Tariff rescue: Trump gives Band-Aids to the farmers he hurt

1 hour ago 1

Opinion

December 10, 2025 — 12.03pm

This week Donald Trump announced an $18 billion bailout of US farmers, saying that it wouldn’t have been possible without the revenue from his tariffs. It seemed to escape him that the $US12 billion aid package wouldn’t have been necessary if not for his tariffs.

“The tariffs are taking in, you know, hundreds of billions of dollars, and we’re giving some up to farmers because they were mistreated by other countries, for maybe the right reasons, maybe wrong reasons,” he said, when announcing the package.

“This money would not be possible without the tariffs. Without it, we wouldn’t be able to help you,” he said, without a trace of any awareness of the reality that he is actually compensating them for some of financial hurt he and his beloved tariffs have inflicted on them.

It was Trump’s tariffs on everyone, but most notably China, that largely shut US farmers out of key markets.

Soybean farmers, in particular, who export about half of their production – about 60 per cent of which used to be sold to China before Trump’s first trade war in 2018 saw US exports largely displaced by Brazilian production – have seen their exports to that market plummet by 33 per cent compared with last year.

After Trump and Xi Jinping agreed a form of trade truce in late October, China did pledge to buy 12 million tonnes of soybeans this year and 25 million tonnes a year for the next three years but, so far – within sight of the end of the year – it has bought less than 3 million tonnes.

With a record harvest, but prices about half what they were before the 2018 trade hostilities, soybeans are piling up in US storage facilities.

US crop receipts are their lowest since 2007 and farm bankruptcies have leapt by 20 per cent this year.

Agricultural economists have estimated that US farmers will lose $44 billion this year, so the one-off “bridge” payments (which is how the administration refers to them) are a Band-Aid for the farmers’ woes, not a solution.

This is not the first time Trump has had to pay farmers compensation for his tariff. During the trade war in his first term, he handed out $US23 billion of aid. The farmers would, you’d assume, prefer to be able to trade freely rather than rely on government charity.

Trump and his officials have described the payments as a “bridge” to tide the farmers over until China delivers on its promises, even though the experience of the 2020 “phase one” trade deal, in which China made similar promises that it didn’t meet, suggests there’s a possibility that it will be a bridge to nowhere.

It’s consistent, however, with the administration’s broader assertions that Americans only have to wait – initially it was supposed to be this year, now it’s next year and beyond – for the benefits of the tariffs to flow.

The administration has previously rolled back tariffs on coffee, bananas, tomatoes and other foods that the US doesn’t produce in significant quantities in an attempt to blunt the impact of tariffs-induced spikes in prices and the cost of living for US households

Now it is subsidising its own agricultural production, while blaming the Biden administration and other countries for the losses of markets and the affordability crisis for middle and lower income household in the US that its own policies have created. Trump doesn’t seem to be able to connect the dots between the cause and the effect.

The hardship being experienced by US farmers isn’t only due to the closure of the Chinese market to their products after the April 2 “Liberation Day” tariffs. It’s not just a revenue problem.

Their input costs have risen sharply because fertiliser prices and farm machinery prices, among other items, have also jumped because of Trump’s tariffs.

The administration lowered the tariffs on some fertilisers last month in an implicit recognition of their impact, although Trump this week threatened “very severe” tariffs on Canadian potash in order to boost domestic production of fertilisers. About 95 per cent of Canada’s potash is exported, with about 50 per cent of those export volumes directed to the US. A tariff on potash would flow through to another hike in farm costs.

Farm machinery prices have risen because Trump slapped 50 per cent tariffs on steel and aluminium and tariffs on other imported items used in their manufacture. About a quarter of the components in a John Deere tractor are imported.

Trump, predictably, blames Joe Biden’s environmental rules for the rising cost of farm machinery and has said he will wind them back.

“You buy it, it’s got so much equipment on it for the environmental, it doesn’t do anything except it makes the equipment much more expensive and much more complicated to work,” he said on Tuesday.

John Deere has said that Trump’s tariffs, particularly those on steel and aluminium, will cost it $US600 million this year. It has laid off about 240 workers this year in response.

The other challenge for US farmers is labour. Trump’s aggressive crackdown on undocumented immigrants has produced a shortage of labour and forced up labour costs. More than 40 per cent of US crop workers lack legal status.

So, the tariffs have closed markets and reduced farm income while the tariffs and immigration policies have driven up costs. The bailout might help some farmers limp on into next year, but they aren’t a long-term response to the bind the farmers find themselves in.

The lost markets, higher fertiliser and machinery costs and shrunken pool of labour are structural changes to the economics of American farms that can’t easily, or readily, be unwound.

Even if China does buy more soybeans and other agricultural commodities, it will buy much less than it did before Trump decided tariffs had magical qualities, able to fix the US trade deficit, rebuild the US manufacturing base, reduce US deficits and debt, fund $2000 “dividends” to households and even enable the abolishment of US income taxes. Oh, and bail out farmers.

China helped build the infrastructure in Brazil than has enabled it to displace the US as its major supplier of soybeans. It has also begun buying the beans from Argentina, much to the chagrin of the US farmers, who saw their administration give that country a $US20 billion bailout package that helped it sell up to $US7 billion of soybeans to China.

Having been burned twice by Trump’s tariffs, China will maintain the diversity of supply it has helped create. Its market, and those of other countries hit by the tariffs, will never be as open to US producers as they once were.

That has longer-term implications for the size and structure of the already heavily subsidised US agricultural sector, none of them pleasant.

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