How Badly Is Trump Treating Rural America?

It surprised me to see Trump's coalition in the Midwest falling apart. In the most recent Morning Consult state-by-state Trump tracker, it doesn't look like rural America will be coming to his rescue in 2020. His net approval in state after state he won in 2016 in underwater:

• Iowa- minus 14
• Wisconsin- minus 11
• Michigan- minus 10
• Ohio- minus 5
• Nebraska- minus 2

And even in the states he's still ahead in, his numbers have collapsed. Indiana is just +2. North Dakota and South Dakota, states Trump took in landslides in 2016, are each +1. Kansas is +4 and Missouri is his only safe seat in the region: +5. Trump's numbers in Iowa are seriously endangering freshman Senator Joni Ernst. Michael Franken is the non-Schumer candidate for Ernst's seat. This morning he told me that "The ample amounts of unsold ethanol in storage, the lag in recovering in the China marketplace, and the contracts already let for this year's crop will offer no salvation to Midwest farmers if Trump and Xi cut a deal. A promise of better markets next year won't help Ernst since her Iowa farmers have been betrayed before, repeatedly."

And J.D. Scholten is running for the last Iowa House seat occupied by a Republican-- and in this case, that Republican is neo-fascist lunatic Steve King who even the GOP was so disgusted by that they kicked him off the Agriculture Committee-- which is exactly where J.D. will be serving once he wins the seat next year. "IA-04," he said this morning, "is the 2nd most ag-producing district in America. Farmers are being hit with a trade war that has cost this district $558 million alone. Also, this administration’s abuse of the Renewable Fuel Standard which is directly depressing corn prices, closed or idled plants and lost good rural jobs. All the while, Ag monopolies are squeezing farmers on both the input and output sides. Farmers are looking for solutions, giving Democrats a huge opportunity in November 2020 but we have to go out there and earn it."

Last week, the Council on Foreign Relations published a blog post by Benn Steil and Ben Della Rocca, China’s “Massive” Trade Offer Leaves U.S. Farmers $7 Billion Worse Off. Does Trump know what the word "massive means? He's been "talking up the “massive” trade deal he expects to sign with President Xi in November," wrote Steil and Della Rocca. 'China,' he said, will soon be 'buying much more farm products than anybody thought possible.' But is this true?" Trump said it, so you would be pretty safe betting the farm that it isn't true; after all, virtually nothing he ever says is.

The latest news from China indicates that it will “aim” to buy $20 billion in U.S. farm goods in the first year of an initial deal. It also says that such purchases “could” eventually rise as high as $40-50 billion. Trump is hailing the latter suggestion as an “incredible deal for farmers,” though he fails to note that the numbers have no empirical or analytical basis and are premised on his repealing all his punitive tariffs-- that is, ending the trade war.

So is the U.S. now really “winning,” as Trump likes to say?

Let us focus first on what China actually has on the table: an offer to buy $20 billion in ag goods in return for Trump killing his planned October tariff increase, from 25% to 30%, on $250 billion in imports, as well as abandoning new 15% tariffs on a further $112 billion in imports scheduled for December. Is this a good deal?

The right way to evaluate China’s offer is to ask how much U.S. farmers would have exported to China in 2020 had Trump never started his trade war. In the graphic above, the dotted blue line projects such sales by assuming that, after 2017, China’s purchase volumes of each type of agricultural good would, absent Trump’s trade war, have continued growing at the rates seen since 2010. As the yellow marker highlights, China’s 2020 purchases would have exceeded $27 billion. That is, China would have bought over $7 billion more than what it is now offering. And this is a conservative estimate, given that the projections assume prices stay fixed at last year’s trade-war-depressed levels.

As regards China’s tease that a complete end to the trade war could push its U.S. ag purchases up to $40-50 billion, this is wholly implausible. As the dashed line above shows, Chinese ag imports before the trade war had barely been on pace to reach $30 billion by 2022.

In short, if Trump accepts what he is calling a “massive” deal with China, he will actually be leaving American farmers at least $7 billion worse off than they would have been without his policies. As for China’s hints of a far-off bonanza for U.S. farmers, these should be taken with a grain of soybean.