On October 9, President Donald Trump announced that he was lifting the EPA’s ban on summertime sales of E15—a motor fuel blend consisting of 15 percent ethanol instead of the usual 10 percent. Trump’s announcement is telling. It teaches much about politics, trade policy, and the sorry state of the environmentalist movement.
That Trump’s announcement was politically motivated is obvious. The proposed new policy was announced during a campaign visit to Iowa. A crucial biennial election looms, and Trump unveiled his plan there to give a boost to the electoral prospects of Republicans in the Corn Belt.
Such a move was politically necessary after Trump’s tariffs on Chinese imports triggered retaliatory tariffs that reduced American food exports to China and cut American farmers’ incomes. The president needed to demonstrate to farmers that he is looking out for their interests. The call for greater use of E15—which would increase the demand for corn— was music to the ears of many voters in the Farm Belt.
This sequence of events—economically disruptive tariffs followed by a policy designed to mitigate or offset those disruptions—illustrates a profound truth about political economy. The great Austrian economist Ludwig von Mises elucidated this truth in his essay, “Middle-of-the-Road Policy Leads to Socialism.” [Stay calm; I am NOT suggesting that Trump wants socialism!]
Mises’ point was that government intervention into markets, however well intentioned, inevitably impacts prices and patterns of production. Intervention helps some and hurts others. Those who now have a government-induced problem, like American farmers after the imposition of tariffs, expect the government to solve that problem. But whatever government does in the attempt to offset the damage its policies caused will further distort markets...
Trump’s trade policy is developing as a “two steps forward, one step back” process. (Let’s hope it doesn’t end up being one step forward for every two steps back!) Clearly, the proposal for increased usage of E15 is a government subsidy to corn growers and the ethanol industry. It moves us even farther away from Trump’s professed goal of dropping all tariffs, trade barriers, and subsidies. Realistically, given our current political alignment, zero subsidies for American agriculture is inconceivable for the foreseeable future.
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