Tariff Threats No Longer Just Bluster

Economic Tidbits 12.18.17

Last week marked a new extreme in the trade tensions between the U.S. and China as President Trump moved forward with tariffs on $34 billion of imported Chinese machinery, auto parts, and medical devices.  China responded immediately with tariffs on several U.S. products including soybeans and pork.  Several U.S. trading partners have now imposed tariffs on U.S. commodities and processed foods in response to tariffs imposed by the U.S.  With all the threats and tariffs imposed, it’s difficult to stay abreast of where things now stand.  Table 1 summarizes recent tariffs enacted by other countries on U.S. agricultural products which will affect Nebraska. 

            Table 1.  Commodity, Country, and Tariff Rate

Corn                                        European Union                      25%
Chilled/Frozen Pork                China/Mexico                          20-25%
Edible Beef, Pork                    China                                       25%
Sausages                                  Mexico                                    15%
Prepared/Preserved Meat        Mexico                                    20%
Soybeans                                 China                                       25%
Sorghum                                  China                                       25%
Wheat                                      China                                       25%

Source:  POLITICO Pro DataPoint; National Sorghum Growers

 
Agriculture isn’t the only Nebraska industry feeling the pinch from the heightening trade tensions. Mexico has also imposed tariffs on iron and steel products imported from the U.S.  Politico Pro DataPoint reports that Mexican tariffs on hot-rolled or NAS bars and rods will affect nearly $10 million in Nebraska sales of these products to Mexico.  Nebraska companies account for 58 percent and 94 percent of the sales of these products into Mexico.  In addition, the Omaha World Herald reported Monday the U.S. tariffs on imported steel and aluminum will mean higher costs on long rails imported from Japan for the Union Pacific railroad and higher input costs and lost sales for Behlen Manufacturing in Columbus.

USDA Undersecretary of Agriculture for Trade and Foreign Agricultural Affairs, Ted McKinney, recently told an audience of Farm Bureau members to “buckle up”, trade relations with China were going to get bumpy.  The drop in commodity prices during the month of June equaled over $1 billion lost in potential revenues for Nebraska corn and soybean producers.  The bumpy ride has indeed begun.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and a firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide an in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

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