{ "id": "R45903", "type": "CRS Report", "typeId": "REPORTS", "number": "R45903", "active": true, "source": "EveryCRSReport.com, CRSReports.Congress.gov", "versions": [ { "source": "EveryCRSReport.com", "id": 606720, "date": "2019-09-13", "retrieved": "2019-10-28T22:11:23.302435", "title": "Retaliatory Tariffs and U.S. Agriculture", "summary": "Certain foreign nations have targeted U.S. food and agricultural products with retaliatory tariffs since early 2018 in response to U.S. Section 232 tariffs on steel and aluminum imports and Section 301 tariffs levied on U.S. imports from China. Retaliatory tariffs have made imports of U.S. agricultural products relatively more expensive compared to similar products from competitor nations. In the short run, U.S. shipments of products to countries with retaliatory tariffs have declined, reducing overall global demand for affected U.S. agricultural products and driving down the prices of U.S. agricultural commodities. Depending on the length and depth of the tariffs and the range of products affected, some experts caution that the long-run trade impacts could inflict further harm as U.S. competitor countries have an incentive to expand their agricultural production. \nIn response to U.S. Section 232 and Section 301 actions, China levied retaliatory tariffs on almost all U.S. agricultural products, ranging from 5% to 50%. In response to U.S. Section 232 tariffs, Canada, Mexico, the European Union (EU), and Turkey retaliated with tariffs during the summer of 2018 on U.S. fruit, nuts, prepared vegetables and meats, pork, cheese, breakfast cereal, fruit juices, and whiskey. India implemented retaliatory tariffs on certain U.S. products after a Presidential Proclamation removed India from the U.S. Generalized System of Preferences program in May 2019. Canada and Mexico levied retaliatory tariffs in mid-2018, but these tariffs were removed in May 2019 after the Trump Administration announced an agreement with Canada and Mexico to remove the Section 232 tariffs on imports from both countries to facilitate ratification of the U.S.-Mexico-Canada Agreement\u2014a proposed regional free trade agreement that is meant to supersede the North American Free Trade Agreement (NAFTA). \nU.S. Agricultural Exports to China, 2014-2018\nIn Nominal Billions of U.S. Dollars\n/\nSource: U.S. Census Bureau trade data, accessed July 2019.\nNote: Data are in calendar years, January to December.\nThe total value of exports of U.S. food and agricultural products levied retaliatory tariffs in 2018 was $22 billion, down 27% from $30 billion in 2017. China accounted for about 80% of the total affected trade in both years. Despite the retaliatory tariffs, U.S. agricultural exports rose in 2018 to $140 billion from $138 billion in 2017, partly due to higher imports during the months leading up to the retaliatory tariffs and increased exports to other nonretaliating countries. With the continuation of retaliatory tariffs, U.S. Department of Agriculture (USDA) projects U.S. agricultural exports to decline about 4% in 2019.\nIn the short run, retaliatory tariffs contributed to declining prices for certain U.S. agricultural commodities and reduced exports, particularly for soybeans. Declining prices and exports sales combined with rising input and farm machinery costs contributed to a 16% decrease in U.S. net farm income in 2018, compared with 2017. China\u2019s soybean imports are expected to resume growing over the next decade, but a USDA study expects the volume traded to be less than previously anticipated. Because of the retaliatory tariffs on U.S. soybeans, USDA projects that Brazil will account for two-thirds of the global growth in soybean exports to China. The United States accounted for 40% of China\u2019s total soybean imports in 2016 and 35% in 2017, compared with Brazil\u2019s 46% in 2016 and 53% in 2017. In 2018, the U.S. share of China\u2019s soybean import market dropped to 19% and Brazil\u2019s share was up at 76%.\nChinese Imports of Russian Agricultural Products, 2016-2018\nIn Nominal Millions of U.S. Dollars\n/\nSource: China Customs Statistics accessed via Global Trade Atlas, July 2019.\nNote: Other animal prods = Other animal products.\nTo help alleviate the financial loss incurred by U.S. farmers due to retaliatory tariffs, USDA announced $12 billion in financial assistance in 2018\u2014referred to as a trade aid package\u2014for certain U.S. agricultural commodities using Section 5 of the Commodity Credit Corporation (CCC) Charter Act (15 U.S.C. 714c). In 2019, USDA announced a second trade-aid package of $16 billion. Increased trade aid to U.S. farmers has generated questions from some World Trade Organization (WTO) members about whether the trade-aid package may violate U.S. WTO commitments.\nWhile trade-aid packages may provide short-term financial assistance, some studies and critics of the President\u2019s actions caution that the long-term consequences of the retaliatory tariffs may present more challenges. Even as China has raised tariffs on U.S. imports, it has improved access to its markets for other exporting countries. Brazil, Russia, and other countries are expanding their agricultural production to meet China\u2019s import demand. For example, Russia\u2019s investments during the past two decades have resulted in agricultural productivity growth ranging from 25% to 75%, with higher productivity growth along its southern region. Although still at relatively modest levels, China\u2019s total food and agricultural imports from Russia increased 61% between 2017 and 2018.\nThe continuation of trade disputes and retaliatory tariffs may be of interest to Congress for the following reasons. Trade disputes have disrupted global markets and increased uncertainty in the farm input and output sectors. They may add to production costs, and they have dampened exports, impacted farm income, and triggered additional federal assistance for the farm sector. In the short run, there could be some transient benefits associated with various aspects of the agricultural sector. 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