When Donald Trump announced on Thursday that he would provide $16 billion in aid to help farmers whose sales have suffered thanks to his trade war with China, he immediately assured Americans that they would not really be footing the bill. The bailout package, the president said, would be funded with money collected from his tariffs, which he insisted were being paid by the Chinese themselves. “It all comes from China,” he said. “We’ll be taking in over a period of time hundreds of billions of dollars in tariffs and charges to China. And our farmers will be greatly helped.” Minutes later, he repeated himself. “Just so you understand, these tariffs are paid for largely by China. A lot of people like to say by us,” he said.
Trump drops versions of this talking point constantly, and it is absolute nonsense. Some Chinese exporters may be losing business thanks to Trump’s levies, as their U.S. customers have started buying elsewhere. But the tariffs themselves are being paid by Americans. That’s true in the legal sense (importers are the ones who actually pay the tax when Chinese goods arrive on our shores) and the economic sense (so far, researchers have concluded that the full cost of the tariff really is being passed on to consumers and companies stateside; Chinese factories didn’t eat the cost by lowering their prices, at least last year).
So now, we find ourselves in a situation where families and companies are paying billions of dollars in extra taxes each year, part of which are being funneled to farmers who can no longer sell their soybeans, because Beijing decided to slap retaliatory tariffs on their crops. According to the White House, $14.5 billion of the bailout fund will be paid directly to farm owners; most of the rest will be used to buy some of the commodities piling up in lots so they can be sent to schools, food banks, and programs for the poor. This is all on top of a $12 billion package Trump announced last year. The grand total, $28 billion, is about what the U.S. spent last school year on Pell grants for college students. It’s not a small amount of money.
Politically, this makes obvious sense. Rural voters are a key constituency for Trump. And angry farmers could create enough political pressure to force him to back down in his conflict with Beijing. Your typical middle-class shopper, meanwhile, probably isn’t going to notice the price bump from tariffs on her Walmart receipt. By keeping soy and corn growers happy, Trump is making it possible to keep waging his trade fight. He’s deflecting the blow to people who won’t necessarily feel it.
If Trump manages to reach a deal with the Chinese soon, that might not be so awful. It will be some short-term pain for, hopefully, some long-term improvements in our trade relationship. But if it drags on, and the tariffs become semi-permanent, you and I are going to be stuck paying farmers to not sell anything. Everyone ought to be mad about the possibility.