Retaliatory Tariffs Could Harm Agricultural Exports, Report Finds
Exports of U.S. agricultural products could decline due to the retaliatory tariffs imposed by major trading partners in 2018, which could have significant economic consequences for U.S. farmers, according to a recent report from the Congressional Research Service.
The report states that more than 800 U.S. food and agricultural products have been subject to tariffs imposed by China, the European Union, Turkey, Canada, and Mexico in response to U.S. tariff hikes on steel and aluminum products and a range of goods from China. U.S. food and agricultural product exports to the retaliating countries totaled $26.9 billion in 2017, but higher tariffs threaten to reduce those exports. That could pose a challenge for U.S. farmers because exports account for about 20 percent of U.S. farm income.
According to the report, China has placed retaliatory tariffs on the largest number and highest value of U.S. agricultural and food products. More than 800 products—including soybeans, pork, dairy products, fruits and nuts, seafood, and processed products—accounting for almost all U.S. agricultural and food exports to China in value terms in 2017 are now subject to additional tariffs of 5 percent, 10 percent, 15 percent, 25 percent, or a combination of those amounts. As a result, China fell from the leading export market for U.S. agricultural products in fiscal year 2017 to the third-leading market in FY 2018 and is projected to fall to fifth place in FY 2019.
Canada and Mexico are each targeting about 20 U.S. food and agricultural products, which accounted for approximately $2.6 billion and $2.5 billion in exports to each respective country in 2017. The EU and Turkey have each put retaliatory tariffs on about 40 U.S. agricultural and food products that were valued at about $1 billion and $250 million, respectively, in 2017. India has threatened to impose tariffs on seven U.S. agricultural and food products, which accounted for about $857 million in exports in 2017.
The report points out that commodities that are highly dependent on exports to the retaliating markets may be more severely affected than others by any loss of markets from the tariffs. Commodities for which U.S. exports to these countries represent 30 percent or more of its total exports include soybeans, sorghum, pork, cheese, apples, cherries, seafood, ginseng, whiskey, and some processed foods.
For example, the American Soybean Association states that the value of U.S. soybean exports to China grew from $414 million in 1996 to $14 billion in 2017, when China imported 31 percent of U.S. production and 60 percent of U.S. soybean exports. However, the report states that U.S. soybean exports to China from January through October 2018 were 63 percent lower than during the same period in 2017, due in large part to the tariffs. On the other hand, the EU recently noted that its imports of soybeans from the U.S. jumped by 112 percent in the second half of 2018 and that the U.S. share of the EU market is now about 75 percent.