The Economic Impacts of Retaliatory Tariffs on U.S. Agriculture

In 2018, the United States imposed Section 232 tariffs on steel and aluminum imports from major trading partners and separately Section 301 tariffs on a broad range of imports from China. In response to these actions, six trading partners—Canada, China, the European Union, India, Mexico, and Turkey—responded with retaliatory tariffs on a range of U.S. exports, including agricultural and food products. The agricultural products targeted for retaliation were valued at $30.4 billion in 2017, with individual product lines experiencing tariff increases ranging from 2 to 140 percent. This report provides a detailed look at the impact of retaliatory tariffs on farmers at the State level by estimating the direct export losses associated with the trade conflict. Using the product-line econometric estimates from Grant et al. (2021) and the USDA, Economic Research Service’s State Exports, Cash Receipts Estimates, this report comprehensively assesses the direct effect of retaliatory tariffs on U.S. agricultural exports to these retaliating trading partners across States and commodities. From mid-2018 to the end of 2019, this study estimates that retaliatory tariffs caused a reduction of more than $27 billion (or annualized losses of $13.2 billion) in U.S. agricultural exports, with the largest decline in export losses occurring for exports to China. At the commodity level, soybeans accounted for the predominant share of total trade loss, making up nearly 71 percent ($9.4 billion of annualized losses) of the total, followed by sorghum (over 6 percent or $854 million in annualized losses), and pork (nearly 5 percent or $646 million in annualized losses). At the State level, losses were largely concentrated in the Midwest with Iowa ($1.46 billion in annualized losses), Illinois ($1.41 billion in annualized losses), and Kansas ($955 million in annualized losses), accounting for approximately 11, 11, and 7 percent, respectively, of the total losses. For soybeans, most of the trade lost by the United States was gained by Brazil. In 2020, U.S. agricultural exports to China significantly rebounded following the signing of the U.S.-China Phase One Economic and Trade Agreement (Phase One Agreement) and a separate retaliatory tariff waiver program; however, 1 year after the deal, U.S. market share still remained below pre-retaliatory tariff levels