Report: USMCA will cause US ag exports to decline by $1.8B

A new report says the United States-Mexico-Canada Agreement (USMCA) will expand U.S. agricultural exports by $450 million, but those gains will be negated by retaliatory tariffs by Canada and Mexico against the U.S.

(ronniechua, BigStockPhoto.com)
(ronniechua, BigStockPhoto.com)

A new report says the United States-Mexico-Canada Agreement (USMCA) will expand U.S. agricultural exports by $450 million, but those gains will be negated by retaliatory tariffs by Canada and Mexico against the U.S.

The study, “How U.S. Agriculture Will Fare Under the USMCA and Retaliatory Tariffs,” was commissioned by agricultural policy institute Farm Foundation and completed by Purdue University agricultural economists Dominique van der Mensbrugghe, Ph.D., Wallace Tyner, Ph.D., and Maksym Chepeliev, Ph.D.

The analysis says retaliatory tariffs will cause U.S. agricultural exports to decline by $1.8 billion and that, with continued tariffs from China and other trading partners, “the United States would see a decline in agricultural exports of $7.9 billion, thus overwhelming the small positive gains from USMCA.”

The USMCA was reached on October 1, but the deal has yet to be signed by the three governments.

Here are the key findings of the analysis:

  • The USMCA maintains relatively free market access across the United States, Mexico and Canada, particularly in agriculture. It improves market access for U.S. dairy and poultry exports to Canada, providing a positive export bump in those sectors of $450 million. Dairy exports are expected to increase by 5 percent and exports of other meat products by 1.6 percent.
  • USMCA has measurable impacts on exports of dairy and poultry to Canada, and “modest” impacts on farm income and labor demand.
  • The USMCA was reached in a “volatile trade policy environment” that will create headwinds for U.S. farmers due to retaliatory measures by not only Canada and Mexico, but other nations such as China. Specifically, retaliatory tariffs from Canada and Mexico could cause U.S. agricultural exports to decline by $1.8 billion, and by $1.9 billion to these two key trading partners, and the broader trade retaliation could cause U.S. agricultural exports to decline by $7.9 billion, thus overwhelming the small positive gains from USMCA.
  • In the 25 years since NAFTA was formed, the share of U.S. agricultural exports to Canada and Mexico has increased to almost 30 percent, from 14.2 percent. The analysis cites a study which indicates “a withdrawal from NAFTA, with tariffs reverting to MFN levels, would create a decline in U.S. agricultural exports of more than $9 billion and a loss of export revenue of $12 billion with the two NAFTA partners.”
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