By Jessica Domel
All eyes are on American trading partners this week following the implementation of a pair of new tariffs that may result in trade retaliation on American agriculture.
The tariffs, 25 percent on imported steel and 10 percent on imported aluminum, went into effect Friday, March 23.
“At first, it was said that all of those tariffs would apply to products coming from every country. Late last week, the administration said there are going to be some countries that are excluded from this, which relieves some of agriculture’s worries,” Veronica Nigh, economist for the American Farm Bureau Federation (AFBF), said in an interview with the Texas Farm Bureau (TFB) Radio Network.
Some of the country’s largest trading partners—like the European Union, Canada and Mexico—were included on a list of countries excluded from the new tariffs.
“That also means that there’s a lot of countries that the U.S. trades with that are still on that tariff list that are going to start paying tariffs on their aluminum and steel,” Nigh said.
The first concern for agriculture is an increased price for products that use aluminum and steel like tractors and implements. The tariff could also mean increases for items like canned food.
“The second issue is what will those countries who are being forced to pay the tariff do in retaliation? I think that’s the larger concern for U.S. agriculture,” Nigh said. “We often find that agricultural products are the first item that countries retaliate against. That’s certainly a concern and something that we’re keeping an eye on.”
About 45 percent of all agricultural exports from Texas in 2017 went to trading partners who are not on the exemption list.
“Losing 45 percent of your state’s exports, or having those impacted, would be a pretty big deal even when we’re not talking about those countries who are on the exemption list,” Nigh said.
If American trading partners decide to retaliate, it could come in the form of smaller purchases of goods from the U.S. or the implementation of higher tariffs on goods bought by American companies.
“The economic theory, and what we’ve seen play out, is that when you place tariffs on products, about two-thirds at minimum of that tariff is actually passed on to the consumer. When the U.S. took on tariffs on steel and aluminum, it raises the price of steel and aluminum that we import from those countries,” Nigh said. “When the price goes up, obviously the amount of product that we buy goes down.”
The same thing happens to U.S. agricultural products.
“If those countries were to retaliate against the U.S., they would put additional tariffs on our ag products, which just means that the consumers in those countries are paying more for our products,” Nigh said. “As the price goes up, the quantity goes down.”
Retaliatory tariffs could also cost American jobs.
“There’s a ripple effect. When input costs go up, production slows down. When production slows down, you don’t need as many employees. There are some estimates that, when you look across the entirety of the U.S. economy, and you say, ‘What are these impacts going to be on jobs?’ there’s a study that says, ‘Yes, we’re going to see 26,000 jobs created in steel in aluminum.’ The negative of that is that you’re going to see a net job loss of almost 500,000 jobs elsewhere. That ripple effect is going to be seen throughout the economy,” Nigh said. “In the state of Texas, the estimates were that the state would lose 40,000 jobs as a result of these aluminum and steel tariffs.”
There’s concern, too, of a larger trade war with China, the largest buyer of American-grown soybeans in the world.
“On top of the steel and aluminum tariffs, we also have this new effort by the administration that was announced on Thursday that the U.S. is contemplating putting tariffs on Chinese imports to try to deal with intellectual property thefts. That’s what caused China, on Friday morning, to say, ‘”Okay, we can play this game, too. Here’s a list of products we would think about putting tariffs on in retaliation.’ There were a number of ag products on that list. So far, soybeans aren’t on that list but certainly could easily make their way onto some sort of a retaliation list,” Nigh said.
Last year, the U.S. sold about $18 billion of agricultu