Trade, Tariffs, & the Ag Economy

1. Trade, Tariffs, & the Ag Economy June 8, 2019 Chad Hart Associate Professor/Crop Marketing Specialist chart@iastate.edu 515-294-9911

2. Net Farm Income Source: USDA

3. Farm Debt Source: Federal Reserve

4. Why do U.S. farmers need export markets? • That’s where the customers are • That’s where the economic growth is • That’s where the consumption growth is • We produce surpluses • We only eat high on the hog • Exports are crucial to farm income

5. 96% of the world’s population lives outside the US Source: CIA World Factbook

6. Population growth 2017 to 2050 Source: World Bank

9. Top ten US ag export markets, 2017 Canada & Mexico buy 28% of US ag exports Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

10. Top 10 ag exporting states, 2017 Source: USDA Economic Research Service, “State Export Data”

11. Value of Ag Trade Source: USDA-FAS

12. U.S. Ag Exports Source: USDA-FAS

13. NAFTA Agricultural trade with Canada Two-way trade up 395% since NAFTA Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

14. NAFTA Agricultural trade with Mexico Two-way trade up 577% since NAFTA Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

15. Tariffs • A tax on imports • Used to reduce trade and protect domestic industries • Has both positive and negative impacts • Positive for domestic producers of the product with the tariff • Negative for domestic consumers of the product with the tariff • If specifically targeted against one country, then impacts are • Positive for that country’s consumers • Negative for that country’s producers

16. Example: China’s Soybean Tariff • Positive for China’s soybean producers and U.S. soybean consumers • Chinese soybean producers capture a higher price • U.S. soybean consumers capture a lower price • Negative for China’s soybean consumers and U.S. soybean producers • Chinese soybean consumers pay a higher price • U.S. soybean producers receive a lower price • Price effects are due to supply changes • Less U.S. soybeans imported by China • More U.S. soybeans left on domestic market

17. Tariffs are a Policy Tool • Can be used to: • Reduce trade deficits • Raise government funds • Protect specific industries • Serve as a bargaining chip in trade negotiations • They’re not new. We’ve had tariffs on many goods since the U.S. was founded. • Major shifts in U.S. tariffs in: • 1789, 1790, 1792, 1816, 1824, 1828, 1832, 1833, 1842, 1846, 1857, 1861, 1872, 1875, 1883, 1890, 1894, 1897, 1909, 1913, 1921, 1922, 1930, 1934, 1947, 1962, 1974, 1979, 1984, 1988, 1994, 2002, 2009, 2018

19. GATT • General Agreement on Tariffs and Trade • A multilateral treaty, signed by 23 countries in 1947, to promote international trade • Was updated several times between 1947 and 1994, lowering trade barriers and including more countries in the agreement (reaching over 100 countries by 1972)

20. WTO • World Trade Organization • Created in the GATT update in 1994 and serves as the formal global organization for trade rules • Currently has 164 country members • Helps administer trade agreements • Serves as a forum for trade negotiations and disputes • Provides technical trade assistance and training for developing regions

21. WTO Members Source: WTO

22. Per Capita Trade Values Source: WTO

23. Trade in Goods Source: WTO

24. Trade in Services Source: WTO

25. Recent Trade Disputes • 2002: U.S. imposes tariffs on steel • Bush administration wanted to protect the U.S. steel industry from surges in steel imports • Several countries were exempt from the tariffs • Canada, Mexico, Argentina, and other developing countries • EU, Japan, South Korea, China, and Brazil challenged the tariffs in the WTO • WTO ruled against the steel tariffs, pointing out that steel imports in the U.S. had actually dropped between 2001 and 2002 • U.S. removed the tariffs in 2003

26. Recent Trade Disputes • 2009: U.S. imposes tariffs on Chinese tires • Obama administration wanted to protect the U.S. tire industry as it accused China of flooding the international markets with cheap tires • China retaliated with tariffs on U.S. chicken • The tariffs substantially reduced trade for the selected products • The tariffs were removed in 2012 • However, the product markets didn’t recover to pre-tariff levels.

27. Beef Export Shifts Source: USDA-FAS

28. Pork Export Shifts Source: USDA-FAS

29. Sorghum Export Shifts Source: USDA-FAS

30. Soybean Export Shifts Source: USDA-FAS

31. Corn Export Shifts Source: USDA-FAS

32. Wheat Export Shifts Source: USDA-FAS

33. Rice Export Shifts Source: USDA-FAS

34. Cotton Export Shifts Source: USDA-FAS

35. Arable land

36. Want to provide feedback on my presentation?https://www.surveymonkey.com/r/ChadHart

37. Thank you for your time!Any questions?My web site:http://www2.econ.iastate.edu/faculty/hart/Iowa Farm Outlook:http://www2.econ.iastate.edu/ifo/Ag Decision Maker:http://www.extension.iastate.edu/agdm/