President Donald Trump is opposed to the government interfering in the market to pick winners and losers — at least when doing so doesn’t directly benefit voters crucial to his reelection prospects.
In recent months, Trump has made his opposition to socialism — a system of government in which the government plays a leading role in distributing goods and services — a regular feature of his speeches.
During his most recent State of the Union address, Trump alluded to rhetoric by Democrats and said, “Here, in the United States, we are alarmed by new calls to adopt socialism in our country.” At a rally in Wisconsin last month, Trump vowed that America “will never be a socialist country.” He framed the crisis in Venezuela as a failure of socialism and suggested Democrats wanted to use the Mueller investigation to force him out of office and “institute Socialism.”
Life, however, comes at you fast — especially when you launch a trade war with a country that represents the second-largest export market for American agriculture.
During an Oval Office event with Hungary’s far-right leader Viktor Orbán on Monday, Trump outlined a plan to redistribute money from American importers to farmers hurt by his escalating trade war with China that might fall short of socialism, but is certainly a far cry from the values of free markets and free trade traditionally embraced by Republicans.
“Out of the billions of dollars that we’re taking in [from tariffs], a small portion of that will be going to our farmers,” Trump said. “We’re going to take the highest year — the biggest purchase that China has ever made with our farmers, which is about $15 billion — and do something reciprocal to our farmers.”
Because he doesn’t understand how tariffs actually work, Trump seems to believe this plan represents a redistribution from China to American farmers. But China does not in fact pay for the 25 percent on $200 billion of Chinese goods in tariffs Trump reimposed on Chinese goods after months of negotiations failed to bring the two countries into agreement. Those tariffs are paid by American importers, who often pass the cost along to consumers.
So Trump’s plan, as vague as it is, seems to represent a selective protection from the costs of tariffs: All Americans — from those who pay for his tariffs in the checkout line to farmers hurt by the retaliatory tariffs China has placed on their goods — are being asked to absorb some short-term pain for the good of the country. But the federal government is subsidizing that cost for only a select group.
On Tuesday morning, Trump reiterated his plan on Twitter, and referred to farmers are “Our great Patriot Farmers” — a label acknowledging the hardship the trade war is causing.
Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now. Hopefully China will do us the honor of continuing to buy our great farm product, the best, but if not your Country will be making up the difference based on a very high China buy……
— Donald J. Trump (@realDonaldTrump) May 14, 2019
Trump’s tariffs subsidy plan — which comes on the heels of a $12 billion program that was available to farmers hurt by retaliatory tariffs last year — represents a sop to his base. More than 75 percent of voters in the Farm Belt voted for him in 2016, yet these same people are being hurt by a self-inflicted trade war as Trump turns his sights to 2020.
“The President of the United States owes farmers like myself some type of plan of action,” John Wesley Boyd Jr., a soybean farmer in Baskerville, Virginia, told CNN on Monday. “Farmers were his base. They helped elect this president … and now he’s turning his back on America’s farmers when we need him the most.”
Trump’s long-term goal is to force China to agree to a trade deal favorable to the US by inflicting pain upon its economy. But in the meantime, his trade war is causing pain to farmers and the financial markets. And if China follows through on its plan to increase tariffs on $60 billion of American products on June 1, consumers likely will feel the hurt too.
“Americans’ entire shopping cart will get more expensive,” Hun Quach, vice president of international trade at the Retail Industry Leaders Association, told the New York Times.
You don’t have to take Quach’s word for it — during a Fox News interview on Sunday, White House economic adviser Larry Kudlow admitted that “both sides will suffer” because of Trump’s trade war with China. Kudlow also acknowledged that Trump’s understanding of how tariffs work is flawed. But Axois’s Jonathan Swan, citing a former White House aide, reported on Tuesday that Trump’s false belief about tariffs is “like theology.”