LINCOLN, Neb. (DTN) -- The Trump administration's use of tariffs this time around could cost the economy upwards of $100 billion and is likely to have a broader effect on agriculture than the 2018 trade war, according to a new report from the University of Nebraska's Clayton Yeutter Institute of International Trade and Finance.
With the 10% minimum tariff on China, in particular, the institute said it "significantly broadens" the number of goods affected compared to a "more targeted" approach in 2018.
The eight-page report was authored by Matthew Schaefer, chairman of the institute and a law professor at Nebraska; John Beghin, a Nebraska agriculture economics professor; and Edward Balistreri, a Nebraska economics professor.
"This, combined with China's retaliation on U.S. energy goods, motor vehicles and agricultural equipment will have a negative economic impact on the U.S. that is larger than the 2018 trade war," the report concluded.
"The cost of the new broad-based tariffs for the U.S. economy is on the order of $30 to $100 billion. The agriculture sector would experience a double whammy of lost competitiveness from U.S. tariffs and loss of export markets through trading partners' retaliation. Products affected by trade retaliation would be pork, beef, corn and soybean products. For U.S. producers, finding new markets when retaliation makes their products less competitive takes time."
Balistreri said in his portion of the analysis that the 10% tariff on China's goods may "seem a modest escalation" compared to other tariffs on Mexico and Canada.
"Our analysis indicates that these new Chinese tariffs need to be taken seriously," he wrote.
Their overall estimated cost for the U.S. is "at least as big as the costs associated with the 2018 tariffs," Balistreri said.
"The worry is that these tariffs are only the first salvo in a new trade war that threatens to spill beyond the U.S. and China," Balistreri wrote.
"In a recent paper with Christine McDaniel (non-resident fellow in the institute), we find that the costs might go up by 10-fold under a retaliatory trade war consistent with Trump's campaign rhetoric of 60% minimum tariffs on China and 10% minimum tariffs on the rest of the world."
FARM INCOME HIT
Beghin said farm income, particularly in Nebraska, would decrease as the state produces "large surpluses" of key commodities and depends on export markets in Mexico, Canada and China.
"If these countries retaliate with their own tariffs, Nebraska exports are compromised and new markets have to be found, which takes time," he wrote.
"When the U.S. agricultural economy is hit with retaliatory tariffs, foreign competitors can move quickly to take advantage of their new, more competitive position in export markets."
Beghin said producers finding new markets can submit bids to tenders in countries that did not retaliate.
"They would need to identify transportation to these new markets (tenders are for both the commodity and its transportation)," he wrote.
"It would take time to find reliable and economical transportation to be competitive (for example, Cargill often loses wheat markets to Ukrainian suppliers because they cannot find transportation that is as cheap as Ukrainians can find). In addition, establishing long-term trusted relationships when tenders are not involved can take time."
When it comes to meat markets, Beghin said it can be "more complicated" because of plant and animal health and food safety requirements to meet in new markets.
COST OF PRODUCTION INCREASE
Since U.S. tariffs affect the cost of fossil fuel-based products and fertilizer prices, he said the "cost of production in farming would increase and competitiveness would decrease."
In Mexico, Canada and China, in particular, the report said 95% of Nebraska's corn exports, 90% of soybean exports, 57% of soybean meal exports, 32% of pork and 23% of beef were sent to the three countries.
Consumers could be facing higher food prices, especially with fruits and vegetables imported from Canada and Mexico, the report said.
"Food is characterized by two-way trade as we export and import a large amount of agricultural and food products," the report said.
"(In fiscal year 2024, the U.S. imported over $206 billion worth of food and agricultural products and exported over $174 billion in this sector, according to the U.S. Department of Agriculture). Food sectors are highly integrated in North America under the U.S.-Mexico-Canada trade agreement. Many products would be affected and supply chains would scramble to find cheaper alternatives."
The Trump administration is issuing the tariffs based on the 1977 International Emergency Economic Powers Act, which is the first time in history the law has been used in this manner.
Schaefer said the law allows tariffs to be imposed "virtually immediately" and with "no investigation" in advance.
What's more, the report said using that law means any legal challenges to the tariffs likely face "an uphill climb" because U.S. courts have traditionally given the president "wide latitude."
Read the Nebraska report: https://yeutter-institute.unl.edu/…
Read more on DTN:
"Trump Lowers Tariffs on Potash While Suspending Canadian and Mexico Tariffs," https://www.dtnpf.com/…
Todd Neeley can be reached at todd.neeley@dtn.com
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