NCSL Agriculture Task Force: Trade, Tariffs and The Ag Economy

Trade, Tariffs, & the Ag Economy
June 8, 2019
Chad Hart
Associate Professor/Crop Marketing Specialist
chart@iastate.edu
515-294-9911
Extension and Outreach/Department of Economics

Net Farm Income
Source: USDA
Farm Debt
Source: Federal Reserve

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

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

Population growth 2017 to 2050
Source: World Bank

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

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

Value of Ag Trade
Source: USDA-FAS
U.S. Ag Exports
Source: USDA-FAS
Agricultural trade with Canada
NAFTA
Two-way trade up 395%
since NAFTA

Agricultural trade with Mexico
NAFTA
Two-way trade up
577% since NAFTA

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

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

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

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)

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

WTO Members
Source: WTO
Per Capita Trade Values
Source: WTO
Trade in Goods
Source: WTO
Trade in Services
Source: WTO
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

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.

Beef Export Shifts
Source: USDA-FAS
Pork Export Shifts
Source: USDA-FAS
Sorghum Export Shifts
Source: USDA-FAS
Soybean Export Shifts
Source: USDA-FAS
Corn Export Shifts
Source: USDA-FAS
Wheat Export Shifts
Source: USDA-FAS
Rice Export Shifts
Source: USDA-FAS
Cotton Export Shifts
Source: USDA-FAS
Arable land

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

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/

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Trade, Tariffs, & the Ag Economy

Extension and Outreach/Department of Economics

Source: Federal Reserve

Extension and Outreach/Department of Economics

Source: CIA World Factbook

Source: World Bank

Canada & Mexico buy

Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Extension and Outreach/Department of Economics

Source: USDA Economic Research Service, “State Export Data”

Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Extension and Outreach/Department of Economics

Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

Extension and Outreach/Department of Economics

• Used to reduce trade and protect domestic industries

• Has both positive and negative impacts

• If specifically targeted against one country, then impacts

Extension and Outreach/Department of Economics

• Negative for China’s soybean consumers and U.S.

• Price effects are due to supply changes

Extension and Outreach/Department of Economics

• They’re not new. We’ve had tariffs on many goods since

• Major shifts in U.S. tariffs in:

Extension and Outreach/Department of Economics

• A multilateral treaty, signed by 23 countries in 1947, to

• Was updated several times between 1947 and 1994,

Extension and Outreach/Department of Economics

• Created in the GATT update in 1994 and serves as the

• 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

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Extension and Outreach/Department of Economics

Iowa Farm Outlook:

Extension and Outreach/Department of Economics

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