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July 25, 2019 4:30 PM, EDT

US to Roll Out $16 Billion in Farm Aid for China Trade War

Farmers Daniel Acker/Bloomberg News

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The U.S. Department of Agriculture is preparing to roll out an additional $16 billion in aid to farmers hurt by the Trump administration’s trade war with China, with payments to begin next month.

The second round of tariff-aid payments will give time for President Donald Trump to strike trade deals, Agriculture Secretary Sonny Perdue said on a conference call July 25 that gave details of the new package.

The aid uses similar damage criteria as last year’s $12 billion tranche. But rather than payments based on crop type, the new program sets a per-county rate based on the blend of crops grown in the area of $15 to $150 an acre.

Agricultural markets largely took the announcement in stride given the package is designed to avoid distorting planting decisions.

“It’s a discussion point, but not really” a factor, although payments may be a consideration for decisions next year, said Rich Nelson, chief strategist at Allendale Inc. in McHenry, Ill.

American farmers are struggling as losses from trade disputes pile on top of wild weather and years of global overproduction that have kept prices low. U.S. farm income dropped 16% last year to $63 billion, about half the level it was as recently as 2013. For Trump, appeasing his rural-voter base has become crucial ahead of 2020 elections.

The aid calculation may be more generous than last year because of a modification in the way the department calculates trade losses.

The new payments will be based on the shortfall in exports of each crop compared with the highest year of exports over the past decade, USDA Chief Economist Robert Johannson said. Last year’s payments were based on the shortfall in exports compared with 2017.

Still, Perdue said individual farmers shouldn’t expect the aid will fully compensate them for trade losses. “There’s no promises and no thoughts this will make anyone whole,” he said.

Overall trade aid is capped at $500,000 per person, with lower limits on payments in individual categories. Farmers will get the higher of $15 an acre or half their total payment in the first tranche of payments next month, with more aid payments to follow in November and early January if the trade war continues, the department said in a statement July 25.

Trump announced the new package in May as he stepped up his trade war with China by threatening new tariffs against the Asian nation.

With aid flowing to farmers, he has avoided erosion of his political support in rural areas. In June, 54% of rural voters approved of Trump’s job performance versus a national approval rating of 42%, according to a Gallup survey of 701 self-identified rural voters.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to travel to China on July 29 for the first high-level, face-to-face trade negotiations between the world’s biggest economies since talks broke down in May.