Trade—particularly exports—is critical to U.S. agriculture. A full quarter of U.S. farm products (by value) is exported. For some commodities, the percentage is even higher.
Clearly, foreign demand for U.S. farm goods plays a huge role in farm income.
Thanks to trade agreements that have reduced barriers to our exports, U.S. farmers and ranchers export more (by value) than farmers in any other country. In fact, the U.S. has a trade surplus in agriculture. Agricultural trade is a success for the United States. Unfortunately, this trade success story is at risk.
Our farm exports—and the big chunk of farmers’ and ranchers’ income that comes from them―are threatened on three fronts.
The U.S. in recent months has imposed tariffs on $79 billion of goods and services and proposed additional tariffs on $702 billion of other foreign products, to encourage key trading partners to resolve long standing trade issues that exist. China and other countries that are important markets for U.S. agriculture have retaliated with tariffs on billions of dollars’ worth of U.S. farm products.
U.S. pork faces an additional 50 percent tariff in China and a 20 percent tariff in Mexico.
Fruit faces an additional 25-40 percent tariff in China and a 20 percent tariff in Mexico.
Tree nuts face an additional 25-40 percent tariff in China.
Wine faces an additional 15 percent tariff in China.
Cheeses face an additional 25 percent tariff in China and a 20-25 percent tariff in Mexico.
Soybeans, cotton, corn, wheat, beef, sorghum and other agricultural products face an additional 25 percent tariff in China.
Other countries also have retaliated. Since the tariffs have gone into effect, prices for some U.S. farm goods have gone down. As of July 2018, the new crop corn price had fallen more than 71 cents a bushel (17 percent) from its mid-May season high, and the new crop soybean price had fallen $2.07 per bushel (20 percent).
Kansas City Hard Red Winter wheat fell nearly $1 per bushel (16 percent).
December lean hogs lost nearly a quarter of their value since the beginning of the year – prices declined $14.90 per hundredweight as of mid-July.
Fruit, nut and vegetable growers are seeing similar impacts. During the last two weeks of June, Washington apple exports to Mexico were off about 40 percent compared with this same time a year ago. Almond exports in June were reported down from May, including to China (down 48 percent), Western Europe (down 18 percent) and the Middle East (down 26 percent). Even worse, farmers also saw costly delays in shipments to China with added customs-clearing times on arrival to go along with the first round of tariffs for products like oranges and cherries.
Livestock and dairy producers have seen their income erode due to trade uncertainty. Milk and dairy product prices fell more than 10 percent between June and July 2018.
Going back to the beginning of 2018, lean hog and live cattle futures have lost 8 percent to 10 percent of their value due to increased trade uncertainty. Since these farmers and ranchers are selling into the marketplace daily, the trade war has wiped out billions of dollars in farm cash receipts.
Many farmers and ranchers support the intent, if not the method, of the dispute—to create a more-level playing field for the U.S. and reduce our overall trade deficit, particularly with China where the U.S. trade deficit reached a record $375 billion last year. However, hurting agricultural exports by engaging in a trade war threatens an area where the U.S. has a trade surplus.
While the Administration has announced it will provide up to $12 billion in assistance for farmers and ranchers affected by the tariffs, that assistance (good for only 2018) cannot and will not make up for long-term damage to our agricultural exports. On the plus side, the assistance shows the Administration is making good on its promise to look out for farmers and ranchers. On the downside, it could also be interpreted to mean that the trade war has no end in sight.
What are we asking for?
To limit the damage to farm prices and farm families’ income, the U.S. must negotiate a resolution to the tariffs dispute soon, and it must not impose any further tariffs that would only invite more retaliation against our farm exports. Our farm economy, which is already hurting, cannot withstand a prolonged trade war.
Ever since the U.S. began hinting at a possible withdrawal from the North American Free Trade Agreement early last year, prospects for U.S. agricultural exports to Canada and Mexico have worsened. Mexico quickly began looking for alternative sources for meat and other products that normally would be purchased from the U.S. Our farmers and ranchers are losing their market share to other countries.
While the U.S. has not withdrawn from NAFTA, the President announced in May 2017 that the U.S. would renegotiate the agreement. However, no agreement has been reached and a cloud of uncertainty hangs over U.S. trade with our NAFTA partners.
U.S. agricultural exports to Canada and Mexico have grown from $8 billion per year to $39 billion per year since NAFTA went into effect in 1994. Without NAFTA or an equally beneficial agreement with Canada and Mexico, U.S. agricultural products will face higher tariffs and other barriers, making them less competitive, and our farm exports will plummet.
What are we asking for?
The Administration must do no harm to trade with Canada and Mexico. Any new agreement must preserve and enhance the market access that U.S. farmers and ranchers have now under NAFTA. We must not withdraw from NAFTA without a new agreement to take its place.
New Trade Agreements Are Needed
During the last presidential campaign, both major party candidates promised to withdraw the U.S. from the Trans-Pacific Partnership agreement, and President Trump quickly fulfilled that promise after taking office. While the TPP was not perfect (no agreement is), the American Farm Bureau Federation’s analysis showed that it would have increased U.S. agricultural exports to Japan and other Asian countries by $5.3 billion per year.
Since the United States’ withdrawal from TPP in January, 2017, the Trump Administration has engaged in productive trade negotiations with the EU, Canada, Mexico and other countries. However, no new free trade agreements have been finalized. Meanwhile, Canada has reached a new trade deal with the European Union, the EU has reached a new trade deal with Japan, and several South American countries have begun trade negotiations with the EU.
The U.S. is being left behind. In fact, the U.S. has trade agreements with only 20 countries—but, as an indicator of how important those few trade agreements are, the countries with which we have trade deals account for more than 40 percent of U.S. agricultural exports.
What are we asking for?
We need to begin trade negotiations with Japan, which would have been the biggest market in the TPP agreement, and with Great Britain as it exits the EU. Trade negotiations with the EU need to be re-energized, and we need to engage in trade talks with other growing economies in Africa, Asia and Central America. The sooner we resolve the tariffs war and conclude the NAFTA renegotiation, the sooner we can turn to opening new markets around the world.
All these trends—the tariffs war, NAFTA uncertainty, falling behind in the race for new trade agreements and greater market access for U.S. farm goods—are threats to U.S. agriculture’s competitiveness around the world.
But the growing impact of the tariff retaliation by China and other countries is the most acute threat that we face today.
During this year’s summer congressional work period—commonly known as August recess—it is critical that farmers and ranchers engage with elected officials and call on them to get more involved in the nation’s direction on trade matters.
How can I engage?
1. Speak at town hall meetings attended by your members of Congress. Use the messaging in this toolkit to help you gather your thoughts and prepare your comments.
2. Share the trade messages in this toolkit via social media.
3. Submit an op-ed article to your local newspaper.
4. Visit fbadvocacy.org and click the “Share Your Video Story” link to upload a short video about how trade uncertainty is affecting your farm or ranch. And to add your name to the petition to support fair trade for agriculture.
We’ve all feared being hit with a tough question from someone who doesn’t understand the issues from a farmer’s perspective. Here are a few of the tough questions that come up on trade and the current tariffs war, with suggested responses.
- Americans for Farmers & Families is a coalition of growers, producers, suppliers, transporters, retailers and consumers dedicated to preserving NAFTA and working with President Trump to negotiate a modernized agreement fit for the 21st Century. Visit the website and follow AFF on social media to stay up to date on ag trade news and social media messaging that you can amplify on your own social networks.
- Farmers for Free Trade is a coalition effort supported by numerous agricultural organizations and companies, with a goal of educating the public about the importance of trade and mobilizing farmers and ranchers to engage in support of maintaining access to our foreign markets. Visit the FFT website and follow them on social media to stay in the loop on messaging and resources.
- FB Advocacy — Use Farm Bureau’s online advocacy tools to tell your story and contact your members of Congress about the importance of trade.
- FB Market Intel — AFBF economists provide regular market updates on breaking trade news and data.