Last month, the Trump administration announced $12 billion in aid for farmers that have been impacted by tariffs on US goods by China, Mexico, and others. Those tariffs were themselves a response to Trump’s own tariffs on steel and aluminum imports. The move functions as a political defense against criticism of the tariffs from Trump’s own party, but it’s also a sign that the administration is preparing for the continued effects of these trade conflicts.
Politically, the administration may be making a mistake trying to shore up support on the right with a massive, tax-payer funded bailout. After all, this is the party of fiscal conservatism. As Senator Ben Sasse of Nebraska put it:
“They’ve been taking the legs out from under America’s farmers and ranchers. What the administration is offering them instead is $12 billion in gold-plated crutches. That’s not what anybody wants.”
Bailouts of this size are normally deployed only in the event of a recession or unusually low prices on agricultural goods. It remains to be seen whether the bailout will be embraced by voters any more than it has been by Republican legislators. Many voters on the right share the view of this aid as a crutch, according to CBS News. But the resistance to the idea of a bailout hints at a much bigger problem: the question of tariffs as a strategy in general.
This is politically risky as a way to gain support from voters that have generally signed on for the benefits of the free market for decades. Trump may have a small and loyal base that support protectionist measures. But it’s unclear how broad that support really is. While Trump has been impervious to serious criticism on the right on many issues, tariffs do not seem to be among them.
“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” Speaker Paul Ryan said in March. The president’s top economic advisor, Gary Cohn, resigned that same month over the administration’s plan for tariffs.
And the practical effects of tariffs may ultimately lead to an even larger political headache for Trump. Experts, such as Dartmouth economist Emily Blanchard, say that import tariffs on steel and aluminum will raise the price of those goods, hurting all the industries that rely on these materials.
According to Blanchard:
“The short-term risk and the near-certainty is that there will be retaliatory tariffs and they will be very large. We know that Canada and the EU and South Korea and Mexico and Brazil and Russia and China are major trading partners who, under the rules of the existing system, will be allowed to retaliate against the US. And of course, they get to pick which products they target for tariffs. The products they pick will be designed to inflict as much political and economic damage as possible.”
While there has been some diplomatic headway in negotiations with the EU, this is still broadly the case. And aid packages like the farm bailout are a (massively expensive) Band-Aid for a bullet wound to fix the fallout that could have easily been avoided in the first place.
While many trade experts have noted that the tariffs are a response to real problems, such as trade disputes with China, most say tariffs are at best, a risky way to respond. On top of the risk, they may not even address problems such as intellectual property theft and limited access to China’s domestic markets. Instead, a wide range of experts have said a diplomatic alliance with allies to put pressure on China would be more fruitful. But Trump’s earlier move to reject the Trans-Pacific Partnership was missed opportunity to unite a dozen nearby countries against China on these very issues.
By using taxpayer money, Trump is asking the American people as a whole to pay for what essentially amounts to a political bailout for his administration. Politically, it’s a highly risky and expensive move that could easily alienate important voters. But beyond that, the actual strategic value of a strategy of tariffs and bailouts as an economic solution is highly suspect in itself.