Losses From Tariffs Retaliating for Section 232 Outweigh USMCA Gains, According to New Study
The higher quotas for poultry and dairy under the new NAFTA should create $450 million in benefits by the time they phase in 19 years from now, according to a new study by Purdue University economists. That gain is massively overshadowed by the size of $1.8 billion in lost sales now to Mexico and Canada because Mexico placed tariffs on pork, poultry, cheese and apples and both countries levied duties on some retail food products. When you combine the gains in the new NAFTA with the losses from retaliatory tariffs, the net loss is $779 million, according to the study. The biggest bite has been from tariffs on pork and poultry in Mexico -- those exports have fallen by 7 percent.
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Dominique van der Mensbrugghe, the lead author on the report, presented the findings in Washington on Oct. 31. When asked how a rollback in Mexican tariffs, but not Canadian tariffs, would affect farm exports, Mensbrugghe said more than 50 percent of the losses would be reversed. Mexican trade negotiators have not ruled out quotas on its steel exports to the U.S., and Canada has. President Donald Trump has said that he's not interested in lifting the tariffs on the NAFTA partners without protecting domestic steel in some way, such as through quotas.
The study also talked about the impact of retaliatory tariffs from China, which has caused the biggest drop in agricultural exports. The category that includes soybeans has seen exports fall by 21 percent. The Farm Foundation event also featured Joe Glauber, a senior research fellow at the International Food Policy Research Institute. He said that impact has been so disruptive and its effect is glaring right now, at harvest time. Last year, he said, "every train heading west to the Pacific Northwest was carrying soybeans. Now nothing's going out that way."
Glauber, the former senior economist at the Agriculture Department, said -- as he has before (see 1810180027) -- that the new NAFTA is more notable for what it lacks than for the modest increases in dairy exports it could engender. "Some of the best news about NAFTA is what's not in NAFTA [2.0]," he said, singling out the seasonality provision for antidumping. Avocado imports from Mexico have helped drive demand for American avocados, he said. And, he added, "our own producers could've been hurt by this" if Mexican or Canadian interests had brought antidumping cases against American apples or tomatoes or blueberries. He said, "I think this is mischief that thankfully was rejected."