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White House plans $12 billion in emergency aid to farmers caught in Trump's trade war

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Frost covers the ground of a harvested corn field on the Couser Cattle Co. family farm in Nevada, Iowa, on Oct. 21, 2016. MUST CREDIT: Bloomberg photo by Barrett Emke.2 / 2

WASHINGTON - The Trump administration on Tuesday announced up to $12 billion in emergency aid to farmers caught in an escalating trade war, seeking to temper growing Republican dissent over President Donald Trump's trade policies.

The aid is designed to help farmers facing tariffs in China, Mexico and other countries that imposed the levies on U.S. products in response to Trump's new tariffs on imported steel and aluminum. It is the latest sign that growing trade tensions between the United States and other countries are unlikely to send soon.

White House officials say farmers will begin seeing payments by September, and they hope the payments will quiet protests by farm groups and lawmakers - many of them Republicans - who contend that Trump's confrontational trade policy is harming American farmers months before the 2018 midterm elections.

Trump defended his approach Tuesday during a speech in Missouri, pleading with the public to "be a little patient" and arguing that farmers would eventually be "the biggest beneficiary" of his policies.

But many Republicans criticized the administration's aid package, saying the president should back off his trade war and help farmers regain more access to foreign markets, rather than offering them government payments.

"If tariffs punish farmers, the answer is not welfare for farmers. The answer is remove the tariffs," Sen. Rand Paul, R-Ky., wrote Tuesday on Twitter, echoing many Republicans.

"The trade war is cutting the legs out from under farmers and White House's 'plan' is to spend $12 billion on gold crutches. America's farmers don't want to be paid to lose - they want to win by feeding the world," said Sen. Ben Sasse, R-Neb.

The $12 billion plan demonstrates Trump's willingness to use his power to further influence the economy, first imposing tariffs and then bailing out people harmed by his approach. In recent weeks, Trump has taken steps to try to lower oil prices and has publicly criticized the Federal Reserve over planned interest-rate increases, all actions taken with an eye to keeping up economic growth ahead of the midterm elections.

But Republicans feared they could face a huge backlash tied to Trump's trade approach, particularly among farmers. Several key Senate races occur this fall in states with strong ties to agriculture, including Missouri, North Dakota and Indiana. The outcomes of those races in November could determine control of the Senate next year.

The new package does not need approval from Congress. It would include direct payments to farmers, efforts to promote U.S. goods abroad and an expansion of a program that purchases surplus farm output and distributes it to food banks and other anti-hunger programs.

Administration officials said the program aims to compensate farmers for how much they would lose as a result of the trade war, in part because of lost sales and lower prices. Trump ordered Agriculture Secretary Sonny Purdue several months ago to begin work on the plan.

A handful of Democrats and Republicans backed the aid package.

"Our president stood up to a bully; now he's standing up for rural America," said House Agriculture Committee Chairman Michael Conaway, R-Texas, referring to Trump's trade struggle with China. "This is the right fight to have, but in the meantime, our producers have got to . . . live, while this fight's going on."

The plan will rely in large part on a 1933 program called the Commodity Credit Corporation (CCC), a division of the Agriculture Department created during the Great Depression to provide financial backup for farmers.

The Agriculture Department already spends more than $10 billion annually on a range of farm supports under the CCC, including trade promotion for crops and purchases of surplus farm goods.

While such efforts are widely popular in rural states, some anti-spending Republicans and urban Democrats have said they unfairly prop up agribusinesses at taxpayers' expense. Trump's proposed 2019 budget also would have slashed funding for the CCC.

In the past four months, Trump has imposed tariffs against steel and aluminum imports from China, Canada, Mexico, the European Union, Japan and other countries. He is threatening to extend the tariffs to cars, uranium and other imports.

Several of the countries have responded to Trump's trade measures by imposing tariffs of their own, and farmers have complained that they are the victims of retaliation from other countries, on which they rely to sell their products.

China, for example, has announced it is imposing tariffs on imports of U.S. soybeans, diverting some of its purchasing to Brazilian production.

While U.S. farmers have complained for months about the brewing trade war, Trump has showed no signs of backing down.

"Tariffs are the greatest!" he wrote Tuesday morning. "Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It's as simple as that - and everybody's talking!"

Some White House officials had hoped that other countries would quickly offer concessions before Trump's trade conflict escalated further. But conservative critics of the White House's approach said that Trump's move suggests an open-ended conflict.

Former Congressional Budget Office director Douglas Holtz-Eakin said the emergency aid for farmers is likely to be considered Trump's first taxpayer funded bailout of private entities, an unusual occurrence during a strong economy.

Holtz-Eakin, a Republican, is one of several conservative economists who have been sharply critical of Trump's approach to trade, and he said Tuesday that the programs the Agriculture Department will use to help farmers were not designed for this purpose.

"This is a terrible idea," Holtz-Eakin said. "These programs exist to insure farmers against the vagaries of nature and crop cycles. They are not there to offset bad policy. Two wrongs don't make a right. It's a misuse of the programs."

It is unusual for the government to extend financial bailouts to U.S. farmers on the basis of trade-related circumstances precipitated by the White House.

Other countries could try to bring a World Trade Organization case against the United States for its aid to farmers, alleging that the Agriculture Department has created an improper subsidy. Agriculture Department officials said they were confident the policy would not be vulnerable to such a challenge.

This week could prove crucial for Trump's trade strategy. He is to meet Wednesday with European Commission President Jean-Claude Juncker, who has criticized Trump's use of tariffs to try to extract concessions from trading partners.

Trump on Tuesday suggested that the Juncker visit should be seen as a sign that European officials are willing to bend to his demands, but European officials have cautioned that no major deals will be cut this week.

On Thursday, Trump is to talk about the economy and his trade agenda during visits to Illinois and Iowa, states where the new package of federal funds for farmers are likely to come under close scrutiny.

Separately, House Republicans plan to meet with one of Trump's top trade advisers, Peter Navarro, who has supported the tariff-driven approach used by the White House this year.

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This article was written by Damian Paletta and Caitlin Dewey, reporters for The Washington Post.

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