By the end of March, Presidents Donald Trump and Xi Jinping are scheduled to meet at a formal signing ceremony to ratify a historic trade agreement between the world’s two largest economies. It has been one long year since the United States fired the first salvos in the trade war, leading to months of tit-for-tat tariffs, endless deliberations, and investors riding their hopes up and down with every little report, comment, and analysis.
Should this prolonged strife receive its final curtain, millions of Americans would have survived the trade war – and all they got for it was a lousy T-shirt. However, for the nation’s farmers, it might be a case of too little too late as they have been the primary casualties in this conflict.
It was a bloodbath out there for the farms that feed this country. But just how bad was it?
Debt, Delinquency, and Death
When China, the European Union, and other important trading partners announced that they would cease or scale back their imports of U.S. agricultural products, prices spiraled down. By September 2018, soybeans had cratered 20%, corn had tumbled 12%, and wheat had fallen 10%. While these commodities have slightly recovered, they are still below their pre-trade-war levels.
Farmers had two main issues throughout the summer: They had nowhere to sell their goods. If they did sell their products, they took a steep loss in lower crop prices.
Hoping to weather the storm, farmers had no other choice but to store their immense inventories of soybeans and grains. They were optimistic, reading every report that claimed a trade deal was imminent. What they got instead were rotting storages and a $12 billion government handout, an insult to these men, women, and families who prefer to partake in commerce rather than depend on the state.
The trade battle began to take its toll on these farms once autumn arrived.
In November, the Federal Reserve Bank of Minnesota found that farm belt bankruptcies had surged. It was reported that nearly 100 farm businesses in Minnesota, Montana, North Dakota, South Dakota, and Wisconsin filed for Chapter 12 bankruptcy. Overall, according to The Wall Street Journal, the Seventh Circuit Court of Appeals processed double the number of insolvency filings from farmers last year; the Tenth Circuit witnessed a 56% jump in 2018.
This trend was inevitable after U.S. farm debt topped $400 billion, a figure not seen since the 1980s, when Chapter 12 bankruptcy was established to assist farmers in coming up with ways to pay off their debts within five years. Moreover, the Department of Agriculture estimated that the typical American farmer household lost more than $1,500 last year, and their incomes are 35% lower than in 2013.
Agriculture Secretary Sonny Perdue recently told the House Agriculture Committee that firm land values and historically low interest rates have helped “vulnerable” farmers. Although the Federal Reserve has hit the pause button on normalizing monetary policy, it is inevitable that rates will go higher, affecting deeply indebted farmers.
Simply put, the domestic agriculture sector may take years to recover fully. Perhaps this alone is contributing to the increasing suicide rates in the profession. It is true that the rate was already high before the trade war – 84.5 per 100,000 people – but experts contend that this bad situation might get worse.
Jennifer Fahy, communications director with Farm Aid, said in an interview with CBS News:
“The farm crisis was so bad, there was a terrible outbreak of suicide and depression. [Today] I think it’s actually worse. We’re hearing from farmers on our hotline that farmer stress is extremely high. Every time there’s more uncertainty around issues around the farm economy is another day of phones ringing off the hook.”
Does anyone ever win a trade war?
In April 1975, Col. Harry Summers was part of a post-war delegation in Hanoi, where he met his counterpart, Col. Tu. The two men sat down and discussed the Vietnam War. Summers told Tu that the United States never lost a battle during the conflict, to which Tu responded: that’s irrelevant.
When President Donald Trump, also known as the Tariff Man, proclaimed on Twitterverse that the United States would win the trade war, someone should have told him that it’s irrelevant. The agricultural industry has been decimated, farms are witnessing the decay of their inventories, and families are going bust. This isn’t a victory, it’s unnecessary suffering, based on a misunderstanding of basic economic principles; it could have been avoided. The American people are paying a higher price (literally) to the tune of $3 billion a month, but farmers are forking over a bigger cost: professional and personal ruin.