Agriculture in the Trump Era
May 12, 2017
Written By Adam Buckallew
President Donald Trump’s victory in the November election was fueled in large part by big wins he secured throughout rural America. Many farmers supported Trump and now they are cautiously optimistic their faith in the new commander in chief will be rewarded with policy that is more advantageous for agriculture. Though the Trump administration has already begun to remold U.S. policy, many of the specifics of his vision for agriculture remain murky.
“In some senses he’s known, in some senses he’s unknown,” said Gary Marshall, CEO of the Missouri Corn Growers Association while addressing the state’s corn growers during the association’s annual meeting and legislative day in January. “I think he’s more unknown than known.”
Uncertainty may concern some farmers, but others see potential opportunities for long-awaited regulatory repeals, tax reform and a fresh look at trade pacts.
Reining in Regulations
Trump has quickly prioritized eliminating the federal red tape he believes has overburdened American businesses’ interests. An unofficial tally conducted by the New York Times estimated more than 90 regulations had been delayed, suspended or reversed by federal agencies and the Republican-controlled Congress as of March 5.
“We’re going to be cutting regulation massively,” but the rules will be “just as protective of the people,” Trump told reporters following a meeting with business leaders shortly after he took office.
This is music to the ears of farmers and ranchers who feel the Obama administration too frequently overstepped its authority.
“All industry, not just agriculture, has been inundated with regulations over the course of the past eight years,” said Gary Wheeler, executive director and CEO of the Missouri Soybean Association. “The Waters of the United States (WOTUS) rule that was issued by the Environmental Protection Agency (EPA) is a prime example of burdensome overregulation that hinders farmers’ freedom to operate.”
When President Trump signed an executive order directing the EPA to review its controversial WOTUS rule, he was met with cheers from agricultural organizations around the country. Farmers feared WOTUS would give the EPA oversight of waters in ponds and ditches.
The rule, which was intended to define which small bodies of water were subject to federal authority under the Clean Water Act, has been on hold since a U.S. appeals court issued a stay to block its implementation in October 2015.
In addition to dismantling existing regulations, Trump has signed executive actions to, as he says, “knock out two regulations for every new regulation” implemented by federal agencies. It’s all part of the administration’s plan to begin what White House Chief Strategist Steve Bannon refers to as the “deconstruction of the administrative state.”
“If you look at these cabinet appointees, they were selected for a reason and that is the deconstruction,” Bannon said while speaking at the Conservative Political Action Conference in late February. “The way the progressive left runs, is if they can’t get it passed, they’re just going to put in some sort of regulation in an agency. That’s all going to be deconstructed and I think that that’s why this regulatory thing is so important.”
Missouri Cattlemen’s Association President Butch Meier welcomes the approach.
“We are extremely optimistic that the president and his cabinet, specifically (secretary of agriculture nominee) Sonny Perdue and (EPA director) Scott Pruitt, will take a long, hard look at some of these out-of-touch, bureaucratic regulations that have been promulgated the last eight years that amount to nothing more than a pervasive invasion of private property rights.”
Meier, a seedstock and cow-calf producer from Jackson, Mo., encourages the administration to specifically intervene in the U.S. Department of Agriculture’s final rule-making decision on the 2010 Grain Inspection, Packers and Stockyards Act, which he said would “drastically limit the way family farmers and ranchers can market their cattle and will open the floodgate to baseless litigation.”
Wheeler points out not all regulations are bad. He references the Renewable Fuels Standard (RFS) as an example of a practical, commonsense federal program that has greatly benefitted farmers. The RFS mandates transportation fuels in the United States contain a minimum volume of renewable fuels such as biodiesel and ethanol.
“We have voiced our support for the continuity of the RFS to be maintained,” Wheeler said. “President Trump has also expressed his support for the RFS, and we will continue to work hard to make sure Congress and the new administration continue to view the RFS positively.”
Tax Relief on the Way?
During the election, Trump promised to deliver “big league” tax cuts to voters. To do so, he’s proposed simplifying the tax code by moving from seven tax brackets to three, with the highest bracket taxed at a rate of 33 percent. He is also pushing to lower the corporate tax rate from its current 35 percent to 15 percent and abolish the estate tax, which is commonly referred to as the death tax.
“I think tax reform is where the president and the majority in Congress will make some real progress,” Meier said. “The death tax needs to be slaughtered immediately. It is ludicrous to think it’s okay to penalize the family because a loved one passed away. It is beyond comprehension.”
Currently, estates are taxed at 40 percent, but there are exemptions on the first $5.49 million per individual or nearly $11 million for couples. That’s a lot of money, but Pat Wolff, senior director of congressional relations for the American Farm Bureau Federation, said the mere specter of such a tax has some farmers and ranchers “worried about growing and going over the (exemption) level.”
“We need to get rid of the tax once and for all,” Wolf said. “We don’t need it hanging over people’s heads and we don’t need farmers having to pay their attorneys to write them estate tax plans just in case.”
Meier cited the “unnecessary and unproductive compliance costs” of the estate tax as reason enough to do away with it. According to a report from the U.S. Congress Joint Economic Committee, for every dollar of tax revenue raised from the estate tax, a dollar is wasted in compliance costs.
Republican congressional leaders are widely expected to begin the work of overhauling the tax code later this year.
The Negotiator in Chief
Throughout his campaign for the presidency, Trump assured voters he would use his business acumen and experience to negotiate better deals for the United States with foreign trade partners. He vowed to abandon the 12-nation Trans-Pacific Partnership (TPP), a trade pact with strong Farm Belt support, on the basis it was bad for American workers and would undercut U.S. companies.
He followed through on his promise by officially withdrawing from TPP during his first week in the Oval Office.
Farmer-led policy organizations, such as the American Soybean Association (ASA), urged the Trump administration to immediately announce how it intends to engage and expand market access in the Asia-Pacific region now that TPP is dead. Ron Moore, ASA president, pointed out the high stakes for U.S. farmers.
“Trade is something soybean farmers take very seriously,” said Moore, who farms in Roseville, Ill. “We export more than half the soy we grow here in the United States, and still more in the form of meat and other products that are produced with our meal and oil. The TPP held great promise for us and has been a key priority for several years now. Moving forward, we expect to see a plan in place as soon as possible to engage the TPP partner nations and capture the value that we lose with the withdrawal. With net farm income down by over 40 percent from levels just a few years ago, we need trade deals with the Asia-Pacific countries to make up for the $4.4 billion in annual net farm income being lost by farmers from not moving forward with the TPP. Also, we expect a seat at the table to help ensure these agreements in whatever form they take are crafted to capture their full value for soybean farmers. Trade is too important for us to support anything less.”
Not long after canceling the U.S. involvement in TPP, Trump set his sights on the North American Free Trade Agreement (NAFTA), which he has referred to as “the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.”
NAFTA was signed by the United States, Canada and Mexico in 1992, and officially went into force on Jan. 1, 1994.
When the president suggested he may scrap NAFTA if he couldn’t renegotiate it to his liking, the American agricultural community grew concerned. NAFTA has grown U.S. ag exports to Mexico and Canada exponentially, moving from $8.9 billion in 1993 to $38.6 billion in 2015.
More than 130 food and agricultural organizations contacted the president to highlight the importance of NAFTA to the industry and urged him to preserve and build upon that success.
“With the productivity of U.S. agriculture growing faster than domestic demand, the U.S. food and agriculture industry — and the rural communities that depend on it — relies heavily on export markets to sustain prices and revenues,” the groups said in their letter to Trump.
Referencing Trump’s campaign promise to revisit the NAFTA deal, Meier shared, “It worries cattlemen a great deal that we are renegotiating something that has and is working to expand beef exports to Mexico and Canada — two of our top trading partners. But then again, (the president) is doing exactly what he said he would do. We just hope it works out like he says it will.”
In late January, the Trump administration floated the idea of a 20 percent border adjustment tax on Mexican imports to foot the bill for the $15 billion wall the president vowed to build to keep out illegal immigrants. The proposal sparked talks of a trade war U.S. farmers fear could lead to retaliatory tariffs put on their products. Some Mexican officials have already called for a boycott of U.S. corn in favor of imports from South America if a U.S. border adjustment tax is implemented.
“Given the size and impact of the Mexican and Canadian markets…we’re watching the administration’s decisions very, very closely, and it’s fair to say that we’re nervous,” said ASA’s Moore.
Joseph Glauber, former chief economist at the U.S. Department of Agriculture, recently published an essay, “Likely effects of a trade war for U.S. agriculture? Sad!” The essay highlighted the potential problems Trump’s proposed trade policies could cause for farmers and ranchers.
“The White House’s flirtation with imposing a 20 percent tariff on Mexican goods, ostensibly to pay for the proposed border wall, suggest the aggressive stance taken in the campaign will likely carry over to his new administration,” Glauber wrote. “Disrupting agricultural trade by imposing punitive tariffs on Canada and Mexican exports would play havoc with supply chains and likely mean the loss of several billion dollars annually to U.S., Canadian and Mexican producers and processors.”
Instead of multinational trade agreements, Trump said he would rather “negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores.” In other words, Trump wants one-on-one trade deals with individual countries. It’s all part of his “America First” policy centered on reviving America’s moribund manufacturing industry.
But what works for manufacturing may not be in the best interests of agriculture or the farm-state voters who helped usher Trump into the White House.
“There could be a negative effect to President Trump’s preference for bilateral agreements,” cautioned Wheeler of the Missouri Soybean Association. “China, for example, has taken some of our commodity markets hostage with bilateral agreements. We hope the Trump administration is not naïve to agriculture’s needs and does not leave us out of potential negotiations. We remain optimistic that the administration will keep all constituents in mind during trade discussions and that any new agreements will be fair for all parties.”
Remaining Cautiously Optimistic
All the ways agriculture will be eventually affected by the Trump era remains to be seen as the president becomes more “known” in his ag-related policy decisions.
Based on his track record so far, President Trump is poised to fulfill many of his campaign promises. This could mean continued advantages to farmers and ranchers. However, agriculture must also be prepared to see changes that could potentially overlook its needs.
Farm and agribusiness groups will continue to work to protect the interests of U.S. growers and producers. For the ag community at large, perhaps the best course of action is to remain optimistic while vigilant.