A Dairy Tariff Relief Promise Not Kept
I was wrong. When the United States Department of Agriculture (USDA) announced it would provide dairy, livestock and grain farmers relief from its self-inflicted tariff trade war, I cynically said it was more about the coming mid-term elections than providing real relief.
The tariff relief package announced by USDA August 27 will do neither. For dairy farmers it means a 12¢/cwt payment on half of their Margin Protection Program production history, and another $84.9 million in dairy food purchases. That’s a total of $212 million out of the $12 billion promised to farmers.
The National Milk Producers Federation estimates the damage to be more like $1.10/cwt, totaling some $1.2 billion in losses for just this year. An Informa Economics study puts the damage $1.5 billion this year, and $3 billion in 2019.
In fairness to USDA, the agency said further payments could be coming if the tariff war drags on. And we’re only two months into the trade war—so damages have been limited thus far. We should get July export totals in a few days. (USDA also announced earlier in August it was spending an additional $50 million in dairy food purchases to bolster prices—though it made a point of saying these purchases were not part of the tariff relief package.)
But USDA Secretary Sonny Perdue also said that no further aid would come if the trade disputes are resolved. A resolution to the dispute with Mexico and Canada might be coming soon. But there is less hope that the fight with China will end anytime in the near future.
The Informa study, commissioned by the U.S. Dairy Export Council, suggests that even if there is a resolution with Mexico and Canada, Chinese dairy trade losses could amount to $876 million this year and about $2.2 billion in 2018.
What stunned me was USDA’s announcement of the paltry 12¢/cwt payment. It also caught Jim Mulhern, president and CEO of the National Milk Producers Federation, by surprise: “The dairy specific financial assistance package provided by USDA…represents less than 10 percent of American dairy farmers’ losses caused by the retaliatory tariffs imposed by both Mexico and Canada…. If farmer incomes continue to suffer as projected, we will lose more farms.”
Mulhern is right. Even if you account for the fact that this is a half-year payment, it comes nowhere near the losses farmers potentially face. And as a farm-aid package announced just 10 weeks before the mid-term elections, it seems politically imprudent, if not inept.
While farmer support of President Trump remains strong, it is eroding, according a recent Farm Journal poll. The tariff aid package gives dairy farmers little incentive to vote. That indifference alone could spell trouble for Republicans in swing districts. Why would the Trump Administration do this?