The US-China trade war just got hotter with cold cash American farm subsidies, analysts say

Donald Trump is trying to ease anxieties in the Republican agricultural heartland and send a message that he’s not about to back off, observers say

PUBLISHED : Thursday, 26 July, 2018, 12:30am
UPDATED : Thursday, 26 July, 2018, 1:42am

US plans to subsidise American farmers caught in the US-China trade war signal an escalation in the hostilities, Chinese analysts have warned.

The administration of US President Donald Trump announced on Tuesday that it would roll out a three-part, US$12 billion plan to offset the effects of retaliatory tariffs imposed by China and other countries on American agricultural products, according to US Secretary of Agriculture Sonny Perdue.

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Perdue said the plan was a short-term solution to the “illegal” response by China, Canada, Mexico, the European Union and other major economies to aggressive US trade sanctions.

“The programmes we are announcing today are a firm statement that other nations cannot bully our agricultural producers to force the United States to cave in,” Perdue said.

On Wednesday Trump accused China of targeting American farmers in a vicious way and using them as leverage to get concessions from him on trade.

“China is targeting our farmers, who they know I love and respect, as a way of getting me to continue allowing them to take advantage of the US,” Trump wrote on Twitter.

“They are being vicious in what will be their failed attempt. We were being nice – until now!”

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On July 6, Beijing hit back at US tariffs on US$34 billion in Chinese products with similar duties of its own on US goods, including soybeans, beef, pork, sorghum and fruit.

China imported about US$24.1 billion in agricultural products from the US last year, accounting for about a fifth of total farm imports in 2017, according to Chinese customs agriculture ministry data.

The Chinese tariffs mainly affect farmers and graziers in the American Midwest – a key constituency for Trump and the Republicans.

The tariffs dovetailed with suggestions from Chinese policy advisers that Beijing make a “precision strike” aimed at agriculture and the Republican heartlands, in the hope of pressuring the president and his party before the midterm elections in November.

Liu Weidong, a US affairs expert from the Institute of American Studies at the Chinese Academy of Social Sciences, said that with just 20 days since the start of the tariffs it was too early to tell if they had been effective.

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Liu said the subsidies were probably a preventive measure by Trump to ease the anxiety of his constituencies because he was worried those voters might reconsider their support if the Chinese duties took hold.

“With the subsidies, he could mitigate the Chinese retaliation to some extent,” he said.

Wang Huiyao, president of the think tank the Centre for China and Globalisation, said Trump was also trying to show to China and other countries that he was determined to carry on with the trade war.

“This is psychological warfare and will have an effect on people’s expectations,” Wang said.

But Pan Rui from Fudan University said China should not overestimate the importance of the midterm elections to Trump. “Even if the Republicans lose some of their seats, Trump is unlikely to make dramatic changes to his foreign policies,” Pan said.

He said the subsidies could be either a sign that Trump was bluffing with “maximum pressure” or he saw China as a strategic rival that he was willing to contain at all cost.

“We cannot exclude either possibility, but China would not want to see the latter,” he said.

Trump has threatened to put tariffs on all of the US$500 billion or so in products China exports to the US each year, while China has vowed to hit back with “qualitative and quantitative” measures.