Agricultural Economics Department
Cornhusker Economics
Date of this Version
1-22-2020
Document Type
Article
Citation
agecon.unl.edu/cornhuskereconomics
Abstract
In a previous issue of Cornhusker Economics ( October 3, 2018, available at https://agecon.unl.edu/ cornhusker-economics/2018/market-facilitationprogram) we reviewed the sequence of events surrounding the trade war between the United States and China, and, in particular, the response of the Trump administration to the retaliatory tariffs imposed by China on soybeans and other agricultural commodities. The Market Facilitation Program (MFP) has been the main mechanism for compensating farmers for losses associated with the trade war. In the past year, there have been several important changes related to these events:
1. On January 15, 2020, the first phase of a trade deal between the United States and China was signed. While the agreement did not resolve many of the issues that had been offered as justification for the trade war (e.g., intellectual property protections, Chinese government subsidies to state-owned enterprises) and most of the tariffs applied by both sides remain in place, it did include a commitment by China to increase purchases of U.S. goods (including agricultural products) by $200 billion over the level in 2017 over the next two years. According to Sherman (2020), the Chinese government has indicated that the increased purchases will be contingent on market demand and some analysts are skeptical that the increased purchases will be realized. If they are, however, it would appear that the rationale for the MFP would largely disappear.