Updated: Exporters gauge potential impact of trade dispute

Issue Date: June 6, 2018
By Ching Lee

The European Union, Canada and Mexico—key export markets for California agricultural products—promised they would strike back with billions of dollars' worth of tariffs on a wide range of U.S. exports, including some agricultural products, in retaliation for new U.S. tariffs on steel and aluminum imports.

The U.S. announced the metal tariffs in March, but it granted temporary exemptions to the three allies in hope of negotiating new trade terms. Those exemptions expired on June 1, with the Trump administration saying trade talks with the EU, Canada and Mexico had not made enough progress to warrant any further exemptions.

The U.S. has been trying to renegotiate the North American Free Trade Agreement with Canada and Mexico.

The EU told the World Trade Organization last month it planned to enact tariffs on more than $3 billion worth of U.S. goods, including agricultural products such as rice, corn, dry kidney beans, cranberries, tobacco and orange juice.

If approved by its 28 member countries, the additional 25 percent import duties would become effective as soon as June 20.

Canada said it plans to impose tariffs on about $12.8 billion worth of U.S. products starting on July 1.

As with the proposed EU tariffs, Canada's list largely spared fresh produce, except for cucumbers, but includes foods such as ketchup and other tomato sauces, yogurt, strawberry jam, nut purees and pastes, berry and other fruit purees, orange juice, pickles, maple syrup, and prepared bovine meat and meal. Those items would be hit with a 10 percent duty.

Mexico released an official list Tuesday, which included agricultural items such as cheeses, apples, potatoes, cranberries, and a number of ham, pork and sausage products. Mexico originally said it planned to levy duties on U.S. grapes and blueberries as well, but did not include those products on its tariff list.

Since April, Chinese tariffs on 128 U.S. products worth $3 billion—including nuts, fruit and wine—have already been in effect related to the steel and aluminum import tariffs the U.S. has placed on China.

Earlier this week, China renewed its promise to impose import duties on an additional $50 billion worth of U.S. goods, including more agricultural products, if the U.S. pushes forward with potential tariffs on $50 billion worth of Chinese goods.

In the current trade dispute with the EU, Canada and Mexico, the impact to California agriculture is not fully known.

Dairy and products represented the No. 1 California agricultural export to Mexico in 2016, with a value of about $421 million—but it is unclear how much of those exports were in the form of cheese.

California exported $35 million worth of rice to the EU in 2016. That's about 5 percent of the state's total rice exports. Rice ranks eighth among the top California farm exports to the EU. The new tariffs cover semi-milled and wholly milled medium- and long-grain rice, and broken rice.

About 40 percent of the state's processing-tomato exports go to Canada, although it's unclear how much of that is ketchup and tomato sauce, items that are specifically targeted for the retaliatory tariffs. Processing-tomato exports to Canada were valued at $295.6 million in 2016. They are the state's second biggest agricultural export to the North American trading partner.

That the United States is sparring with the state's top trading partners is worrisome, said Josh Rolph, federal policy manager for the California Farm Bureau Federation.

California farmers, he said, face a host of pressures and "trade has been the bright spot," noting that in 2016, the state exported nearly half of what it produced in farm-gate value.

The EU was the No. 1 export destination for the state's farm products in 2016, followed by Canada, China/Hong Kong, Japan and Mexico.

"Of our top five exporting destinations for California agriculture, four are at immediate risk," Rolph said.

Now that the tariff exemptions for Mexico and Canada have expired, it could accelerate trade talks among the NAFTA partners to finalize an agreement more quickly, he said, but it could also further sour relations with the nation's closest neighbors.

"It's either going to help us or hurt us in the long term, but right now it's too early to say which direction it's going to go," Rolph said.

Brian Kuehl, executive director for Farmers for Free Trade, said the new tariffs from the EU, Canada and Mexico could "take many American farm operations to the breaking point."

"Already, farmers are grappling with the impact of previous tariffs, which have caused falling commodity futures, higher equipment prices, and the markets they've fought to get into for decades to vanish overnight," he said.

"The addition of new retaliatory tariffs on everything from bourbon, to rice, to orange juice and cranberries will only widen the pain to additional farmers across the country," Kuehl said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

[Story updated 6/5/18.]


Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.