, and other agricultural products from more tariffs.

For American producers, the hit to exports has further strained finances that are at a breaking point because of a six-year slump in prices for agricultural commodities. Net farm income is projected to be down 29% this year from 2013 levels, and debt to total $416 billion.

The weather hasn’t cooperated: Record floods this spring prevented farmers from planting about 11.4 million acres of corn and 4.5 million acres of soybeans, according to government estimates. Producers have also expressed dismay that Trump has failed to live up to his campaign pledge to uphold national consumption mandates for renewable fuels. Instead his administration has granted small refineries waivers on quotas for corn-based ethanol and soybean-based biodiesel. Farmers argue the exemptions reduce demand for those crops.

Farmers will receive $19.5 billion in direct government aid this calendar year, the most since 2005, according to the latest USDA projections. That doesn’t include an extra $10.5 billion forecast this year in federally subsidized crop insurance payments, the main vehicle for the regular farm subsidy program.

Bret Davis, a fifth-generation farmer from Delaware, Ohio, who grows soybeans, corn, and wheat, says the subsidies “will keep us going.” But things are still tight. “I had that conversation with a banker, and he says, ‘Well, I see you didn’t pay down your loan very much this year,’ ” says Davis. “I said, ‘No, I paid off a lot of equipment that I had.’  He was understanding about that. But still the first question he asked was, ‘What’s going on here?’ ”

The bailout funds won’t cover all of farmers’ losses. Producers in Iowa received $973 million in direct payments from the first round of trade aid covering a period in which Iowa State University estimated the trade war cost them $1.7 billion.

Even so, there’s been no break in Trump’s support in rural areas, where his poll numbers are consistently about 12 percentage points higher than they are nationally. In August, 52% of rural residents approved of Trump’s job performance, vs. 40% of Americans overall, according to Gallup polling including 1,258 self-identified rural respondents. Support among farmers is even higher: 67% back Trump, up from 60% a year ago, according to a Farm Futures survey taken from July 21 to Aug. 3.

Any waning of rural America’s enthusiasm for Trump could doom the reelection of a president who eked out his 2016 victory with a combined margin of fewer than 80,000 votes in three traditionally Democratic-leaning states, particularly after the 2018 midterms showed weakening support for Republicans in suburban areas. In Iowa, Democrats last year wrested two of the state’s four house seats from the GOP, leaving northwestern Iowa’s Steve King the state’s lone remaining Republican congressman.

In the northwestern corner of Iowa known as God’s Country for its concentration of Dutch Christian Reformed and Roman Catholic church members, at least one farmer is unsure about who’ll get his vote in 2020. Brian Kemp, who grows soybeans and corn on 1,500 acres that have been in his family for 120 years, supported the president in the last election—like just about everybody in Iowa’s 4th Congressional District, where Trump trounced Hillary Clinton to the tune of 60% to 33%. “I guess I’m kind of waiting to see how the trade issue gets resolved or if it gets resolved,” says Kemp. “Something needed to be done, it’s just unfortunate it hit agriculture so hard, particularly soybeans.” —With Michael Hirtzer
 
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To contact the editor responsible for this story: Cristina Lindblad at mlindblad1@bloomberg.net

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