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August 25, 2019 | CoBank
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U.S. Farms Paying the Cost of Retaliatory Tariffs

U.S. bargaining power shifts in global commodity markets

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U.S. farms are taking the brunt of retaliatory tariffs placed on their products, according to a Knowledge Exchange report released by CoBank, a cooperative bank serving agribusinesses, rural infrastructure providers and Farm Credit associations throughout the United States.

In an analysis of 11 U.S. agricultural commodities representing a cross-section of agricultural exports, U.S. producers — not the importing country or its consumers — paid much of the cost of these tariffs in all but two cases.

The impact of retaliatory tariffs placed on U.S. farm products reflects the lopsided balance of power between U.S. producers and their importing customers. The commoditized nature of agricultural products, inventories with long shelf lives, and ease of identifying and sourcing suitable substitutes are among the factors that give importing customers the upper hand. In some instances, the U.S. is able to take on less of a share in the cost of retaliatory tariffs due to geographic and supply chain advantages, and/or dominance in particular markets. 

With the prospect of declining bargaining power, U.S. producers of most agricultural commodities will face pressure to absorb more of the costs of retaliatory tariffs in the future. 

While the U.S. has highly efficient farms with advantages in natural resources along with other strengths that make many U.S. food and agriculture products the most competitive in the world, the more time competitors have to take U.S. market share and cement trade relationships will negatively impact U.S. producers’ ability to recover.

 

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