Trump’s Return Set to Upend Trade for American Farmers Yet Again

(Bloomberg) - Donald Trump's reelection promises another shakeup for American agriculture.

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Expectations for a fresh round of trade disruptions with China sent soybeans, corn and wheat futures plunging early Wednesday, before recovering later in the day. American farmers, who by and large strongly support Trump, are willing to go along for the ride.

"Farmers trust Trump to equalize trade, even if tariffs are used as a tool for persuasion," Ben Riensche, a sixth-generation corn grower in the Midwestern state of Iowa, said before the election was called.

At first, it seems contradictory that growers would back a president that radically altered global export markets after imposing tariffs on certain goods produced in China. After all, soybean sales to the Asian nation dropped by almost 79% in the first two years of his presidency, leaving bins busting across the US Heartland.

But Trump, who also rewrote trade with Mexico and Canada, threw $28 billion at farmers to soften the blow of his trade spats — something that helped him widen his lead in rural areas in 2020. That's even if he ended up losing the election to Joe Biden. At the same time, many growers are looking for change amid a weakening farm economy.

Trump has proposed a 10% to 20% tariff across the board on all imported goods into the US, and a 60% tariff on Chinese products — a move that could prompt retaliation from the world's largest soybean buyer.

American sales of the commodity to China fell to just about $3 billion in 2018 from $14 billion two years earlier, when Trump took office, according to data from the US Department of Agriculture. Soybeans are widely used to make cooking oil and animal feed.

Soybean futures traded in Chicago fell the most in almost a month Wednesday before erasing declines. Markets were pricing a Trump win even before the race was called, with Treasuries slipping, Bitcoin climbing to a record and the US dollar surging.

"There is a segment of analysts who are betting Trump will immediately turn the screws on China with tariffs," said Bevan Everett, risk management consultant at StoneX Financial Inc. "China's expected response will be fewer US exports. They are already doing less with the US but the rest of the market is picking up the difference for now."

Trump beat Kamala Harris, in part with the support of farmers, even after the vice president tried to appeal to his loyal rural base. She hired a new rural outreach director and spent big on a series of ads featuring growers pledging to vote for her in the swing states of Wisconsin and Pennsylvania.

But Harris' task was never going to be easy — the overall backing of Democrats in rural areas across local, state and federal elections has steadily declined since 1980, according to The Rural Voter by Nicholas Jacobs and Daniel Shea. Trump, who won in 2016 with 59% of the rural vote, increased that lead to 65% in 2020, according to Pew Research Center.

'Challenging Times'

His tactic of blaming inflation on Harris also worked well with farmers. At a Trump rally earlier this year in Dane County, a deep blue area of Wisconsin, Grant Grinstead, a dairy farmer, backed that premise.

"Our inputs from feed to seed, fertilizer, fuel, machinery and labor costs have just gone out of hand," Grinstead said. "It's challenging times and we need your help, sir."

Throughout the campaign, Trump also stressed that Wisconsin, the country's second-largest milk producer, had lost 455 dairy farms under Biden's watch.

While Trump upended markets rewriting the rules of trade, supporters say his strategy works. The so-called Phase One trade deal during his first term resulted in a large bump in demand that helped farmers recapture some lost sales, said Terry Branstad, who served as the US's ambassador to China from 2017 to 2020.

"There has been no new trade agreements since the Phase One," Branstad said. "I'm hopeful there will be in the next administration, maybe an improved trade agreement."

Export Demand

JPMorgan Chase & Co. analysts including Tracey Allen argued there could be more export demand under Trump, "with China potentially making goodwill purchases" of US agricultural products "in the event of trade negotiations under a Trump presidency."

Still, there are signs the last trade war left permanent scars. China now buys most of what it needs from other suppliers, especially Brazil, and that shift could mean demand may never fully return to the US. A study last month published by US farm groups estimated that soy and corn growers could lose billions of dollars in another trade spat.

Growers may also face labor shortages, with Trump's reelection pointing to tighter immigration policies. And machinery could also get more expensive after he threatened tariffs on products that Deere & Co. produces in Mexico.

No matter who leads the country, what American growers really need is higher grain prices and lower input and equipment costs, said Bill Krueger, chief executive officer of crop merchant The Andersons Inc.

"Looking into 2025, the US farmer is really looking for the price of the grains to come off of these lows that we're on," he said. "Farm income is still very stressed."

-With assistance from Tarso Veloso and Ilena Peng.

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