A new analysis commissioned by Farm Foundation and completed by Purdue University agricultural economists found the benefits of the United States- Mexico- Canada Agreement do not outweigh the costs of the two countries reaction to increased tariffs on steel and aluminum imports, Southeast Farm Press reports.
Improvements included in USMCA will lead to an expansion of U.S. agricultural exports by $450 million, however, those gains will be negated by retaliatory tariffs taken by Canada and Mexico. The analysis estimates that the retaliatory measures will cause U.S. agricultural exports to decline $1.8 billion. Additionally, retaliatory tariffs from China and other trade partners could potentially see a decline in agricultural exports of $7.9 billion.
The USMCA still needs to be ratified by all three nations. If the agreement is not ratified and the U.S. were to withdraw from NAFTA, the three countries could potentially revert to most favored nation status, and exports would decline by more than $9 billion while cause higher consumer prices for food, Southeast Farm Press reports.
Here are key findings of the analysis:
- The USMCA maintains relatively free market access across the United States, Mexico and Canada, particularly in agriculture. It improves market access for U.S. dairy and poultry exports to Canada, providing a positive export bump in those sectors of $450 million. Dairy exports are expected to increase by 5 percent and exports of other meat products by 1.6 percent.
- USMCA has measurable impacts on exports of dairy and poultry to Canada, and "modest" impacts on farm income and labor demand.
- The USMCA was reached in a "volatile trade policy environment" that will create headwinds for U.S. farmers due to retaliatory measures by not only Canada and Mexico, but other nations. Specifically, retaliatory tariffs from Canada and Mexico could cause U.S. agricultural exports to decline by $1.8 billion, and by $1.9 billion to these two key trading partners, and the broader trade retaliation could cause U.S. agricultural exports to decline by $7.9 billion, thus overwhelming the small positive gains from USMCA.
- In the 25 years since NAFTA was formed, the share of U.S. agricultural exports to Canada and Mexico has increased to almost 30 percent, from 14.2 percent. The analysis cites a study which indicates "a withdrawal from NAFTA, with tariffs reverting to MFN levels, would create a decline in U.S. agricultural exports of more than $9 billion and a loss of export revenue of $12 billion with the two NAFTA partners."