The Glaring Fact That We are All Ignoring in the US-China Trade War

American Taxpayers are Subsidizing China

There is no question that the trade war with China is going to have some effect on the United States economy. Those who were born after 1988 lack the experience of growing up in a Cold War economy where the US made dedicated trade decisions to maintain its status as a superpower. 

As a result, there are millions of Americans who accept the media-industrial complex’s lamentations about the effect that tariffs are supposedly having on US farmers. In a clever conflation of farmers and industrial farmers, the anti-Trump media has created an outcry against the “negative” effects that the trade war is having on the “poor” farmers.

What the media fails to mention is that industrial farming is one of the most highly subsidized segments of our economy. This article presents the case that when subsidized farmers sell to China, taxpayer money is subsidizing cheap goods for one of our largest debt holders.

When government hands out unrestricted subsidies, corporations get in on the game

Soybean and Pork Subsidies

Two of the biggest areas that have been effected by the trade war with China are soybeans and pork. Annual soybean subsidies average just over $18,000 per farm (not including sales) and are capped at $125,000 for larger farms (not including sales).

Pork is also an industry that large amounts of money go toward. In 2012 alone, we saw over $100 million go into the annual pork buy-up, which keeps pork prices high for the American consumer while dropping prices on the global market. 

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US Farm Categories

Before we discuss the idiocy of the subsidization of industrial farms that export, it is important to understand the four types of farms in the United States:

  1. Family farms for food
  2. Family farms for industrial farming
  3. Corporate farms for food
  4. Corporate farms for industrial farming

None of these poses a problem. Data, such as the Heritage Foundation report stating that the average subsidy per farm is $1,000,000, looks at all farms, large and small. Family food farms are just that, small locally owned farms producing food sent to grocery stores around the country and around the world. 

These farms include both “normal” and organic farms; these are the operations that the original subsidies were created to help.

Corporations Like Free Money

One significant sector emerged after subsidies became a “thing.”  Companies realized that if the government was giving free money out to farmers, they could get in on it. All government programs have waste, and clever companies exploit that waste. This led to the rise of corporate farming in the United States.

This was not a “bad” thing necessarily; corporate farming kept the costs of goods down for consumers and allowed them access to reasonably priced food. However, the advent of corporate farming did lead to a problem; family farming for industrial purposes. 

Industrial family farms are the lesser of the several evils. While there is no inherent problem with family farms producing industrial crops, the difficulty arises when the key buyer is a nation with whom we are competing global dominance. 

In a recent report, the USDA stated that up to 70% of the US soy production would head to China by 2028. With family industrial farming came the lobbyists advocating that those farms should also become eligible for subsidies. This led to — you guessed it — corporate industrial farming.

Corporations Get Into the Game

When the government hands out unrestricted subsidies, corporate America (and in some cases, multinational corporations) gets in on the game. Corporations are in the business of making money for their shareholders. If the government is giving out free money like a football player at a strip club, the corporations are going to get on those poles.

Billions of dollars in farm subsidies go to mega-corporations that are sending large portions of their crops to China. America is being sold out by representatives, corporate farms, and the international business system. The one way we are fighting back is tariffs.

Without putting too find of a point on it, the scenario is as follows:

  1. Farms get subsidies
  2. Subsidies allow for lower price goods
  3. Farmers sell lower priced goods to compete in foreign markets
  4. Other countries buy lower priced goods for industrial purposes
  5. Industrial goods flood markets from countries that can produce cheaper goods because of lower labor standards
  6. Goods compete with American goods
  7. American companies fail.

Helping China, Hurting America

Because we are subsidizing industrial farming in the United States to save thousands of farming jobs, we are effectively building up the Chinese economy and thus destroying hundreds of thousands of American industrial jobs. 

While funding farmers is important, we need to redirect subsidies to farmers who are producing food goods for the United States. If a farmer chooses to take the risk of making industrial goods for sale overseas at prices which are “anti-competitive” because of taxpayer subsidies, American citizens are subsidizing China’s economic revolution.

We need to put an end to this practice and bring farm subsidies back to the people producing food for domestic consumption.

If you want to play the international game, then farmers, rather than the taxpayers, should take the international risk.

Author Profile

Dr. Christopher W. Smithmyer
Dr. Christopher W. Smithmyer
Dr. Christopher Smithmyer is a writer for NRN, the Vice President of International Affairs at Brav Online Conflict Management, and an Adjunct Professor of MBA Business at Doane University. He is also part of the founding team at BlackWalletLTD, one of the leaders in stable coin 2.0 ecosystem maintenance. Dr. Smithmyer’s focus is international business and finance, along with reviews of board games, weapons platforms, and survival items.