USDA Official Says Ag Exports to Change, Not Decline, in Response to New Tariffs
Large-scale agriculture is one of America's competitive advantages, and farm exports are one of the top targets for tariffs in China, the European Union, Mexico and Canada. But Rob Johansson, chief economist at the U.S. Department of Agriculture, said even though tariffs are high enough to disrupt sales, "at least in terms of short-run effects, you could see trade increasing." Johansson explained: "Markets will find a way." As China buys more soybeans from South American countries, such as Argentina and Brazil, U.S. soybeans will go to the markets Brazil and Argentina had been selling to. He said agriculture economists will be watching to see which tariffs are high enough to keep a product out of the market. Johansson was one of the experts discussing the Organisation for Economic Co-operation and Development (OECD)-United Nations Food and Agriculture Organization's 10-year agricultural outlook at a program in Washington on July 10.
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Will Martin, a senior research fellow at the International Food Policy Research Institute, quipped that the trade war between China and the U.S. "is kind of a subsidy for the world transport industry." But the experts weren't sanguine about the tariffs on agriculture. All said they hope they end quickly -- but noted the effects could last far longer than the tariffs did. Constance Cullman, CEO of the Farm Foundation, noted that when the U.S. imposed a grain embargo on Russia about 25 years ago, "we never got that market back."
Martin said it's notable that so many of the U.S. tariffs on Chinese goods are on intermediate goods and inputs. That will make U.S. producers less competitive. Agriculture, too, is part of a global supply chain, particularly among the NAFTA countries.
Jonathan Brooks, head of the OECD Trade and Agriculture Directorate, agreed with Johansson, that in the case of non-perishable grains and oilseeds, "the system can get around it." But, he said, "It really is worrying if these things accumulate across commodities. Lost markets take a long time to get back, if at all." Brooks was speaking via videoconference from Paris.
Aside from the global trade conflict, trade in agricultural products has been increasing by 5 percent to 6 percent annually over the last decade, as China's increasing income means its people can afford to eat more animal protein -- which in turn means both more grain imports, as feed, and more frozen pork imports. With China mostly caught up to Western meat consumption -- and India more likely to increase fresh milk consumption than increase meat eating -- the growth trend will moderate, according to OECD-FAO projections. The USDA believes Chinese demand for protein and soybeans will grow more slowly, too, but it still thinks the rate of growth will be faster than the OECD-FAO projections.