There are many moving parts to consider when discussing the impacts of trade wars for both short-term and long-term. One crucial piece is the perception and attitude of the people in a country. Leaders of democratic nations are elected – meaning it matters what the general population thinks, regardless of whether a policy or approach is economically ‘correct.’
This line of thinking comes into play when considering the U.S. / China trade war. China has strategically put tariffs on U.S. soybeans, despite their own need to purchase them, to have the farm lobby put pressure on Washington to find a quick resolution to the dispute. Their strategy has worked regarding the impact on prices – soybean values have tanked since the trade war heated up, with the expected loss of demand being a key factor. However, whether this translates into the desired pressure on the Trump Administration is more questionable.
Farmers have always punched above their weight when it comes to political influence, at least if measured as a share of the population or GDP. The sentiment is particularly true in the U.S. where the Senate carries enormous weight, and where each state gets two Senators. This means that California (which has a GDP larger than Canada) has the same number of Senators as states that have populations of less than a million people and are heavily reliant on agriculture (i.e., North Dakota, South Dakota, Wyoming).
Of course, the agriculture industry is vital both regarding its overall size, as well as strategic importance in providing necessary food supplies to a nation and as a critical economic engine in sparsely populated rural areas. But the shrinking share of the population working in agriculture is a fact. At this point in the U.S., the categories described as agriculture/forestry/fishing and hunting combined accounts for just 0.9 percent of GDP. This is leading to a softer influence overall at the political level. For example, at this point 80 per cent of the U.S. farm bill is classified as ‘nutritional assistance,’ and just 20 per cent goes towards crop insurance, farm subsidies and commodity programs. Lobbying spending by agribusiness, as a percentage of total lobbying expenditures, has decreased since 2008.
It’s true that farmers are voters, and that they are suffering due to the negative consequences of the trade war. But they also don’t matter that much in real terms in 2018. In the context of a much larger trade agenda, mainly if politicians believe that their patience can be ‘bought’ with a $12 billion emergency aid package. A large sum of money to be sure, but merely a footnote in the larger trade discussion. It’s possible that a combination of sustained low prices and increased political pressure from other angles heading into key November midterm elections could trigger some additional motivation to pay closer attention to agriculture’s trade concerns, but at this point, we would not bank on it.