Denny Mertz of Chesterfield, Mo., knows a thing or two about farm crises. He’d only been in the ag business a few years when the last big one hit. That was after President Jimmy Carter slapped a grain embargo on the Soviet Union to punish it for invading Afghanistan. The embargo hurt the Soviets, but it hurt U.S. farmers more. Grain prices cratered, and farmers who had bought up land to capitalize on booming exports suddenly found themselves struggling beneath crushing debt. Foreclosures spiked. Farm kids fled to the cities.
Mertz was one of the lucky ones—he had a second job to fall back on, working as an engineer at Emerson Electric. But he, too, eventually felt the crunch: He was priced off his land, forced to move his operation out of the St. Louis area where he had grown up. So this year, when he heard President Donald Trump was picking a trade fight with China, the world’s largest importer of American produce, Mertz’s reaction was straightforward: “Oops.”
Farmers are already feeling the squeeze this year from the Trump administration’s tit-for-tat tariff war with China, the biggest step yet in President Trump’s campaign to renegotiate America’s “terrible trade deals.” The stated aim is to punish China for its unfair trade practices, including intellectual property theft and counterfeit goods, and to act on Trump’s personal hobbyhorse of tightening U.S. trade deficits. A month in, the president has already adopted a triumphant tone: Tariffs are “the greatest,” “working big time,” “far better than anyone ever anticipated.” Tariffs “will make our country much richer than it is today,” and “only fools would disagree.”
Mertz, a Trump supporter and no fool himself, says he hopes such hard-nosed trade policies will help the economy in the long run and, just as important, compel China to straighten out its trade-crookery. Mertz says he’s experienced China’s brazen price manipulation and intellectual property theft firsthand, both as a farmer and as an engineer at Emerson. For him, it’s a moral matter: Who wants to do business with a cheat?
“I spent probably 10 years training the Chinese engineers how to do things. And then, all of a sudden, we find product on the market which was not ours but was built exactly the same way,” Mertz says. “I think many people, they understand the unfairness if you do things which aren’t right, the pirating of the high-tech industry and all that stuff. If you’re going to deal with a trading partner, there has to be sort of an ethicalness and an honesty in your trading and your dealings. Whether it hurts us more than it hurts them—I don’t know where that goes.”
So far, it has hurt farmers plenty. As a matter of economics, the problem is simple. China imports enormous amounts of U.S. agricultural goods—particularly Midwestern crops like soybeans, which are used as feed for livestock. According to the American Soybean Association, China imported 31 percent of total U.S. soybean production in 2017, to the tune of $14 billion. So when Beijing retaliated against America with tariffs of its own, agriculture was the obvious target—not to mention a political pressure point, given President Trump’s relative popularity among the ag crowd. On July 6, China slapped duties on $43 billion worth of U.S. goods, nearly $17 billion of it in agricultural products, including soybeans, sorghum, and pork. The move hit markets like a lightning bolt out of a clear sky: Soybean prices dropped a dollar a bushel when the tariffs were announced and another dollar when they were implemented, plummeting to a near-decade low below $9 a bushel.
Other farm commodities—corn, cotton, pork, and dairy—have suffered collateral damage from tariffs as well. And then there are the ripple effects through the farm production chain: suppliers, processors, packers, distributors. Nobody along the line is equipped to absorb the costs of the new tariffs.
On their face, the numbers are devastating for farmers, who operate with high overhead and slim profit margins in the best of times. It gets worse when you consider that tanking prices don’t just affect this year’s harvest: They retroactively damage income from last year, too.
“For all the folks, including me, that were storing some of their grain from last year—typically during the summer, if there’s any kind of drought scare or something like that, you’ll get a market bump, and so you hold some of your grain for that. Well, this year, we’re talking thousands and thousands of dollars farmers have lost because of that,” Mertz says. “It’s the kind of thing in hindsight where you say, well, I should have sold it. But nobody really foresaw what was going to happen with China.”
All of this has been bad news for the Trump administration, which had repeatedly assured farmers it would not allow them to bear the brunt of the trade dispute. After weeks of farm outcry, the White House announced on July 24 that it would issue $12 billion in emergency aid, in the form of direct payments and crop buybacks, to help farmers weather the unexpectedly difficult year. How much of the financial pressure that will alleviate is unclear.
“I’m not a big guy on government aid. I prefer the free market. But I do think that they depressed the market in a significant way,” says Illinois farmer James McCune.
But serious questions remain about whether the administration will be able to get that aid to the farmers who have been hardest hit and whether it will arrive soon enough to make a difference. The Department of Agriculture has promised to have money in the hands of farmers by September. But farm economist Dan Basse says that the crop yield data needed to determine how the payouts will be distributed won’t be available for months after that. Meanwhile, commodity lobbies are jockeying for position, each trying to ensure its own farmers can recoup their losses.
“Everybody’s arm wrestling,” Basse says. “Arm wrestling for what money’s there, trying to get their sliver of gold. We just don’t know at this point—the administration’s not been clear in terms of who gets what, and how much, and all of that.”
Meanwhile, agriculture experts warn that this short-term pain may pale in comparison to a greater danger: the permanent loss of U.S. farm superiority in global markets. Over the past few decades, American farmers who grow feed crops like corn and soybeans have enjoyed a boom as countries around the world have increased their living standards. As people in China and India started to make more money, they wanted to eat richer, higher-protein diets. That meant raising more livestock. And that, in turn, meant an insatiable demand for livestock feed. The United States, with its vast swaths of arable land and unsurpassed infrastructure, was in prime position to capitalize. Farmers pumped out record crop after record crop, but demand was such that prices were good as well.
This competitive advantage has been a source of comfort to farmers like Mertz. In their reasoning, even if China develops new trade relationships with other suppliers, they will be able to recoup their market share once the trade dispute is over.
“We over here in the United States, because of our infrastructure over the years, have been able to supply product to the world in a very efficient manner that most countries aren’t able to do. . . . Places like Brazil, the reason that they haven’t taken over many of the markets is they can’t get their products from the inland areas out to the ports,” Mertz says. “Because there aren’t any roads, and it takes a truck six or eight weeks to go from the farm to the port. If they ever fix their infrastructure, they would be a formidable competitor. But you know, they haven’t yet.”
Brazilian farmers, though, have been doing their best to catch up, buoyed in recent years by investment from multinational agribusiness giants such as Cargill. It is to Brazil that China is turning now as they attempt to wean themselves from U.S. produce. With Brazilian farmers reaping sky-high profits, some experts fear the trade war has handed them a golden opportunity to close the gap further.
“Brazil, when you talk about logistics, has really made tremendous progress in the last 10 years, particularly with the building of what’s called the Northern Arc, which is a bunch of ports either in the Amazon or along those northern areas of Brazil that can export tremendous amounts of corn and soybeans in a short period of time,” Basse says. “The American farmer no longer has the logistical advantage that he thought.”
It’s little wonder farm country lawmakers are beginning to sound the alarm. Republican senators Rob Portman of Ohio and Joni Ernst of Iowa have teamed up with Alabama Democrat Doug Jones to introduce legislation that would clip the wings of the president’s unilateral tariff powers. The bill, called the Trade Security Act, would require the Department of Defense to provide a legitimate national security rationale for a trade action before the White House could put it into place—a clear broadside against Trump, who has consistently used national security concerns as a barely disguising fig leaf to justify trade actions.
Other Republicans remain understandably skittish about undercutting one of the president’s signature policies. Missouri’s Republican attorney general Josh Hawley, who is backed by farm groups in his challenge to Democratic incumbent senator Claire McCaskill this November, declines to object to Trump’s trade policies on either legal or practical grounds. “I continue to support the goal here of trying to get trade deals for workers and especially for farmers,” Hawley says. “I’m sure when you’re talking to Missouri farmers, what they’re telling you, what they’re telling me, is that they feel like they’ve gotten the short end of the stick for years when it comes to trade. And they’re right about that. And so I think the president going out there and wanting to shake up things, to say we’ve got to get better trade deals, he’s right to do that. So I support the goal, and I keep saying let’s see what kind of a deal he gets.”
That last statement is a common refrain: Even the most pessimistic farmers continue to hold out hope that China will blink and Trump will pull off a dazzling success that will lower longtime trade barriers and help farm income expand further. But farmers and economists alike acknowledge that it’s difficult for Trump to threaten China with short-term political pain, given the fact that President Xi Jinping can’t be voted out of office. Either way, they’re counting on it being over soon.
In the meantime, they’d settle for getting China to the table.
“The U.S. is waiting for the Chinese to call and apologize and say that we somehow want to negotiate,” Basse says. “The Chinese aren’t going to call.”
