Economic Effects of U.S. Trade Tensions in the Face of Domestic Agricultural Support

The USDA instituted the Market Facilitation Program (MFP) to assist U.S. farmers impacted by retaliatory actions of U.S. trading partners in 2018 and 2019, which included payments to U.S. producers of affected commodities. The MFP programs differed in scope and design in each year implemented. MFP 1 (2018) consisted of yield-based payments to producers totaling up to $12 billion while MFP 2 (2019) was comprised of direct producer payments covering a broader set of agricultural products totaling $14.5 billion. This research examines the economywide effects of U.S. trade tensions and retaliation from trade partners in the presence of alternate U.S. producer support programs. We simulate the 2018–19 retaliatory tariffs between the U.S. and trade partners in tandem with U.S. domestic support to understand how alternative domestic policy scenarios for U.S. agricultural producers compare.