The Trump Effect on Trade

Where will it go from here
Where will it go from here
Jul 13, 2018
WASHINGTON, DC -- The last several months in international trade have been unpredictable and often contentious as many of the U.S.’s largest trading partners react to the Trump Administration’s recent tariffs.  As the U.S. exports 50 percent of its rice crop each year, any disruption in trade has a major impact on the profitability and viability of farmers, millers, merchants, and others in the U.S. rice industry.
Just after midnight on Friday, July 6, the U.S. government enacted tariffs threatened by President Trump against China, putting a 25 percent border tax on $34 billion worth of Chinese imports.  This recent round of tariffs is an effort by the Trump administration to punish China for what it sees as intellectual property theft, and follows on the heels of tariffs levied against steel and aluminum imports from many origins including China, Mexico, Canada, and the European Union earlier this year.
China swiftly responded with $34 billion of retaliatory tariffs against a range of U.S. goods and commodities.  President Trump has threatened more tariffs of up to $500 billion on Chinese imports in response.
Although China’s tariffs have threatened large parts of the U.S. agriculture sector, they do not directly impact rice sales, since China does not currently accept U.S. rice exports.  The bitter back-and-forth retaliation could, however, potentially set back the U.S.’s recent progress with the Chinese government to open up their enormous market to U.S. rice.

“The trade dispute with China will negatively impact our ability to sell into the Chinese market in the short-term,” said Todd Burich, with ADM Rice, Inc. and member of the USA Rice International Policy Committee.  "It may be difficult for the U.S. rice industry to navigate an agreement with the Chinese government in such a contentious atmosphere."
Closer to home, Mexico, the U.S.’s top rice market, has levied retaliatory tariffs against the U.S. in response to the Trump administration’s duties against aluminum and steel imports.  While rice is not on that list, Mexico did temporarily remove tariffs on rice from Asian origins, which presents an opportunity for some of the U.S.’s toughest competitors to swoop into this important market.  Retaliatory tariffs from Canada valued at $12.5 billion have also gone into effect, targeting products from districts represented by Republican lawmakers.
Rice is not on Canada’s retaliation list either, however, the tension between the three neighbors caused by the trade dispute is compounded by failure to conclude negotiations to “modernize” the North American Free Trade Agreement (NAFTA).  Ongoing negotiations among the three countries have missed multiple deadlines, and the President has threatened several times in the last year to exit the agreement.
“We are advocating that the partners of NAFTA come to a solution right away,” said Burich.  “It’s unclear when that will happen, but there probably won’t be a resolution until 2019, after our midterm elections.”
Looking east, U.S. rice has been directly targeted by retaliatory tariffs from the European Union of 25 percent, including milled and semi-milled long and medium grain, and broken rice.  This is already affecting shipments to Europe.

Meanwhile, Turkey has also announced increased import duties on U.S. rice.  Exports to Turkey are variable and extremely price sensitive, and any additional duty on U.S. rice in the face of competing suppliers from Russia and Southeast Europe is likely to greatly harm this export market.
The U.S.-Colombia Free Trade Agreement is another deal the Trump administration has plans to retool.

According to Carl Brothers, senior vice president & COO of Riceland Foods, the U.S.-Colombia trade deal has been a huge benefit to U.S. rice.  “The agreement opened a new market, and the management of access by auctioning the certificates has generated millions of dollars for U.S. rice research.  We want to preserve this key benefit.”
“Agriculture is perhaps the sector most impacted by retaliation to the Trump administration’s steel and aluminum tariffs,” said USA Rice COO Bob Cummings.  “Many in the rice industry are already experiencing consequences, while others seethe administration’s trade policies as a necessary hardline, and that once the storm has been weathered the U.S. will be in a stronger position on international trade matters.  In the meantime, USA Rice continues to advocate for a resolution of trade disputes that preserves NAFTA, opens the Chinese market to U.S. rice, and eliminates the retaliatory tariffs that unfairly target rice producers.”

U.S. Secretary of Agriculture Sonny Perdue has said that the Trump administration is crafting a strategy to keep U.S. farmers from being harmed by retaliatory tariffs.