U.S. trade policies remain in a state of flux with the Trump administration, and billions of dollars hang in the balance for agriculture.
“U.S. ag is at a crossroads,” Dominique van der Mensbrugghe, director of the Center for Global Trade Analysis at Purdue University, said Monday during the audiocast of the Farm Foundation’s forum on trade.
Since the end of World War II, U.S. administrations have been pursuing lower-tariff trade. But the Trump administration has reversed those long-standing policies, he said.
“The steel and aluminum tariffs were the first salvo,” he said.
The U.S. also withdrew from the Trans-Pacific Partnership, which was signed by 11 other countries.
“This will certainly have an impact on market access for U.S. farmers,” he said.
U.S. steel and aluminum tariffs are still in place, and the U.S. has threatened China with more tariffs. And while there’s no immediate concern about ratification of the new U.S.-Mexico-Canada Agreement, it is not yet a done deal, he said.
How those trade issues turn out will have an impact on U.S. agriculture. Things could go in a direction of more protectionism, remain at the status quo or swing to a total reversal of the trade wars, he said.
A study of the potential impacts of those outcomes by Purdue University shows U.S. agriculture could lose $21.8 billion annually in exports under the worst-case scenario.
That scenario would include the U.S. remaining outside TPP, continued tariffs and retaliatory tariffs and a complete withdrawal from the North American Free Trade Agreement with Mexico and Canada.
Taking the issues separately, the U.S. withdrawal from TPP would reduce U.S. agricultural exports by $1.8 billion annually. If the U.S. were to rejoin TPP, however, those losses would turn into a gain of $2.9 billion annually in additional agricultural exports.
The total cost to agriculture and other industries of leaving TPP is roughly $5 billion, he said.
As for NAFTA, it’s had a dramatic impact on trade, he said. The share of U.S. agriculture exports going to Canada and Mexico increased from 14 percent in 1995 to 30 percent in 2017, he said.
While its replacement — the USMCA — was mostly a modernization of NAFTA with a relatively small increase in U.S. agricultural exports, it consolidated the gains made under the previous agreement, he said.
A complete withdrawal from NAFTA would lead to a $12 billion decline in U.S. agricultural exports annually.
But current retaliatory tariffs are a more glaring issue. Continuation of those tariffs by Canada and Mexico would result in a decline of $1.8 billion in agricultural exports annually.
The impacts of all U.S. tariffs and counter tariffs, including retaliatory tariffs by China and the EU, would result in an $8.4 billion annual loss in U.S. agricultural exports.
The trade wars and withdrawal from TPP are leading to a $9.8 billion decline in U.S. agricultural exports annually.
As for the outlook, there’s been no reversal yet in the trade wars — even with the signing of the new USMCA, he said.
“At this point, there’s no reason to believe there will be a reversal. Can we be optimistic? I’m not sure at this stage. (But) I think we can be optimistic things won’t get worse,” he said.