Donald Trump stiffs farmers and China stiffs Donald Trump

Welcome to the antepenultimate Trade Secrets newsletter of 2025. It doesn’t look like we’re going to get the US Supreme Court ruling on President Donald Trump’s tariffs before next year, which is a shame as that would have ended 2025 on a spicy note. Still, it will be a treat to look forward to in 2026.

Today’s newsletter is on Trump’s halfhearted attempts to protect US farmers and the travails of being one of his North American neighbours. Charted Waters, where we look at the data behind world trade, is on US imports of batteries and transformers.

A handout, not a hand up

One of the least surprising news events of the year happened last week when the White House announced a $12bn bailout for the American farmers who have been clobbered by Trump’s tariff war. This is, of course, exactly what happened in his first administration, taking from the agricultural sector one minute and giving it a handout the next. Essentially the president took away farmers’ work and put them on welfare. The most salient example is US soyabean exporters, whom China has boycotted in retaliation for Trump’s tariffs on Chinese goods.

Foreign Policy magazine has a very good piece summing up the current situation. It quotes Chris Barrett, agricultural economist at Cornell University, who says the $12bn is nowhere near enough to compensate for total farm losses, which he estimates exceed $40bn.

Trump has only got away with this because Congress is frozen in fear of crossing him. Back in the days when the US signed actual trade deals that required congressional approval, farmers generally got what they wanted. 

As I wrote two months ago, political backlash from farm counties — which overwhelmingly voted for Trump in 2024, to a greater extent than in 2016 and 2020 — is nothing like strong enough to deflect the president from his destructive path. Farmers these days tend to be very well off, get most of their income from non-farm activities and are largely in agriculture for the tax breaks.

In any case, Trump doesn’t really care much, even for those farmers being hit by the Chinese boycott. He’s famous for stiffing those who do deals with him, particularly if they don’t have the ability to retaliate or anything more to offer. Farmers aren’t going to be able to do Trump favours in the way that, for example, tech and media companies can improve the information environment for him. 

Trump is much more likely to keep promises to China, which can hurt him with rare-earths restrictions and the like. Naturally, Beijing has made the same calculation with regard to Trump that Trump has to US farmers. That is, because the president will find it hard to retaliate, China can renege on any deal. Beijing’s supposed end-year targets for buying US soyabeans, agreed after the Trump-Xi meeting in October, recently had to be pushed back to February, as they clearly weren’t going to be met.

We have, of course, been here before. China got nowhere near fulfilling its promises to buy US exports as part of the “phase 1” deal during Trump’s first term. Maybe it will this time. But if it does, it will be because it has taken a strategic decision, not because it fears immediate repercussions.

The US plans Fortress North America

I think we can all agree that Trump is pretty terrible at creating alliances in the trading system. He was handed one when he first entered office in 2016 in the shape of the former North American Free Trade Agreement (Nafta), now the US-Mexico-Canada (USMCA) agreement. He renegotiated it during his first term and it remains the only proper legal trade deal with congressional approval he’s signed.

It seemed like a big renegotiation at the time. But in practice the changes didn’t amount to a great deal. USMCA created a Rapid-Response Labor Mechanism, which aimed to expedite complaints from the US about Mexican labour standards undercutting American workers. Four years after it was implemented, academic research suggests its impact was non-negligible but not dramatic.

Anyway, here we go again: that renegotiation comes up for review in mid-2026. It remains unclear what the administration will do or whether it will junk it altogether. I suspect not the latter, not least because Canada and Mexico are the two countries that are bound sufficiently tightly to the US that Trump has been able to get them to move when he tells them to.

Mexico recently put tariffs of up to 50 per cent on China at the US’s behest. The Trump administration is keen to prevent the end-running around its tariffs on China that it saw during the first term and indeed to some extent this year. Canada has been talking a good game about diversifying from trade with the US to Asia but, as the Bank of Canada governor pointed out recently, it would have been helpful to have started this 15 years ago. Relations with the US remain by far Canada’s most important trade consideration.

As it happens, USMCA is quite popular across the ideological spectrum in the US and on Capitol Hill. It unites the US Chamber of Commerce and liberal groups such as the Progressive Policy Institute. It’s also of ongoing interest to Biden administration officials, with their geopolitical concerns about “economic security”. Emily Kilcrease from the Center for a New American Security (CNAS) recently testified that the USMCA renewal was a chance for the US to encourage “responsible de-risking” from China by aligning tariffs, export controls and foreign investment screening among the three signatories.

With everything China has to offer Mexico, particularly investment and green technology, it will be a big task for the US to turn the USMCA into Fortress North America. But it’s going to be one to watch in 2026 as an example of whether Trump’s supposed strategy towards Beijing can work in the most conducive conditions imaginable — three neighbouring countries with tightly integrated supply chains and a pre-existing trade deal whose renewal can be exploited as leverage to force change.

Charted waters

Despite the Trump administration’s mercantilism, the huge build-out in data centres and other artificial intelligence-related infrastructure has driven imports of batteries and transformers sharply higher.

Trade links

• The consultancy Flint Global gives its trade predictions for 2026.

• Cornell professor Eswar Prasad writes in the Financial Times about the destabilising effect of China’s trade surplus, which has topped $1tn for the first time.

• A study from the Australia-based Lowy Institute examines how south-east Asia is weathering Trump’s trade shocks.

• A piece by Vox looks at how Trump permitting Nvidia to sell semiconductors to China shows how he is backing away from the chip war he himself started in his first term.

• Relatedly, writing last month, academic and Trade Secrets favourite Henry Farrell argues that China is weaponising trade much more effectively than the US.

Trade Secrets is edited by Harvey Nriapia