Economic Tidbits

Tariffs Cost U.S. Agriculture  

Agriculture was an innocent bystander in the trade war a couple years ago between the U.S. and several trading partners. The disputes were initiated when the U.S. imposed tariffs on steel and aluminum imports from several major trading partners, escalated when the U.S. imposed tariffs on a broad range of imports from China, grew in volume when trading partners imposed retaliatory tariffs on U.S. goods, and crescendoed with the U.S. issuing threats to impose additional tariffs on China. Agriculture, while innocent, was not unscathed. Several trading partners—Canada, China, the European Union, India, Mexico, and Turkey—included U.S. agricultural exports on their list for retaliatory tariffs. Depending on the product, the retaliatory tariffs ranged from 2 to 140 percent.

The trade tit-for-tat resulted in lost trade for U.S. agriculture. Earlier this year, researchers at the USDA Economic Research Service (ERS) released a report containing estimates of the impacts of the retaliatory tariffs on U.S. agricultural trade. According to the report, retaliatory tariffs resulted in a loss of more than $27 billion to U.S. agricultural exports between mid-2018 through 2019, with losses in shipments to China accounting for the bulk of the loss. Lost soybean exports accounted for nearly 71 percent of the total with sorghum and pork exports also suffering large losses.

Iowa ($1.464 billion in annualized losses), Illinois ($1.408 billion) , and Kansas ($955 million) had the greatest trade losses among states. Nebraska’s annualized annual trade losses were estimated at $736 million, or $1.47 billion total over the 2-year period. Nebraska losses in soybean receipts equaled $675 million, corn totaled $22.5 million, and pork $25 million. Nebraska’s share of losses were the sixth-highest in the nation at 5.6 percent (Figure 1).

The Phase I agreement with China, an agreement with Japan over beef trade, and import needs mitigated the effects of the tariffs starting in 2020. However, many of the tariffs imposed during this period remain. For Nebraska agriculture, the fifth-largest agricultural exporting state in the nation, it’s important for the U.S. to continue to build relations and open markets with trading partners and avoid damaging trade disputes. As the USDA ERS report shows, agriculture trade can be hurt when disputes break out.

 Figure 1. Distribution of Losses from Retaliatory Tariffs

Source: Morgan et. Al., The Economic Impacts of Retaliatory Tariffs on U.S. Agriculture, Economic Research Report Number 304, USDA Economic Research Service, January 2022.

You may also like