President Donald Trump’s announcement Thursday of a 25% tariff on imported steel and a 10% tariff on aluminum left the door open to exclude some of the U.S.'s most crucial trading partners, including Canada and Mexico, but the agriculture industry fears that it will be the one to pay the price in any trade war.
According to Virginia Tech associate professor Jason Grant, who opposes the proposed increased tariffs, trade economists are concerned about retaliation from other countries if the U.S. should follow through with the suggested 25% steel and 10% aluminum tariffs.
“As opposed to safeguards or antidumping and countervailing duties, the proposed steel and aluminum tariffs for national security reasons could be in place indefinitely, and the proposed imposition of these tariffs on the basis of national security will leave the U.S. vulnerable to retaliation by some of our biggest, and perhaps most important, trade allies,” Grant said.
Grant said the proposed tariffs stand to disrupt substantial two-way trade between the U.S. and Canada, Mexico and South Korea. Canada and Mexico will be specifically exempted from both tariffs initially. Trump has linked the exemptions to the ongoing North American Free Trade Agreement (NAFTA) talks.
European countries and others could potentially request exclusion. Other countries with a “security relationship” to the U.S. may seek exemptions by opening talks with the Administration on “alternative ways” to address the threats their products allegedly pose to national security. Trump earlier hinted that Australia could be exempted, citing a good relationship and close defense ties.
Grant noted that China and the European Union both have already indicated that they would impose tariffs on U.S. food and agricultural products if the U.S. places tariffs on steel and aluminum.
"The immediate target for retaliation toward the proposed tariffs are in product lines for which we have a trade surplus, which happen to be farm products – from corn and soybeans to wheat and sorghum,” Grant said.
The American Soybean Assn. (ASA) said soybeans are a prime target for retaliation, given the crop's prominent role in agricultural trade.
“These tariffs are a disastrous course of action from the White House. They may lead to retaliation by one or more of our valuable trading partners, which, in turn, will kneecap demand for soybeans in a time when the farm economy is struggling,” ASA president and Iowa farmer John Heisdorffer said. “The idea that we’re the only game in town and that these partners have no choice but to purchase from the U.S. is flatly wrong. Our competition in Brazil and Argentina is eager to capitalize on whatever openings these tariffs create for them in markets like China and elsewhere.”
Heisdorffer said it was disappointing that, despite meeting with officials at the commerce and treasury departments as well as the U.S. Trade Representative and the White House, ASA's input was not taken into account.
“There is absolutely a way to encourage growth in domestic industry without cannibalizing the success of agricultural trade. With these tariffs, the Administration has taken the opposite approach and sacrificed the progress and potential of farmers,” Heisdorffer said.
Farmers for Free Trade said these tariffs will cause retaliation that will come out of the pockets of American farmers. “History shows that these types of tariff fights escalate with our trading partners and result in farmers paying the price in the form of higher tariffs on the products we export. We’ll also see the price of ag equipment and inputs increase. While we need tough trade enforcement, we need to be smart about avoiding global trade fights that hurt American agriculture,” the coalition said in a statement.
Americans for Farmers & Families, a broad coalition advocating for a strong NAFTA, saw the exclusion of Mexico and Canada as a recognition by Trump of the importance of renegotiating a better NAFTA.
“We need to wrap up NAFTA negotiations without jeopardizing our access to export markets or our ability to protect that access,” Americans for Farmers & Families spokesperson Joshua Baca said. “Plainly stated, since its implementation, NAFTA has been a win for rural families. It is critical to the 43 million Americans whose jobs are supported by the U.S. food and agricultural industries, and it has boosted our domestic economy by $127 billion annually with trade between the U.S., Mexico and Canada nearly quadrupling. America’s rural voters are watching and listening to President Trump. It is critical that he keeps his promise to protect farmers in a modernized NAFTA.”