By Charlie Schlenker
Donald Trump promised increased tariffs on the campaign trail. As president-elect he's doubled own on the pledge, targeting Canada, Mexico, and once again China. Illinois agriculture organizations still hope he doesn't mean it.
Trump's first term was pretty good for farmers on tax policy, not so much on trade policy. Tariffs imposed on China prompted a backlash that cost global market share for farmers like Ryan Frieders of Waterman, Illinois.
“It was pretty detrimental to the soybean market as a U.S. farmer,” said Frieders, who sits on the government relations committee for the Bloomington-based Illinois Soybean Association.
Farm groups understand there are players and practices in the global market that need to be addressed, but corn, beef, and pork have taken hits, said Ryan Whitehouse, director of national legislation for the Illinois Farm Bureau, also based in Bloomington.
“Slapping just tariffs, it is a little scary to a farmer. We hesitate a little bit here at Illinois Farm Bureau when we hear we’ll just tariff other countries because we know who is going to take that first and it’s going to be the Illinois farmer and the American farmer through retaliatory tariffs. We don’t need anything else to hurt the farm economy. The farm economy is struggling right now,” said Whitehouse.”
The USDA Economic Research Service estimated retaliatory tariffs on U.S. agriculture product and food exports dropped by $27 billion from mid-year in 2018 to the end of 2019. Iowa, Illinois, and Kansas amounted to more than half the total decline.
Agriculture groups hope the promised trade restrictions will be brief.
Rodney Weinzierl farms near Stanford in McLean County. He’s the executive director of the Illinois Corn Growers Association. Weinzierl said a second Trump administration could use the tariffs as a lever to address unfair trade practices other countries exert on the U.S.
“And it’s used as kind of a bargaining step to get them at the table to get something worked out rather than kind of a therapeutic tariff that goes on a really long time with kind of no bargaining, of trying to resolve it,” said Weinzierl.
Frieders seconds Weinzierl's idea.
“I think president-elect Trump is a very smart businessman and I think he is not afraid to use tariffs if he needs to as we have seen in the past, but hopefully it could be a tactic to just bring people back to the tables,” said Frieders.
And some of the trade practices the U.S. criticized as unfair go beyond tech, manufacturing, and consumer goods. There are ag-specific barriers farmers would like the Trump administration to take on.
“When we import products from other countries like a Brazil, when we import ethanol at zero tariff from them, but they slap an 18% tariff on our ethanol, that’s an unfair practice,” said Whitehouse.
Recent history suggests the effect of tariffs could be long-lasting regardless of how long they last. Frieders acknowledged that after U.S. tariffs, China has continued to buy some soybeans, but has largely transferred its buying to South American countries.
“It has not come back. We have not regained our market share with that market,” said Frieders.
Part of the reason is U.S. trade restrictions on China have continued and vice versa. Weinzierl of the Bloomington-based Corn Growers said another piece is that nations want to make sure their food supply is coming from a secure source. When the U.S. hit China, China invested in countries like Brazil to build infrastructure for more row crop production.
“And so that would be in particular an area that could have potentially a long negative effect,” said Weinzierl.
Brazil and other South American countries also are boosting their own production capacity by clearing forest for farmland, though low commodities prices have curbed that explosive growth for now.
Weinzierl said it's hard to predict whether the row crop market share loss will be permanent.
“You continue to see expansion of especially meat consumption in developing countries throughout southeast Asia. You will see continued meat exports or grain exports for those countries to raise livestock,” he said.
If not China, ag groups hope the incoming administration will look to open new markets and create free trade agreements with more partners around the world. Frieders said it's crucial for Illinois — 60% of soybeans in the U.S. are exported and because of the river transportation network it’s even higher here.
“We’ve been focusing a lot of our efforts on Egypt and north Africa. That would be a great market for us to be able to expand into. And then Asia, continuing not only to include China, but to include other countries in Asia where their protein sources are changing and they’re needing some of our soybeans to maybe feed some of their aquaculture or poultry,” said Frieders.
Frieders noted the House version of the tentative Farm Bill re-authorization does double dollars allocated for market access and trade promotion.
In the first Trump administration, the government did make efforts to mitigate the impact of trade barriers on farmers. The U.S. Department of Agriculture calculated Market Facilitation Payments, or MFPs, to farmers on a per-county basis. Those payments didn't make farmers whole, but the farm bureau's Whitehouse said they were absolutely necessary.
“There have been no talks about MFP-2 yet. We in the ag sector are kind of sitting on the edge of our chair waiting to see how much of the talk was political rhetoric and campaign rhetoric and how much is going to be implemented,” said Whitehouse.
At this point Whitehouse said ag groups hesitate to ask for direct payments and they're doing everything they can to encourage the incoming administration to open up markets and that tariffs, if imposed, need to be thoughtful and targeted not willy-nilly.
“It hurts American agriculture and the farmer and the rural way of life because if the American farmer is hurting, a lot of small towns struggle, too,” he said.
Tax policy
Illinois ag group feelings about potential Trump administration tax and regulatory policies are a lot less ambiguous than they are over trade. The Corn Growers Association, Soybean Association, and Farm Bureau all expect favorable tax legislation.
Republicans will hold the House, Senate and presidency next year. That makes many things easier. The GOP is largely united on an approach to tax policy — lower taxes are better. Weinzierl noted a number of tax credits enacted in Trump's first term will sunset next year, and they expect a new Congress to revive them and the president to sign them.
“The changes that were made to the estate tax were very beneficial to agriculture and there is a number of business tax credits that are associated with depreciation of farm equipment that are really important in helping farmers manage the variability of income that you have in agriculture,” said Weinzierl.
Non-ag tax laws also can help farmers. Frieders said many family farms have corporate structures so corporate tax rate reductions could help a lot in a time of low commodities prices.
Weinzierl hopes for clarity over the long-contested Waters of the United States rules that farmers say prevents them from farming their own land in their own way.
“There’s still a lot of concerns on consistency as to how USEPA or the Army Corps is handling that,” he said.
There has been a lot of change around the re-registration of herbicides and the insecticide rule and the Endangered Species Act. Weinzierl said he is confident the Trump administration will make choices that favor farmers in that area to make sure the regulations work together and create certainty for agriculture.
“Some of the current rules are going to be one — just difficult to understand what compliance looks like. And the different mitigation areas that are being proposed add a lot of complexity in trying to meet what the standard is trying to do,” said Weinzierl, adding many of the rules are tied to current ag practices that vary from region to region, making it tough to tell what's legal and what's not.
“Just keeping things simple so that people can understand what it takes to be in compliance is a big deal,” he said.
Farm Bill
Congress has been kicking the can down the road for some time on renewing the federal Farm Bill that covers a host of commodity, conservation, trade, and nutrition programs.
With the early bandwidth of the Trump administration taken up with confirming cabinet nominees and renewing the Trump tax cuts, almost no one expects a Farm Bill to pass in 2025. Ag groups all said they expected a one-year extension to the expired Farm Bill.
The farm bureau's Whitehouse said that still leaves farmers dealing with a 2024 economy through 2018 policy rules. With such a sweeping piece of legislation, and no big majorities in either legislative chamber, Whitehouse said there are many opportunities for differences. For instance, the House GOP Freedom Caucus doesn't like the inclusion of food assistance, or SNAP, benefits for lower-income Americans in a traditional Farm Bill.
“We will see with president-elect Trump being in the White House if he can persuade the Freedom Caucus to come along on some of these bills, specifically the Farm Bill, especially when president-elect Trump has talked about how important agriculture is and the farmer is, but it’s not a slam dunk yet, it’s not a slam dunk,” said Whitehouse.
The three farm groups say they hope the next Farm Bill will not take away from people in need. Frieders said it’s about more than filling a need, it's about food security.
“Keeping that nutrition component is important. It also focuses the USDA on making sure we are providing a safe healthy food source for our nation and the world,” he said.
If SNAP does become [more of] a political football, Weinzierl urged Republican restraint to avoid blow back in a succeeding administration. Outside of SNAP, the percentage of people affected by the rest of the Farm Bill is less than 2% of the nation’s population, he said. You cut nutrition out of a bill and Weinzierl said you will get no Democratic votes and it will be hard to get urban votes. SNAP did become part of the presidential campaign for a minute. That's unusual.
“What we don’t need is having ag policy that kind of gets whipsawed from one side to the other and back if we turn the Farm Bill into a partisan effort. So, hopefully that doesn’t happen to the degree that maybe some people would like to see,” said Weinzierl, adding until now, the Farm Bill has been one of the few areas where bipartisanship still prevails.
“It seems like it’s different and hopefully it’s not, and we’re able to go back to regular order and get a bipartisan bill,” he said.
Another aspect of the Farm Bill relates to potential impacts from Trump's protectionist trade stance. Agriculture interests say they hope any trade tariffs will not create a need for Market Facilitation Payments to offset lost foreign sales of commodities. If they do, it raises the importance of a safety net for farmers incorporated into the Farm Bill.
Traditionally, the commodities credit corporation has been responsible for making funds available to farmers in times of crisis. Frieders of the Soybean Association said that's a current sticking point.
“There has been some negotiations in using commodity credit fund money for other various programs through the USDA besides what it was originally intended for and designed for. I feel that would be a bad use of those funds. We need to make sure those funds are kept separate and available for what those were originally intended for,” he said.
Frieders also hopes there will be other offsets to tariffs.
"There hasn’t been any increases in the money spent on market access program, or the foreign market development program in years, and those programs have brought us the customers that we have today,” he said.
There is new money for that in the house draft of the bill.
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