Trade and Tariff Impacts

Trade and Tariff Impacts

David Sparks Ph.D.
David Sparks Ph.D.
For the growth and renewed prosperity of agriculture, particularly with farm income on a downward slope, current trading relationships must be preserved and new opportunities for agricultural trade must be secured, the American Farm Bureau Federation said in a recent statement to the Senate Agriculture Committee.

"Farm Bureau urges our trade officials to engage in discussions with our trade partners to resolve trade concerns before resorting to tariffs. Tariffs targeting our largest agricultural export markets have resulted in retaliation against U.S. farmers, ranchers and agricultural and food businesses across the country," Farm Bureau said in the statement.

U.S. agriculture exported more than $140 billion in 2017, sending more than 25 percent of farm and ranch products to international markets. With many sectors of the agricultural economy dependent upon exports, farmers and ranchers are negatively impacted by the retaliatory tariffs many of the United States' top trading partners have put in place in response to tariffs imposed by the U.S.

In the statement, Farm Bureau detailed how the U.S.-imposed tariffs and the retaliatory action from the international community are affecting particular sectors of the agricultural community.

In 2017, the U.S. exported more than $19.6 billion worth of agricultural products to China, making it the second-largest export market for U.S. farmers and ranchers. The Chinese market has increased exponentially for U.S. farm and ranch goods since 2000, becoming especially critical for U.S. soybean growers, who sent nearly 60 percent of their 2017 crop there.

In response to U.S. tariffs on steel and aluminum, as well as those imposed on only China for violations related to U.S. intellectual property, China has imposed hefty tariffs on more than 90 percent of U.S. agricultural exports to that country. As a result, China is expected to drop from being the second-largest market for U.S. agricultural goods now to the fifth largest in 2019.

With plummeting Chinese demand for U.S. soybeans tagged with a 25 percent tariff, USDA in August projected the average soybean price would range from $7.65 to $10.15 per bushel, down from a month earlier, when the projected average price was $8.00 to $10.50 per bushel. In one month, the estimated price declined 3-to-4 percent.

A tariff of 25 percent on U.S. corn is expected to have a slightly smaller, yet still negative effect. USDA in August projected the average corn price would range from $3.10 to $4.10 per bushel. This is down from July, when USDA projected corn prices at $3.30 to $4.30 per bushel. In one month, the estimated price declined 5-to-6 percent.

Livestock producers are feeling pinched too. U.S. pork exports by volume to China are 58 percent lower than they were at this time in 2017 and 80 percent lower than this point in 2016.

Though few new products are likely to be added to China's retaliatory list, "the impact on American farmers and ranchers, and associated businesses in processing, transportation, finance and retailing must be considered when pursuing trade actions," Farm Bureau emphasized.

The European Union, Canada, and Mexico all have implemented retaliatory tariffs in response to the U.S. steel and aluminum tariffs. Mexico's retaliation list for 20 percent tariffs includes pork, cheeses, apples, and whiskey. The list from the European Union, at 25 percent, includes rice, cranberries, peanut butter, kidney beans, and whiskey. The list from Canada, also at 25 percent, includes pizza, yogurt, chocolate, orange juice, and whiskey.

Farm Bureau also addressed the North American Free Trade Agreement, noting the progress made on a deal with Mexico. The final text of the agreement with Mexico, and possibly Canada as Canadian officials have rejoined the NAFTA discussions, are due to Congress by Sept. 30.

"Since 1993, U.S. agricultural exports to Canada and Mexico have increased from $8.9 billion to $39 billion in 2017. We want NAFTA to continue as a trilateral agreement including the U.S., Canada, and Mexico," Farm Bureau said.

With Japan actively negotiating trade agreements with many of our biggest competitors, Farm Bureau urged the administration to enter into a free trade agreement with Japan, either on a bilateral basis or by entering into discussions to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, previously known as the Trans-Pacific Partnership.

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