Editor’s note: National Potato Council’s Kam Quarles wrote this article before President Trump threatened to close the U.S./Mexico border. The border is open at the time of this publication.
The 2018 Farm Bill is finally behind us and the government shutdown drama is over. We can now focus on the cost of the trade wars on American agriculture, including our industry.
The ongoing back-and-forth regarding the multitude of actions taking place across the globe, and the arcane agreements they impact, creates confusion. To cut through the noise, we wanted to talk specifics on the impact for our industry.
Japan and Vietnam
In Japan and Vietnam, when the Administration elected to withdraw from the Trans-Pacific Partnership (TPP) Agreement, the U.S. lost tariff concessions that it negotiated. All the other nations involved in TPP moved forward in our absence. Their tariff reductions are down 50%, with the additional benefits of duty-free access to be completed by 2021.
Given these disadvantages, the U.S. potato industry might lose $150 million annually in the Japanese market.
Due to ongoing trade battles, China placed a retaliatory tariff on U.S. frozen fries and dehydrated potatoes.
Since the Chinese tariffs against the U.S. went into effect, Canadian exports have increased 59% and EU exports are up 110%. In part, that’s filling the void left by reduced U.S. exports. Should the announced tariffs remain, the U.S. stands to lose more than $40 million in exports to China over the next year.
Mexico has placed a 20% tariff on U.S. frozen fries. This action invalidates our previous duty-free access under the North American Free Trade Agreement (NAFTA). And it could potentially mean a loss of more than $80 million in sales annually.
Keep in mind these losses occur regardless of how competing players act. For example, the EU seeks to establish itself in Mexico. And since the tariffs against the U.S. were announced last year, EU exports to Mexico have increased 145%.
Additionally, the Administration has suggested that if Congress does not approve the pending U.S.-Mexico-Canada Agreement (USMCA), it will exert leverage on senators and congressmen by pulling out of NAFTA. Should that occur, the U.S. potato industry would likely lose upward of $140 million in exports to Canada each year.
In the aggregate, the estimated impact to U.S. potato exports from just these examples could exceed more than $400 million annually.
This overall number, combined with losses across U.S. agriculture, does not account for the negative economic impact that will trickle down to dependent jobs and businesses throughout the supply chain.
To avoid these overwhelming negative consequences, we are strongly urging the Administration and Congress to restore the substantial tariff concessions we negotiated under TPP, ratify the USMCA, and act to eliminate the retaliatory tariffs against our products in China and Mexico.
Inaction will only allow these numbers to grow and dig the hole we must climb out of that much deeper.