U.S. Mexico Canada Agreement

Tariff Escalation Clouds the Outlook

Mon, 21 Apr 2025 18:50:07 GMT

After a long winter, farmers have returned to the fields for a new crop year, and milk production is racing higher to the peak output weeks of the year. Milk prices were relatively healthy in the first quarter of this year, and when coupled with welcomed lower feed costs, there were likely profits earned on dairies in most regions of the country. However, recent policy shifts have clouded the outlook for the months ahead, introducing demand uncertainty at a time when milk production and components are increasing. These wildcard factors are driving increased volatility and have forced markets lower in recent weeks, must the concern of farmers who were hoping for continued healthy margins throughout this year.

Increasing Milk Production and Supply Dynamics

On the supply side, milk production returned to growth this year, with volume up 0.5% in January followed by a leap-year adjusted 1% growth rate in February. Globally, production gains are expected as well, with RaboResearch expecting 0.8% YOY growth from the Big 7 export regions in 2025. Regardless of a limited supply of replacements, U.S. cow numbers grew quickly early this year, likely driven by farmers keeping cull rates low to drive as much milk volume as possible when prices were good. With this additional milk after three years of stagnation, the outlook shifts to demand expectations, with trouble brewing for the export markets.

Trade Policies and Their Ripple Effects

Since the U.S. presidential inauguration in January, a range of tariffs have been implemented, with some ongoing and others temporary. Initially, the focus was on China, Mexico, and Canada, key markets for U.S. dairy products. China has issued retaliatory tariffs on a wide variety of U.S. dairy products, making it more expensive for product to move to the country. So far, Mexico has avoided any retaliatory action, but the situation with both Canada and Mexico remains tenuous, with USMCA-covered products like dairy avoiding the worst of the tariff impacts for now. Attention now turns to the major announcement that came in early April: the U.S. will institute a 10% import tariff on goods from all countries, with certain higher tariffs on goods from more than 60 countries. The likelihood of retaliation is high, which could limit dairy exports moving forward. With more products to be consume domestically, markets have reacted accordingly lower.

It is frustratingly impossible to estimate how the trade situation will play out. CME Class III milk futures have sunk below $17 per hundredweight for May and June contracts, reflecting the uncertainty on the trade front. What was initially expected to be a healthy year for on-farm profitability is now being questioned after the increasing trade ambiguity. Thankfully, milk production growth is not overwhelming, and certainly, the tariff situation is ever evolving and could change quickly. Expect ongoing volatility in the short run, with market attention focused on forthcoming policy changes in the coming weeks.

Your Next Read: No, You Aren’t Crazy: It Is The Windiest Start To Spring In 50 Years

Mexico's President Says the Country Won't Retaliate with More Reciprocal Tariffs on U.S. Products

Wed, 02 Apr 2025 18:06:07 GMT

In what President Donald Trump is calling Liberation Day, the White House plans to officially roll out a plan to combat what he calls unfair trade policies in an effort to bring industrial jobs back to the U.S., the other major unknown is how other countries will retaliate. On Wednesday, the United States’ top trading partner announced it won’t go toe to toe with the president on trade.

Mexican President Claudia Sheinbaum says Mexico won’t retaliate with a long list of reciprocal tariffs. In her daily morning press conference, Sheinbaum says instead, Mexico will “announce a comprehensive program, not a tit for tat on tariffs” on Thursday. She adds Mexico’s leadership is still waiting to see what exactly Trump announces on Thursday, but added “we have a plan to strengthen the economy under any circumstance.”

Trump is slated to hold a press conference at 4 p.m. EST at the White House, saying “It’s going to make our country rich again .... We’re basically going to take back the money — a lot of the money that we’ve given away over many decades.”

President Trump has been calling attention to the disaster falsely marketed as "free trade" for decades.

In reality, foreign countries have gotten rich at the expense of the American worker.

Today, he finally levels the playing field. 🇺🇸 pic.twitter.com/XS0ZAiZS6p
— Rapid Response 47 (@RapidResponse47) April 2, 2025

Can Mexico Afford to Retaliate?
As AgWeb reported in March , the question leading up to April 2 was not only what the president would ultimately decide to do, but also if countries like Mexico could even afford to retaliate.

Here’s why. According to the Federal Reserve Bank of Dallas, Mexico’s GDP grew only 0.9% year over year in fourth quarter 2024, after expanding 2% in 2023 and 4.6% in 2022. Economic growth slowed, mainly due to lower investment, slowing consumption and a contracting energy sector.

The other issue? Mexico is extremely reliant upon demand from the U.S., exporting $41.9 billion worth of agricultural products to the U.S.

In 2023, Mexico accounted for 16.3% of U.S. agricultural exports and 23.3% of U.S. agricultural imports.

By the numbers:

Mexico is the largest source of horticultural imports to the U.S., supplying 63% of vegetables and 47% of fruit and nuts in 2023.
The top agricultural exports from Mexico to the U.S. in 2024 included beer, tomatoes, tequila, avocados, strawberries, raspberries and peppers.

Another important piece is Mexico is now the top ag export destination for the U.S.

According to Krista Swanson, chief economist for National Corn Growers Association (NCGA), Mexico is a huge destination for U.S. corn. More than 40% of U.S. corn exported last year went to Mexico. Not only does that mean the U.S. relies on Mexico, but Mexico is also reliant upon the U.S. due to the strong demand.

“That’s the other key piece here when we think about a Mexico situation, you know, will they retaliate on corn because it’s so important to the consumers in their country,” Swanson told Farm Journal during Commodity Classic this week. “And it’s such a big part of their diets and consumption. It’s a commodity that they consume way more of than what they produce. So they’re going to have to get it from somewhere.”

According to USDA’s Economic Research Service , between 1993 (the year before NAFTA’s implementation) and 2023, U.S. agricultural exports to Mexico expanded at a compound annual growth rate (CAGR) of 7%, while agricultural imports from Mexico grew at a rate of 9.7%.

“With the economic recovery in the United States and Mexico that followed the pandemic, U.S. agricultural exports to Mexico increased at a CAGR of 15.7% between 2020 and 2023, and U.S. agricultural imports from Mexico grew at a CAGR of 11.3%,” according to the USDA report. “In 2023, however, U.S. agricultural exports to Mexico decreased by 0.3% compared with the previous year, as the prices of major agricultural exports (such as corn and soybeans) declined.”

‘Farmers for Free Trade’ Speaks Out
Trump will announce his full plan at 4 p.m. EST on Wednesday, and Farm Journal will continue to follow this story as it evolves.

Ahead of Wednesday’s announcement on global tariffs, Farmers for Free Trade Executive Director, Brian Kuehl released a statement condoning the president’s use of tariffs.

“Farmers don’t want tariffs. In the midst of an already struggling farm economy, new tariffs threaten to raise input costs, close off key markets, increase uncertainty—and push more family farms to the brink of bankruptcy,” said Kuehl in a statement.

However, not all farmers agree with that. Iowa farmer Ben Riensche is hoping getting tough on trade will address the record ag trade deficit.

“We’re going to go through an adjustment period. We’re going make things a little less than comfortable for a while here while we make our trade partners be fair trading partners. It could be hard in the short term on farmers,” Riensche says.

You can read more about Rienche’s take on trade here.

Your Next Reads:
BREAKING: CNH Halts Farm Equipment Shipments From North America, Europe To Assess Tariff Situation

Farmers Who Stand Strong With Trump on Tariffs Say Long-Term Gain is Worth Short-Term Pain

Take Our Poll: Do You Agree With President Trump's Use of Tariffs?

Wed, 19 Mar 2025 17:07:05 GMT

Tariff whiplash is consuming the commodity markets — and the possible impact is stirring up quite the debate. At present, President Donald Trump says he’s sticking to his plan to impose additional tariffs on the United States’ top three trading partners starting April 2.

In early February, President Trump announced a 25% additional tariff on imports from Canada and Mexico , a 10% additional tariff on imports from China and a 10% tariff on energy resources from Canada.

Those tariffs were scheduled to go into effect in early March. However, President Trump made the decision to exempt goods from Canada and Mexico under the U.S.-Mexico-Canada Agreement (USCMA) from the 25% tariffs for another month.

What we know today is those exemptions for goods from Canada and Mexico covered under USMCA are scheduled to expire on April 2.

As agriculture waits to see what happens, the commodity markets continue to trade headlines and concerns are mounting about possible retaliatory tariffs. Tariff talk is already impacting input prices for farmers heading into spring.

Share Your Thoughts on Tariffs
In light of the ongoing tariff battle, we have two questions for you:

Do you support President Donald Trump’s use of tariffs as a negotiation strategy?
Do you believe USDA will compensate farmers for losses if agriculture is affected by a trade war, similar to the compensation provided through the Market Facilitation Program?

Click here to share your answers.

NOTE: We appreciate your input. The poll has been closed. Check back on Monday, March 24 for results and analysis.

The US–Canada Dairy Trade Dispute: Unraveling the Complexities

Thu, 13 Mar 2025 17:44:28 GMT

In recent years, the U.S.-Canada trade relationship has been under scrutiny, particularly regarding dairy exports and tariffs. This complex issue recently became a significant talking point after President Donald Trump pointed out Canada imposes tariffs exceeding 200% on certain U.S. dairy products. However, there’s much more to this narrative than meets the eye.

The Fine Print Behind High Tariffs
While President Trump’s statements highlight stark figures, the context reveals a nuanced picture. These high tariffs are not immediate; they take effect only after U.S. dairy exports surpass a certain quota, negotiated under the United States-Mexico-Canada Agreement (USMCA). As it stands, the U.S. has yet to reach this quota in any category of dairy products, with many categories, such as milk, not even reaching half of the zero-tariff maximum.

The Senators’ Stance on Compliance
A bipartisan group of senators, including Tammy Baldwin, Roger Marshall and Joni Ernst, have expressed concerns about Canada’s adherence to USMCA guidelines. Despite new provisions in the trade agreement, they emphasize Canada continues to fall short in market access for U.S. products. The senators’ letter to U.S. trade and agriculture secretaries urged congress to address these “long-standing issues” that hinder U.S. dairy exports.

“Historically, Canada has failed to live up to its commitments to provide access to its market; this remains the case even with new provisions in USMCA. In addition, Canada appears to be evading USMCA disciplines designed to deal with excessive protein exporting at artificially low prices,” wrote the senators in a letter to U.S. Trade Representative Jamieson Greer, Commerce Secretary Howard Lutnick and Department of Agriculture Secretary Brook Rollins. “In upcoming negotiations with your Canadian counterparts, particularly those regarding USMCA, we ask that you address these longstanding issues that harm the United States’ ability to export dairy products.”

The senators noted the dairy sector in Canada operates under strict and predetermined circumstances. These include limits on production, pre-set prices and restricted imports, in order to guard the country’s supply management system.

The Canadian dairy industry operates under a tightly regulated system characterized by production limits, fixed prices and import restrictions. While recent trade agreement changes are aimed at easing access, lawmakers argue Canada has exploited loopholes to continue its trade-distorting practices. One major point of contention is Canada’s export of dairy proteins at low prices, undermining global markets crucial to the U.S.

Industry Response to Potential Tariff Increases
Becky Rasdall Vargas of the International Dairy Foods Association acknowledges the accuracy of Canada’s high tariffs, noting these only activate upon reaching designated export quotas. Despite the U.S.'s efforts, no such quota has been met due to Canada’s protective trade measures, which conflict with their USMCA commitments. While acknowledging the progress set by the Trump administration, Vargas warns against a prolonged tariff war, urging a swift resolution to the protectionist issues harming American producers.

“U.S. dairy is grateful for the Trump administration’s efforts to hold Canada accountable on these protectionist measures. At the same time, a prolonged tariff war with our top trading partners will continue to create uncertainly and additional costs for American dairy farmers, processors, and our rural communities. We urge Canada and the United States to negotiate a resolution to these issues – both Canada’s trade barriers to U.S. dairy exports and the tariffs – as expeditiously as possible,” she said in a press release statement .

The ongoing discourse between the U.S. and Canada signifies a critical need for diplomatic negotiations to resolve these trade barriers. The impact of these issues extends beyond tariffs, affecting American dairy farmers, processors and rural communities.

Your Next Read:
Navigating Rough Waters: The U.S. Dairy Industry Amidst Global Trade Tensions

Can Mexico Afford to Retaliate Against the U.S.?

Wed, 05 Mar 2025 19:46:39 GMT

President Donald Trump followed through on his threats of imposing a 25% tariff on most imports from Canada and Mexico, along with an additional 10% on goods from China. While China and Canada released their list of retaliatory tariffs the same day, Mexico’s president, Claudia Sheinbaum, says they won’t release their list until the weekend.

Sheinbaum said the country will also respond with a 25% tariff on U.S. goods but will announce the products it will target on Sunday.

But can Mexico afford to retaliate? That was one of the questions asked by USDA chief economist Seth Meyer during Commodity Classic this week. The reason is Mexico’s economy is struggling, due to a number of factors, which includes a large informal sector, high budget deficit and unstable infrastructure.

According to the Federal Reserve Bank of Dallas, Mexico’s GDP grew only 0.9% year over year in fourth quarter 2024, after expanding 2.% in 2023 and 4.6% in 2022. Economic growth slowed, mainly due to lower investment, slowing consumption and a contracting energy sector.

(Federal Reserve Bank of Dallas)

The Dallas Fed says lower investment and consumption was the main driver behind the slow growth.

“Investment contributed three percentage points less to GDP growth in 2024 compared with 2023,” the Federal Reserve Bank of Dallas said in a recent report. “The major drop was in nonresidential construction investment, while purchases of imported machinery and equipment also slowed noticeably as the Mexican peso continued to weaken against the dollar. In addition, consumption was impacted by sluggish growth in remittances, high interest rates and flat employment. However, net exports boosted growth in 2024 after dragging it down the previous two years.”

Extremely Reliant Upon Exports
The other issue? Mexico is extremely reliant upon demand from the U.S., exporting $41.9 billion worth of agricultural products to the U.S.

In 2023, Mexico accounted for 16.3% of U.S. agricultural exports and 23.3% of U.S. agricultural imports.

By the numbers:

Mexico is the largest source of horticultural imports to the U.S., supplying 63% of vegetables and 47% of fruit and nuts in 2023.
The top agricultural exports from Mexico to the U.S. in 2024 included beer, tomatoes, tequila, avocados, strawberries, raspberries and peppers.

Mexico is the Biggest Customer of U.S. Ag Exports

The other important piece is Mexico is now the U.S.'s top ag export destination.

According to Krista Swanson, chief economist for National Corn Growers Association (NCGA), Mexico is a huge destination for U.S. corn. More than 40% of U.S. corn exported last year went to Mexico. Not only does that mean the U.S. relies on Mexico, but Mexico is also reliant upon the U.S. do to the strong demand.

“That’s the other key piece here when we think about a Mexico situation, you know, will they retaliate on corn because it’s so important to the consumers in their country,” Swanson told Farm Journal during Commodity Classic this week. “And it’s such a big part of their diets and consumption. It’s a commodity that they consume way more of than what they produce. So they’re going to have to get it from somewhere.”

Bigger Picture
According to USDA’s Economic Research Service , between 1993 (the year before NAFTA’s implementation) and 2023, U.S. agricultural exports to Mexico expanded at a compound annual growth rate (CAGR) of 7%, while agricultural imports from Mexico grew at a rate of 9.7%.

“With the economic recovery in the United States and Mexico that followed the pandemic, U.S. agricultural exports to Mexico increased at a CAGR of 15.7% between 2020 and 2023, and U.S. agricultural imports from Mexico grew at a CAGR of 11.3%,” the USDA report said. “In 2023, however, U.S. agricultural exports to Mexico decreased by 0.3% compared with the previous year, as the prices of major agricultural exports (such as corn and soybeans) declined.”

Trump Sows Confusion on Tariffs for Canada and Mexico, Floats 25% Duty for EU Goods

Wed, 26 Feb 2025 21:25:23 GMT

U.S. President Donald Trump on Wednesday raised hopes for another month-long pause on steep new tariffs on imports from Mexico and Canada, saying they could take effect on April 2, and floated a 25% “reciprocal” tariff on European cars and other goods.

A White House official, however, said Trump’s previous March 4 deadline for the 25% tariffs on Mexican and Canadian goods remained in effect “as of this moment,” pending his review of Mexican and Canadian actions to secure their borders and halt the flow of migrants and the opioid fentanyl into the U.S. Trump sowed confusion during his first cabinet meeting on Wednesday, when he was asked about the timing for the start of the duties for Canada and Mexico and replied that it would be April 2.

“I have to tell you that, you know, on April 2, I was going to do it on April 1,” Trump said. “But I’m a little bit superstitious, I made it April 2, the tariffs go on. Not all ofthem but a lot of them.”

Trump’s comments prompted jumps in the value of the Canadian dollar and Mexican peso versus the greenback.

Canada’s Finance Ministry and Mexico’s Economy Ministry both declined to comment on Trump’s remarks.

U.S. Commerce Secretary Howard Lutnick said the fentanyl-related actions were paused for 30 days but referred to “overall” tariffs on April 2. He did not specify whether the March 4 deadline was still in effect.

“So the big transaction is April 2, but the fentanyl-related things, we’re working hard on the border,”
Lutnick said during the cabinet meeting. “At the end of that 30 days, they have to prove to the president that they’ve satisfied him in that regard. If they have, he’ll give them a pause, or he won’t.”

EU Tariff Rate

Trump has targeted early April for imposing reciprocal tariffs that would match the import duty rates of other countries and offset their other restrictions. His trade advisers consider European countries’ value added taxes to be akin to a tariff.

Trump, asked whether he has decided on a tariff rate for goods from the European Union, replied: “We have made a decision, and we’ll be announcing it very soon, and it’ll be 25%, generally speaking, and that’ll be on cars, and all of the things.”

He said the EU is a “different case” from Canada and takes advantage of the U.S. in different ways.

“They don’t accept our cars. They don’t accept, essentially our farm products,” Trump said, adding that the EU was formed “in order to screw the United States.”

Roberta Metsola, president of the European Parliament, is in Washington and will meet U.S. lawmakers on Wednesday, a spokesman said. She is not slated to meet with any Trump administration officials.

New U.S. Trade Representative Confirmed

Also on Wednesday, the U.S. Senate voted 56-43 to confirm Jamieson Greer as Trump’s new U.S. Trade Representative, putting a veteran of the Republican president’s first-term trade wars fully on the job.

Greer, who served as chief of staff to former USTR Robert Lighthizer, won the support of five Democrats, including both senators from Michigan, the center of the U.S. auto industry.

Trade groups welcomed Greer’s confirmation, lauding his commitment to consulting with industry and standing up for U.S. businesses, farmers and workers. “We share Ambassador Greer’s desire for an active and pragmatic trade policy that creates

U.S. jobs and more resilient supply chains,” said Jake Colvin, president of the National Foreign Trade Council.

Greer told senators during his Senate confirmation hearing that he wanted to quickly renegotiate the U.S.-Mexico-Canada Agreement on trade to ensure China does not use it as a back door to the U.S. market to avoid other tariffs.

“Right out of the gate, I expect that we’ll be taking a second look at the USMCA,” Greer said.

Asked what changes he would like to see in the pact, Greer zeroed in on further tightening automotive content rules.

“I think we should look at the rule of origin for automobiles and aerospace and other things to look and see if we need to have any kind of restriction on content or value added from foreign countries of concern, or non-market economies,” he said, using language that U.S. trade officials often use to describe China.

(Reporting by David Lawder and Andrea Shalal; additional reporting by Bo Erickson and Ryan Jones in Washington, Brendan O’Boyle in Mexico City and Ismail Shakil in Ottawa; Editing by Dan Burns, David Gregorio and Paul Simao)

Mexico’s Sheinbaum Pushes for USMCA Deal as Tariff Deadline Nears

Tue, 25 Feb 2025 19:02:31 GMT

Mexican President Claudia Sheinbaum reaffirmed her commitment to securing a deal with the U.S. to prevent the imposition of 25% tariffs on Mexican exports, set to take effect on March 4. She emphasized Mexico’s dedication to addressing the U.S. fentanyl crisis and maintaining strong trade relations under the USMCA.

Sheinbaum also noted that Mexico is considering additional tariffs on imports from countries without free trade agreements, particularly China. Bloomberg reported this week that if Mexico imposes tariffs on Chinese imports the direct impact will be limited, as Mexico accounts for only 2.4% of China’s total exports.

Economy Minister Marcelo Ebrard remains in Washington for negotiations, as Sheinbaum expressed willingness to speak directly with President Trump if necessary.

Trump said Monday that his planned 25% tariffs on all Mexican and Canadian exports to the U.S. “are going ahead on time, on schedule,” meaning the duties would take effect on March 4 at the conclusion of a one-month suspension.

“This is an abuse that took place for many, many years,” Trump said in justification of the decision to impose tariffs on the United States’ neighbors and North American trade partners. “And I’m not even blaming the other countries that did this, I blame our leadership for allowing it to happen. I mean who can blame them if they made these great deals with the United States, took advantage of the United States on manufacturing, on just about everything,” he said at a joint press conference with French President Emmanuel Macron.

Are Tariff Threats Trump’s Way to Reach a New USMCA Deal?
As the Trump administration decides whether to impose tariffs or not, some argue this negotiation is a precursor to renegotiating USMCA, and this is actually President Trump’s way of renegotiating that agreement.

Is that the case? That’s what Farm Journal asked Gregg Doud who served as the Chief Agricultural Negotiator in the Office of the United States Trade Representative (USTR) during the Trump administration.

“I think you will intentionally never know the answer to that. That’s what I think,” said Doud. “You saw was it at CPAC last week where the Vice President, J.D. Vance, explained the art of President Trump and the way he negotiates. He never takes anything off the table.... it’s all negotiable. That’s the way he views the world. And he’s never going to let you know really where you’re at until the bottom line. He’s a master at it, I think.”

Parts of Mexico Face Growing Drought
One factor that could impact demand for imports is Mexico’s intensifying drought. Mexico’s northwest region is grappling with extreme drought conditions, with parts of Sinaloa, Sonora, Chihuahua, Durango, and Coahuila classified under the highest drought severity level, “exceptional,” according to the National Water Commission (Conagua).

The ongoing dry spell, exacerbated by the La Niña climate phenomenon, has led to widespread crop failures, dwindling reservoir levels, and looming water shortages.

Mexico’s current drought map.

(Conagua)

Water storage in Sinaloa’s dams has hit a 30-year low, with key reservoirs like Adolfo López Mateos and Huites at critically low levels. The drought has severely impacted agriculture, leaving nearly half of Sinaloa’s farmland unplanted.

In response, the government has launched a cloud seeding initiative, allocating 13 billion pesos ($636 million) to stimulate rainfall. Governor Rubén Rocha assured farmers of continued support for fertilizers, seeds, and price stabilization measures but urged cost reductions in agricultural production. With little to no rain expected before July, water rationing and supply cuts are anticipated in the coming months.

USDA's Rollins: 'Let's Go Barnstorm The World And Find New Partners' For Trade

Tue, 18 Feb 2025 18:25:26 GMT

On Brooke Rollins’ first full week on the job as Secretary of Agriculture, she addressed the 600 farmers, ranchers and industry leaders in Kansas City for the 2025 Top Producer Summit.

High on Rollins’ list of priorities was the topic of trade and President Donald Trump’s vision for U.S. agriculture moving forward.

While Rollins did not shy away from addressing the administration’s decision to implement trade tariffs, noting “farmer and rancher concerns are legitimate,” she focused on what she sees as her role ahead.

“My job is to ensure that as President Trump and our trade representatives are making their decisions that I am in the room and advocating on behalf of our people, on behalf of all of you,” she told Top Producer Summit attendees.

One of her key objectives, she says, is to find and expand market access for U.S. agricultural products domestically and abroad.

“Let’s go barnstorm the world, and let’s go find some more trade partners and access [to market opportunities],” she says.

Rollins says her goals for trade are a reflection of Trump’s vision and his determination to make agriculture part of the “golden age” he sees ahead for the U.S.

Trump is the consummate deal maker, Rollins notes, able to side-step bureaucracy and red tape in the process to work with world leaders.

“I don’t know that in the last 250 years, we’ve had anyone in office like President Trump,” she says. “He is a very unusual, remarkable and fearless man, and he wants to make a deal, and in the best way, and put America first.”

Agriculture Secretary Brooke Rollins spoke to a crowd of 600 farmers, ranchers and industry leaders at the 2025 Top Producer Summit.

(Jim Barcus)

Making Headway With Trade
Sen. Roger Marshall of Kansas, who moderated the conversation with Rollins, highlighted Trump’s work to build trade during his first term.

“He redid USMCA, and now that’s our largest ag partnership, with Mexico and Canada,” Marshall says. “He gave us South Korea and Japan, which has been so important to Kansas and our cattle industry, as well as trade 1.0 with China.”

Marshall then mentioned the headway he believes Trump and team have made with India.

“I see India replacing China as our major trade partner, as well that China is growing right now,” Marshall says. “I think there’s huge opportunities in India.”

U.S. ethanol, cotton and tree nuts are three of the top agricultural exports to India, a country that has in the past impeded agricultural trade with tariffs and non-tariff barriers alike. Trump called out the barriers to trade following recent conversations with India’s Prime Minster Modi.

A joint statement after the Trump-Modi meeting said Washington welcomed New Delhi’s recent steps to lower tariffs on select U.S. products and increase market access to U.S. farm products, while seeking to negotiate the initial segments of a trade deal by the fall of 2025.

Rollins says the progress underway with India was just one step forward to address what she described as a trade crisis for the U.S.

“Our exports are down $37 billion this year and likely to be down $42 billion in the months to come. This is a crisis, and this is something that I understand inherently,” Rollins says.

“We have a tremendous amount of work to do,” she adds. “But my promise to you is this, and my commitment will never waver, that every minute of every day for the next four years, I will do everything within my power with hopefully God’s hand on all of us and our work to ensure that we are not just entering the golden age for America, as my boss, President Trump, likes to say, but that we are entering the golden age for agriculture.”

Secretary Rollins joined Chip Flory on AgriTalk. Listen to their discussion about trade policy and tariffs; avian flu; and disaster and economic aid.

Your next read: Senate Overwhelmingly Confirms Brooke Rollins as 33rd Secretary of Agriculture

Trump Imposes Sweeping Steel and Aluminum Tariffs, Sparking Trade War Risks

Tue, 11 Feb 2025 15:57:02 GMT

President Donald Trump as expected raised tariffs on steel and aluminum imports to a flat 25% without exceptions , aiming to support struggling domestic industries but escalating trade tensions worldwide. The measures, effective March 12, eliminate country-specific exemptions and extend to downstream steel and aluminum products, affecting key suppliers such as Canada, Mexico, Brazil, and South Korea.

The move expands Trump’s 2018 Section 232 tariffs, justifying the action on national security grounds.

“It’s 25% without exceptions,” Trump emphasized, adding that reciprocal tariffs on countries taxing U.S. goods will be announced soon.

According to the White House fact sheet , the move is to restore fairness into the steel and aluminum markets, while also strengthening the manufacturing industry in the U.S. The White House fact sheet states:

Foreign nations have been flooding the United States market with cheap steel and aluminum, often subsidized by their governments.
A report from the first Trump Administration found that steel import levels and global excess were weakening our domestic economy and threatening to impair national security.
While the domestic steel industry briefly achieved 80% utilization in 2021, subsequent trade pressure following the COVID-19 pandemic has depressed domestic production. In 2022 and 2023, capacity utilization fell to 77.3% and 75.3%, respectively. High import volumes from sources exempt from Section 232 tariffs are a major factor in depressing domestic production volumes.
For aluminum, there was an increase in the capacity utilization rate between 2017 and 2019, from 40% to 61% during that period. But since 2019, the aluminum capacity utilization has once again seen a steady decline, falling from 61% to 55% between 2019 and 2023.
The United States does not want to be in a position where it would be unable to meet demand for national defense and critical infrastructure in a national emergency.

Criticism from Canada

Canada criticized the action as unjustified, citing its critical role in U.S. supply chains. The European Commission, South Korea, and other affected nations expressed concern, with retaliatory measures and negotiations expected in the coming days.

U.S. steel and aluminum producers saw stock gains, while foreign steelmaker shares fell.

Trump Considers Exemption for Australia on Steel, Aluminum Tariffs

President Trump agreed to consider exempting Australia from newly reinstated steel and aluminum tariffs, following a call with Australian Prime Minister Anthony Albanese. Trump reintroduced a 25% tariff on imports after previously allowing duty-free quotas. The decision could escalate trade tensions globally.

Citing Australia’s trade surplus with the U.S. and the strategic Indo-Pacific partnership, Trump acknowledged the exemption request, saying he would “give great consideration” due to the strong bilateral ties and Australia’s minimal share of U.S. steel (1%) and aluminum (2%) imports. Albanese described the call as constructive, expressing confidence in a favorable outcome. Australian officials highlight the importance of steel exports for U.S. defense supply chains, especially under the AUKUS pact.

South Korea Seeks Talks with President Trump

South Korea’s acting President Choi Sang-mok said the government would seek talks with the Trump administration on the tariffs Washington is imposing to reflect the interests of domestic companies. The CEOs of 20 major South Korean conglomerates plan to visit the U.S. in the near future, while the government intends to discuss response measures with Japan and the European Union, Choi said.

EU Expected to Respond Strongly

The European Union pledged a robust response to the U.S.’ recent imposition of 25% tariffs on steel and aluminum imports, a move that has reignited transatlantic trade tensions. European Commission President Ursula von der Leyen warned that “unjustified tariffs” will trigger “firm and proportionate countermeasures.”

The EU is exploring several options, including:

Targeted tariffs: Imposing reciprocal tariffs on U.S. goods, focusing on politically sensitive sectors.
WTO challenge: Filing a complaint with the World Trade Organization.
Safeguard measures: Protecting European industries from potential surges in imports redirected from the U.S. market.

German Chancellor Olaf Scholz and French Industry Minister Marc Ferracci have both emphasized the need for a unified EU response. The European Commission has convened an emergency meeting of trade ministers to discuss next steps, signaling the potential for a broader trade conflict if the U.S. does not reconsider its tariff policy.

Trudeau Slams U.S. Tariffs on Canadian Steel and Aluminum as “Unjustified”

Canadian Prime Minister Justin Trudeau criticized U.S. tariffs on steel and aluminum as “entirely unjustified,” according to a CBC video posted on X. Trudeau emphasized that Canada’s response “will be firm and clear” while the government engages with Donald Trump’s administration to underline the tariffs’ negative impact on both nations. When asked about the possibility of retaliatory tariffs, Trudeau expressed hope that escalation could be avoided.

Trump Confirms Speaking with China’s Xi Since Taking Office

President Donald Trump revealed in a Fox News interview that he had spoken with Chinese President Xi Jinping since his inauguration on Jan. 20 but did not disclose details of the conversation.

“We have a very good personal relationship,” Trump said, though he did not specify when the call took place or what was discussed.

Despite rising tensions between the U.S. and China over trade, cybersecurity, Taiwan, and other issues, Trump previously stated he was in no rush to contact Xi regarding the ongoing trade conflict. The Chinese Foreign Ministry did not confirm the latest conversation, instead referring to a scheduled call on Jan. 17 before Trump officially took office.

Meanwhile, China recently responded to U.S. trade tariffs with targeted duties on American imports and potential sanctions on several U.S. companies, including Google.

Trump’s plan to call Xi following his latest round of tariffs on China has been delayed, with no contact yet made.

Trump says he’s “in no hurry,” but the Wall Street Journal says insiders suggest that Beijing hasn’t proposed a concrete plan to curb China’s role in the U.S. fentanyl crisis — a key demand behind Trump’s decision to impose an additional 10% tariff on Chinese goods.

A U.S. administration official noted that the tariffs could be paused if “serious headway” is made on fentanyl during the next Trump-Xi conversation. Unlike the quick deals reached with Mexico and Canada that resulted in suspended tariffs, China has yet to offer a concession.

“The Chinese should just offer to crack down on fentanyl once and for all,” an American executive told the WSJ, highlighting Beijing’s proven efficiency in suppressing dissent and private enterprise. But President Xi appears in no rush. Instead, he’s pursuing a broader agreement that could shape long-term U.S./China relations.

Beijing’s initial proposal, according to the Wall Street Journal, involves reinstating elements of the 2020 trade deal, a renewed pledge not to devalue the yuan, and commitments for increased U.S. investments. For now, however, Xi seems willing to absorb the additional tariffs, relying on Chinese companies’ ability to reroute exports through third countries.

In response to the U.S. tariffs, China has imposed modest retaliatory measures, avoiding full escalation while keeping leverage on the table. Actions include new tariffs on U.S. energy imports and an investigation into Google for potential antitrust violations.

Of note:
1.36 billion shipments entered the U.S. in fiscal year 2024 using the de minimisprovision. The provision allowed bargain platforms Shein and Temu to skirt import duties on low-value packages from China.

Your Next Read:
Tariffs and trade: CPMA president shares what’s at stake for fresh produce

Trump Agrees to Delay Tariffs on Goods From Mexico and Canada for 30 Days

Mon, 03 Feb 2025 16:14:46 GMT

The U.S. has agreed to delay tariffs on goods from Mexico and Canada for one month to allow for more time for negotiations. The agreement from both sides happened on Monday, just hours before the tariffs were set to take effect.

Sostuvimos una buena conversación con el presidente Trump con mucho respeto a nuestra relación y la soberanía; llegamos a una serie de acuerdos:

1.México reforzará la frontera norte con 10 mil elementos de la Guardia Nacional de forma inmediata, para evitar el tráfico de drogas…
— Claudia Sheinbaum Pardo (@Claudiashein) February 3, 2025

President Claudia Sheinbaum said U.S. tariffs against Mexico will be delayed for one month after a conversation with President Donald Trump on Monday. Trump then confirmed the news on Truth social.

Mexico’s president said she had reached several agreements with Trump during the phone call and that both countries will start working on trade and security.

Sheinbaum also said her government agreed to reinforce the border with the U.S. with 10,000 National Guard officers to prevent the trafficking of drugs, particularly fentanyl, from Mexico to the U.S.

Trump had announced plans to hold discussions with the leaders of Canada and Mexico on Monday following his recent declaration of imposing significant tariffs on imports from these countries and China.

“I don’t expect anything very dramatic,” Trump said before he held any of the calls. “We put tariffs on. They owe us a lot of money, and I’m sure they’re going to pay.”

Tariffs Also Delayed At Least One Month on Goods from Canada

Just hours after Mexico’s president said Trump agreed to pause tariffs for at least 30 days, Canadian Prime Minister Justin Trudeau made a similar announcement on X.

I just had a good call with President Trump. Canada is implementing our $1.3 billion border plan — reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl. Nearly…
— Justin Trudeau (@JustinTrudeau) February 3, 2025

In his tweet, Trudeau wrote, “I just had a good call with President Trump.”

Trudeau also committed to appointing a “Fentanyl Czar” and better patrol the border.

Executive Order Over the Weekend Hit Mexico and Canada With Tariffs

Before and after Trump singed the executive order over the weekend, Mexican President Claudia Sheinbaum vowed to counter with retaliatory measures. On Saturday, Sheinbaum announced Mexico would issue its own retaliatory measures to Trump’s 25% tariffs, but no specifics were unveiled.

Sheinbaum said last week she had told her economy minister “to implement Plan B” which she said “includes tariff and non-tariff measures” though it was not clear what those measures were exactly.Sheinbaum said: “We have Plan A, Plan B, Plan C, depending on what the government of the United States decides. It’s very important that Mexicans know that we will always defend the dignity of our people, respect for our sovereignty and a dialogue among equals [with the U.S.], not with subordinates.”

Sheinbaum noted that Mexico has been open to receiving its citizens sent back under Trump’s plan for mass deportation of unauthorized migrants and that it was prepared to take some from other countries, which represented a concession. Deputy Economy Minister for Trade Luis Rosendo Gutierrez is expected to travel to Washington on Monday, according to reports. But he can’t meet with U.S. trade or Commerce Department officials until they’re formally ratified, they said. Instead, he’ll talk to business leaders and associations. Sheinbaum has also pointed to Foreign Minister Juan Ramon de la Fuente as a key interlocutor to US Secretary of State Marco Rubio.

High-level teams from Mexico’s foreign ministry and the State Department are in frequent communication working on security and migration, Mexico is the No. 1 trade partner of the United States, and sends 80% of its exports north. Mexico supplies around half of America’s imported fruit and two-thirds of imported vegetables, in dollar terms — tomatoes, berries, bell peppers, cucumbers. And it’s the largest source of imported beer. Mexico also is the No. 1 provider of medical devices to American hospitals and doctor’s offices, from surgical gloves to scalpels. Mexico emerged last year as the top market for American agricultural exports, totaling $30 billion.

Trump announced general tariffs at his Mar-a-Lago, Florida estate. White House spokesperson Karoline Leavitt said the tariffs would be implemented immediately, but as noted, Canada said tariffs would be implemented on their goods on Tuesday. It typically takes weeks for tariffs to take practical effect.

Key points:

Sector-specific tariffs: New duties will target high-tech and industrial sectors, potentially covering more imports by dollar value than previous tariffs on China. Trump also suggested Friday he’d consider new tariffs on oil and gas, potentially by Feb. 18, though it wasn’t clear what he was referring to.
The duties come on top of existing tariffs on those products. The first Trump administration imposed tariffs on more than $300 billion worth of Chinese goods to respond to an array of unfair trade practices, including intellectual property theft. The Biden administration kept all of them in place and increased rates on $18 billion in goods, including electric vehicles, solar panels, medical equipment, lithium-ion batteries, steel, and aluminum.
A second wave of tariffs could follow a comprehensive review of the trade relationship among the three countries (Canada, Mexico and China) that Trump has ordered completed by April 1.
Exemptions and negotiations: There are ongoing discussions about potential carve-outs for critical industries (like oil and automobiles) amid intense lobbying by U.S. business and labor groups. Some hope for exemptions to mitigate domestic economic risks. Trump told reporters in the Oval Office on Friday that there was nothing Canada, Mexico and China could do to avoid the tariffs before Saturday. “Not right now,” he said, telling reporters that his tariff threat wasn’t a negotiating tool. “It’s a pure economic [decision],” he said. But he did say he was considering a lower tariff on Canadian crude oil — 10% instead of 25% (and that it was he announced on Saturday). At nearly $100 billion in 2023, imports of crude oil accounted for roughly a quarter of all U.S. imports from Canada, according to U.S. Census Bureau data. The tariff on China would be for what Trump said was failing to stop the manufacturing of fentanyl precursor chemicals.

Reasons for the tariffs”

Trump on Friday said, “We’ll be announcing the tariffs on Canada and Mexico for a number of reasons. Number one is the people that have poured into our country so horribly and so much,” he said about migrants that have entered the United States via its southern and northern borders. “Number two are the drugs, fentanyl and everything else, that have come into the country and number three are the massive subsidies that we’re giving to Canada and to Mexico in the form of [trade] deficits,” Trump said. “I’ll be putting the tariff of 25% on Canada and separately 25% on Mexico and we will really have to do that because we have very big deficits with those countries. Those tariffs may or may not rise with time,” he said.

During a Friday press conference in the Oval Office, Trump criticized the previous administration’s handling of trade agreements. During his previous term, Trump initiated trade disputes, particularly with China, which significantly impacted U.S. agricultural exports. He stated that China had committed to buying $50 billion a year in farm products, but claimed that former President Joe Biden didn’t enforce this commitment. Trump said, “We’re going to enforce it,” referring to this $50 billion annual purchase agreement with China. His recent statements suggest a continuation of this aggressive stance on trade, framing it as necessary to protect American farmers and correct perceived imbalances left unaddressed by the Biden administration.

Trump’s team was initially considering a grace period between the announcement of the tariffs on Saturday and when they would be imposed, but White House press secretary Karoline Leavitt played down that possibility on Friday. Leavitt said that a Reuters report stating that the tariffs wouldn’t be implemented until March 1 was “false.”

Your Next Read: Trump Officially Signs Three Executive Orders Imposing 25% Tariffs on Canada and Mexico, 10% Tariffs on China

Canada, Mexico Hit Back with Retaliatory Tariffs on U.S. Imports

Sun, 02 Feb 2025 13:56:53 GMT

In response to President Donald Trump’s decision to impose 25% tariffs on Canadian and Mexican goods , Canada announced its own 25% tariffs on $155 billion worth of U.S. imports. Mexican President Claudia Sheinbaum also announced its own retaliatory measures to Trump’s 25% tariffs, but no specifics were unveiled.

Canada Strikes Back
Prime Minister Justin Trudeau stated that the tariffs will roll out in two phases, starting Feb. 4 on $30 bil. targeting American products such as alcohol, produce, household goods, and industrial materials, the same day the American tariffs are set to begin.

The tariffs on the other $125 billion worth of goods will come in 21 days, to allow impacted Canadian companies to adjust their supply chains. Trudeau emphasized that Canada’s response would be “strong but appropriate,” while also considering non-tariff measures like restrictions on critical minerals.

The move has drawn mixed reactions within Canada, with provincial leaders urging strategic countermeasures while ensuring minimal harm to the domestic economy. Meanwhile, the White House justifies the tariffs as a measure against drug trafficking and illegal border crossings, further straining trade relations between the two countries.

American items that Canadians tariffs will be applied to include:

Beer, wine, and bourbon
Fruits and fruit juices including orange juice, as well as vegetables
Perfume, clothing, and shoes
Major consumer products such as household appliances and furniture
Sports equipment
Other materials such as lumber and plastics

The government of Canada says a more detailed list of impacted products will be released soon.

More Tariffs Coming
Foreign Affairs Minister Mélanie Joly said on Jan. 31 that Canada’s retaliatory tariffs would be coming in rounds. “There would be a first round of measures, second round of measures, and a third round of measures,” Joly said at a press conference in Washington. “And we’ll keep ourselves also some leverage.”

When asked if Canada would be shutting off oil exports to the U.S., Trudeau said he will be ensuring Canada’s response will be “equitable” and won’t be damaging to one part of the country more than the others. Energy-rich Alberta has strongly opposed any export tariffs on oil, or for Canada to stop oil exports altogether. Trump said on Jan. 31 that the U.S. tariffs will be lower on Canada’s oil and gas exports, at 10%, while other goods will have a tariff of 25%.

Canada’s trade surplus in merchandise with the U.S. was around $100 billion (US$59 billion) last year, according to a report by TD Bank. If Canadian oil exports to the U.S. are removed from the figure, the “scales tip to America’s favor,” the report says, meaning the United States would have a $60 billion (US$41 billion) trade surplus.

Canada and U.S. Conduct Two-way Trade Worth $1.3T Every Year

According to the Canadian Chamber of Commerce, 2.3 million Canadian jobs are supported by exports to the U.S., and 1.4 million American jobs are supported by exports to Canada. A Bank of Canada analysis says that under a mutual 25% tariffs scenario, Canada’s GDP would take a 2.4% hit.

Mexico Announces Plans for Retaliation
Mexican President Claudia Sheinbaum announced its own retaliatory measures to Trump’s 25% tariffs, but no specifics were unveiled. Sheinbaum said she had told her economy minister “to implement Plan B” which she said “includes tariff and non-tariff measures” though it was not clear what those measures were exactly.

China Reacts
China’s Ministry of Commerce denounced Trump’s tariffs, saying they undermine “the normal economic and trade cooperation” between the U.S. and China.

The ministry said it would challenge the U.S. action at the World Trade Organization (WTO) and take countermeasures “to firmly safeguard its own rights and interests.” The WTO dispute settlement mechanism has been dysfunctional for years amid U.S. opposition to the appointment of new judges.

Your Next Read:
Trump Officially Signs Three Executive Orders Imposing 25% Tariffs on Canada and Mexico, 10% Tariffs on China

Trump Officially Signs Three Executive Orders Imposing 25% Tariffs on Canada and Mexico, 10% Tariffs on China

Sat, 01 Feb 2025 23:01:55 GMT

Big tariffs, big risks, big impacts: When populism and commercial agriculture collide.

President Donald Trump signed three executive orders for tariffs Saturday, the first time a president has used powers granted under the International Emergency Economic Powers Act of 1977. The orders also include retaliation clauses that would ramp up tariffs if the countries respond in kind. Trump cut the levy on imports of Canadian energy to 10%.

Trump officially announced plans to impose new tariffs on imports including computer chips, pharmaceuticals (without specifying which, at what level or when it would take effect), steel, aluminum, copper, oil, and gas by mid-February, expanding his administration’s trade war strategy. He said he would put new taxes on imported oil and gas on Feb. 18 and aimed to do the same for steel and aluminum this month or next month. This move is separate from scheduled tariffs — 25% on Canadian and Mexican goods and 10% on Chinese products set for Saturday, Feb. 1 — and aims to pressure Mexico, Canada, and China to address issues such as border security, drug trafficking, and migration.

Here’s the detailed Fact Sheet from the White House .

Of note: Canadian officials were told by U.S. officials on Saturday that the tariffs would be implemented on their goods on Tuesday, according to people familiar with the situation. Senior figures on Capitol Hill were briefed on the decision.

Trump also hinted at additional tariffs on EU products, citing poor treatment of the United States, though details remain vague. The president said he “absolutely” would impose tariffs on their shipments to the United States. “We are treated so badly: They don’t take our cars, they don’t take our farm products; essentially, they don’t take almost anything. And we have a tremendous deficit with the European Union. So, we’ll be doing something very substantial with the European Union,” he said.

Related News: Canada, Mexico Hit Back with Retaliatory Tariffs on U.S. Imports

Big impact. Such levies targeting imports from America’s top three trading partners — which together accounted for more than 41% of the U.S.’ goods trade in the January-November period of 2024 — potentially affect trillions of dollars in merchandise, like cars and farm products.

Trump said there was nothing the three countries could do now to stop the tariffs.

Trump announced general tariffs at his Mar-a-Lago, Florida estate. White House spokesperson Karoline Leavitt said the tariffs would be implemented immediately, but as noted, Canada said tariffs would be implemented on their goods on Tuesday. It typically takes weeks for tariffs to take practical effect.

Key points:

Sector-specific tariffs: New duties will target high-tech and industrial sectors, potentially covering more imports by dollar value than previous tariffs on China. Trump also suggested Friday he’d consider new tariffs on oil and gas, potentially by Feb. 18, though it wasn’t clear what he was referring to.
The duties come on top of existing tariffs on those products. The first Trump administration imposed tariffs on more than $300 billion worth of Chinese goods to respond to an array of unfair trade practices, including intellectual property theft. The Biden administration kept all of them in place and increased rates on $18 billion in goods, including electric vehicles, solar panels, medical equipment, lithium-ion batteries, steel, and aluminum.
A second wave of tariffs could follow a comprehensive review of the trade relationship among the three countries (Canada, Mexico and China) that Trump has ordered completed by April 1.
Exemptions and negotiations: There are ongoing discussions about potential carve-outs for critical industries (like oil and automobiles) amid intense lobbying by U.S. business and labor groups. Some hope for exemptions to mitigate domestic economic risks. Trump told reporters in the Oval Office on Friday that there was nothing Canada, Mexico and China could do to avoid the tariffs before Saturday. “Not right now,” he said, telling reporters that his tariff threat wasn’t a negotiating tool. “It’s a pure economic [decision],” he said. But he did say he was considering a lower tariff on Canadian crude oil — 10% instead of 25% (and that it was he announced on Saturday). At nearly $100 billion in 2023, imports of crude oil accounted for roughly a quarter of all U.S. imports from Canada, according to U.S. Census Bureau data. The tariff on China would be for what Trump said was failing to stop the manufacturing of fentanyl precursor chemicals.

Why a lower tariff on China? Trump’s threats on tariffs are clearly not all bark and no bite, said Wendy Cutler, vice president of the Asia Society Policy Institute in Washington and a former acting deputy U.S. trade representative in the Obama administration. “He’s clearly in an action-oriented mode and wants to use these tariffs to pressure the three countries to address serious U.S. concerns,” Cutler said. “This is the beginning of the story, this is the first salvo in what’s going to be a long four years,” she said. On why the tariff on Chinese goods will be 10% and not 25%, Cutler said this shows that Trump “may be more interested in seeking a trade deal” with Beijing.

Trump said the Biden administration had not enforced trade deals beneficial to U.S. farmers. During a Friday press conference in the Oval Office, Trump criticized the previous administration’s handling of trade agreements. During his previous term, Trump initiated trade disputes, particularly with China, which significantly impacted U.S. agricultural exports. He stated that China had committed to buying $50 billion a year in farm products, but claimed that former President Joe Biden didn’t enforce this commitment. Trump said, “We’re going to enforce it,” referring to this $50 billion annual purchase agreement with China. His recent statements suggest a continuation of this aggressive stance on trade, framing it as necessary to protect American farmers and correct perceived imbalances left unaddressed by the Biden administration.

· Trump’s team was initially considering a grace period between the announcement of the tariffs on Saturday and when they would be imposed, but White House press secretary Karoline Leavitt played down that possibility on Friday. Leavitt said that a Reuters report stating that the tariffs wouldn’t be implemented until March 1 was “false.”

· Reasons for the tariffs. Trump on Friday said, “We’ll be announcing the tariffs on Canada and Mexico for a number of reasons. Number one is the people that have poured into our country so horribly and so much,” he said about migrants that have entered the United States via its southern and northern borders. “Number two are the drugs, fentanyl and everything else, that have come into the country and number three are the massive subsidies that we’re giving to Canada and to Mexico in the form of [trade] deficits,” Trump said. “I’ll be putting the tariff of 25% on Canada and separately 25% on Mexico and we will really have to do that because we have very big deficits with those countries. Those tariffs may or may not rise with time,” he said.

· International reactions: Leaders from Canada, Mexico, and China are preparing responses. The scale of their responses will depend on whether Trump’s actions match his rhetoric, according to officials in Canada and Mexico.

Canada comments. “You will find when we do respond, at least initially, that we will focus on tariffing American goods that actually are sold in significant quantities in Canada, and especially those for which there are readily available alternatives for Canadians,” Natural Resources Minister Jonathan Wilkinson said in an interview cited by Bloomberg on Friday ( link ), hours after Trump reiterated his plan to bring in tariffs on Canada, Mexico and China.
Of note: Canadian officials were told by U.S. officials on Saturday that the tariffs would be implemented on their goods on Tuesday, according to people familiar with the situation.

Canadian Prime Minister Justin Trudeau warned of economic fallout, and Canada even weighed an export tax on oil to undercut Trump’s ability to exclude gasoline price hikes from his tariff fight. Mexican and Canadian officials have expressed frustration that they don’t know what actions would satisfy Trump’s demands, despite weeks of meetings between senior officials. A Canadian contact said Trump “keeps on moving the goal post… If Trump was trying to build anti-American sentiment in a country like Canada (who get mad about little except for hockey), he is executing well.” Trudeau’s government won’t unveil its retaliation list until it sees what the Trump administration moves forward with. After Trump tied tariffs to what he called an “invasion” of migrants and fentanyl, Canadian officials in December unveiled a $900 million border plan, to add helicopters, drones and other surveillance capacity. “Canada’s border is strong and we’re making it stronger,” said Public Safety Minister David McGuinty, speaking to reporters. “When our largest ally raises concerns, we take it seriously.” McGuinty was in Washington Friday to meet with U.S. border czar Tom Homan. Bloomberg reports that Canadian officials come to the discussions armed with documents, charts and even time-lapse videos of certain border crossings. Only 1.5% of migrants apprehended by U.S. Customs and Border Protection in the 2024 fiscal year and 0.2% of fentanyl seized at U.S. borders came from Canada.

Ontario Progressive Conservative Leader Doug Ford spoke in anticipation of Trump’s tariffs on Canadian imports, which are set to be implemented on Saturday, calling them “reckless… I wish I had better news to share but Donald Trump couldn’t have had been more clear. He’s moving forward with these reckless tariffs. He’s chosen to tear up decades of good will that has made life better for workers on both sides of the border, for businesses on both sides of the border, for families on both sides of the border,” Ford said at a campaign event in Brampton.”

Mexican President Claudia Sheinbaum vowed to counter with retaliatory measures. Sheinbaum said: “We have Plan A, Plan B, Plan C, depending on what the government of the United States decides. It’s very important that Mexicans know that we will always defend the dignity of our people, respect for our sovereignty and a dialogue among equals [with the U.S.], not with subordinates.” Sheinbaum noted that Mexico has been open to receiving its citizens sent back under Trump’s plan for mass deportation of unauthorized migrants and that it was prepared to take some from other countries, which represented a concession. Deputy Economy Minister for Trade Luis Rosendo Gutierrez is expected to travel to Washington on Monday, according to reports. But he can’t meet with U.S. trade or Commerce Department officials until they’re formally ratified, they said. Instead, he’ll talk to business leaders and associations. Sheinbaum has also pointed to Foreign Minister Juan Ramon de la Fuente as a key interlocutor to US Secretary of State Marco Rubio. High-level teams from Mexico’s foreign ministry and the State Department are in frequent communication working on security and migration, Mexico is the No. 1 trade partner of the United States, and sends 80% of its exports north. Mexico supplies around half of America’s imported fruit and two-thirds of imported vegetables, in dollar terms — tomatoes, berries, bell peppers, cucumbers. And it’s the largest source of imported beer. Mexico also is the No. 1 provider of medical devices to American hospitals and doctor’s offices, from surgical gloves to scalpels. Mexico emerged last year as the top market for American agricultural exports, totaling $30 billion.

· USMCA impact. While the U.S., Canada and Mexico have a standing free-trade agreement, it isn’t clear that the expected tariff action would immediately violate that pact. The U.S.-Mexico-Canada Agreement (USMCA), like most trade pacts, includes a provision that allows for the imposition of tariffs on national-security grounds.

One of Trump’s tariff goals is to push Canada and Mexico to accelerate a renegotiation of USMCA, now slated for July 2026. President Trump and his supporters believe that imports of cars and steel from Mexico (and China’s involvement in such activity) are weakening U.S. manufacturers. And they say the USMCA, the trade deal Trump signed in 2020 to replace the North American Free Trade Agreement, needs to be updated — or perhaps, scrapped.

Of note: According to economists at S&P Global, of the imports coming into the United States from Canada and Mexico, more than 18% of their value was created in the United States, before being sent to those countries. That’s far more than the proportion for other countries, and a sign of how closely the economies are integrated.

One out of three cars sold in Mexico last year came from China. That means Chinese exports are now meeting Mexican demand for cars, rather than exports from the United States, a blow to the U.S. auto industry.

· Economic impact concerns: “I think there could be some temporary, short-term disruption and people will understand that,” Trump said. Trump said the tariffs “will reinvigorate industry. “The way you bring it back to the country is by putting up a wall. And the wall is a tariff wall,” he said. “The tariffs are going to make us very rich and very strong.” He dismissed concerns that placing steep taxes on many foreign goods would lead to renewed inflation in the United States, where prices are still rising faster than the Federal Reserve’s target. “Tariffs don’t cause inflation. They cause success,” the president said.

Although Trump dismissed worries about inflation and supply chain disruptions, critics warn that broad tariff applications could disrupt trade and lead to higher prices for consumers, especially in border regions heavily reliant on imports from North America. Tariff-related price increases would hit consumers’ wallets at a time when beef prices are near record highs and costs for eggs have climbed after bird flu eliminated millions of egg-laying hens. “Any increase in expenses in the form of a tariff subsequently serves as a ‘food tax’ on consumers for imported products and is not a workable solution,” National Grocers Association spokesman David Cutler said.

Tariffs are paid by American importers and borne by consumers, though offset potentially by price reductions abroad. The burden will fall disproportionally on low-income households who spend more of their income on physical goods relative to higher income households who spend more of their income on services and experiences, which aren’t subject to tariffs.

A new analysis from the Budget Lab of Yale estimated that the proposed tariffs could raise annual costs on households by roughly $1,300. Researchers at the Peterson Institute for International Economics in Washington estimate that a 25 percent tariff on all exports from Mexico and Canada would lower U.S. gross domestic product by about $200 billion for the duration of the second Trump administration. A model gauging the economic impact of Trump’s tariff plan from EY Chief Economist Greg Daco suggests it would reduce U.S. growth by 1.5 percentage points this year, throw Canada and Mexico into recession and usher in “stagflation” at home. “We have stressed that steep tariff increases against U.S. trading partners could create a stagflationary shock — a negative economic hit combined with an inflationary impulse — while also triggering financial market volatility,” Daco wrote on Saturday.

Facts and figures: 17% of U.S. goods exports go to Canada, 16% go to Mexico and 7% go to China and totaled $763 billion in the first 11 months of 2024.

Of note: For many items, there is roughly a three-month wait until the tariffs impact consumer prices as retailers sell their existing inventory that are not subject tariffs. Getting a firm impact assessment of tariffs is difficult because some exporters will absorb some of the additional costs, and currency changes by some countries will temper the impacts. There will also mean changes to trade flow patterns as buyers seek alternatives sources and sellers look for other importers.

Mexican Economy Minister Marcelo Ebrard said a 25% duty on Mexican goods would have a multibillion-dollar impact on U.S. consumers, affecting millions of households. “Mexico is the main exporter of finished products like automobiles, computers, TV screens and refrigerators,” he said, adding that tariffs would also raise prices of fresh fruit and vegetables, meat and beer. “This impact will be greater in border states and cities that are big consumers of Mexican goods, like California, Texas, Florida and Arizona,” Ebrard said.

A Wall Street Journal opinion item ( link ) was headlined: The Dumbest Trade War in History; Trump will impose 25% tariffs on Canada and Mexico for no good reason.

House Ag Committee Chairman GT Thompson (R-Pa.): Trump’s tariff policy is a crucial tool. Following the imposition of tariffs on Mexico, Canada, and China by the United States, House Ag Chairman GT Thompson issued the following statement: “President Trump’s tariff policy has been an effective tool in leveling the global playing field and ensuring fair trade for American producers. Look no further than Colombia’s about face on accepting repatriated criminal migrants at the mere threat of tariffs. After four years of the Biden/Harris administration’s failure to expand foreign markets, which led to an inflated agricultural trade deficit of $45.5 billion, America’s producers deserve an administration that will fight for them. I look forward to working alongside of President Trump to support our hardworking producers and to make agriculture great again.”

House Ag Committee Ranking Member Angie Craig (D-Minn.) released the following statement ( link ): “No one wins in a trade war. The last time President Trump started a trade war, costs went up for America’s family farmers and consumers. The same will happen today. The cost of imported goods like oil, lumber, avocados, tomatoes, bell peppers, lettuce, broccoli, cucumbers, onions and mushrooms and other fresh food are likely to go up for Americans. At a time when farmers are struggling with high input costs and the American people continue to struggle with the cost of groceries, these tariffs will make it more expensive for farmers to grow food and for consumers to buy it. Additionally, when American farmers face the inevitable retaliatory tariffs from our trading partners, their profits take a hit. This action is especially questionable since President Trump’s previous administration negotiated our last trade agreement – USMCA — with Canada and Mexico.”

Imported goods.

(Bloomberg)

Tariffs coverage. Depending on carve-outs, this round of Trump tariffs could cover more trade in dollar value than his first-term duties on China. Trump’s four tranches of tariffs on Chinese goods in 2018-19 covered imports valued at around $360 billion at the time. New tariffs on Canada and Mexico plus additional tariffs on China would — if all items are subject to the action — cover imports valued at more than $1.3 trillion in 2023. Canada and Mexico combined supplied about 28% of U.S. imports in the first 11 months of 2024, according to Census Bureau data. China accounted for an additional 13.5%.

Price hikes: From Tonka trucks to tequila. While cars and lumber are obvious price hike targets, some unexpected items could see increases, too, according to the Wall Street Journal ( link ):

Cherry tomatoes: Canada and Mexico supply much of the U.S. market.
Tonka trucks: Made exclusively in China, these toys may see a price jump from $29.99 to nearly $40.
Maple syrup: With most commercial production coming from Canada, costs could rise. Canada and the U.S. are the only two countries that produce this at commercial scale, according to Canada’s agriculture department. More than 60% of Canada’s production is exported to the U.S.
Tequila & avocados: Mexico is the top supplier, meaning Super Bowl snacks and drinks could cost more.
Smartphones: Previously spared, they may now be hit with new tariffs.
Sledgehammers: Already taxed at 25%, additional tariffs could push prices even higher.

Securing the U.S. border and dealing with fentanyl are the two major goals of the Trump tariffs. According to Robert Marbut, former homelessness czar for the first Trump administration, fentanyl has killed more Americans in the past five years than all wars combined in the past 100 years. Marbut criticized Canada’s liberal drug policies and Mexico’s unstable regions, where cartels control the drug trade. He said that if the U.S. government is going to tackle fentanyl, it needs to recriminalize drugs domestically, stop China from sending precursors, get the biker gangs in Canada under control, and force Mexico to rein in the cartels. “Fentanyl is a hundred times more powerful than morphine,” he said. “Fentanyl dusts will kill children, fentanyl dusts will kill adults. So just three grains of salt equivalent will kill anybody.”

Tariffs as a revenue raiser. Peter Navarro, a Trump trade adviser, told CNBC on Friday that the tariff effort can replace the revenue of tax cuts. “Tariffs can easily pay for that,” Navarro said. “President Trump wants to move from the world of income taxes and countless IRS agents to the world where tariffs, like in the age of McKinley, will pay for a lot of government that we need to pay for and lower our taxes.” Perspective: The non-partisan Congressional Budget Office has put the cost of extending the 2017 tax cuts — Trump’s top legislative priority — at $4.6 trillion over 10 years. A 25% tariff on the more than $900 billion in annual imports from Canada and Mexico would raise roughly $225 billion annually or $2.3 trillion over 10 years if the tariffs had no impacts on trade, which many economists see as unlikely.

Of note: Navarro thinks corn exports haven’t been entirely benign. Navarro said that NAFTA had kick-started America’s illegal immigration problem, because when the United States began exporting corn to Mexico after the trade pact took effect, that put Mexican agricultural workers out of jobs, sending some of them into the United States. “That’s where that began, our illegal immigration problem,” he said.

Tariffs impact on the U.S. ag sector. American Farm Bureau Federation President Zippy Duvall wrote ( link ) to President Trump Friday urging him to consider U.S. farmers before proceeding with tariff action. “American farmers and ranchers rely heavily on export markets for their business success, especially during these times of economic distress across rural America,” Duvall wrote. A targeted approach to tariffs, with specific exemptions for fuel and fertilizer imports, Duvall added, could “minimize negative repercussions” for farmers. Mexico and Canada account for around a third of all U.S. agriculture exports, buying $30 billion and $29 billion, respectively. China received around $26 billion of ag products last year, Duvall said.

U.S. farmers face rising costs amid proposed Canadian import tariff. The proposed 25% tariff on Canadian imports is expected to have significant repercussions for U.S. farmers, particularly in their access to potash and fertilizers. Key Impacts:

Increased fertilizer costs: U.S. farmers rely on Canada for 85-86% of their potash. The tariff could raise fertilizer prices by $50 to $75 per ton, cutting into profit margins and potentially reducing crop yields.
Short-term supply challenges: With spring planting nearing, farmers may struggle to meet urgent fertilizer needs, as domestic production accounts for less than 10% of U.S. demand. Many farmers have already purchased and applied fertilizer for the 2025 crop season, potentially mitigating immediate impacts, but farmers are unclear as to whether their undelivered fertilizer from Canada will be impacted.
Long-term market shifts: Importers may seek alternative suppliers, and Canadian producers could absorb some costs, but a more significant price increase is expected for the 2026 crop season.
Broader economic consequences: Higher fertilizer costs may lead to rising food prices, strain U.S./Canada agricultural ties, and provoke potential retaliatory trade measures from Canada.

Survey quantifies Canadian farmers’ concern about impact of tariffs, potential trade war. New data from Real Agriculture’s RealAgristudies ( link ) confirms and quantifies the level of concern in Canada’s agriculture sector if the U.S. implements 25% tariffs on Canada on Feb. 1. Farmers who primarily produce livestock are slightly more likely to expect an impact on their farm business than mixed or primarily crop-focused farmers. Interestingly, there wasn’t much difference in how farmers see the potential impact when you compare age, farm size and geography.

Results of a survey of 660 Canadian farmers between Jan. 23 and Jan. 29 showed: 59% of respondents expect the proposed Trump tariffs will negatively impact their business. Only 7% feel there will be no effect. Another 7% don’t know if there will be an impact, while 27% see a possible impact of the Trump tariffs on their farm business.

When it comes to the likelihood of a trade war that significantly decreases Canadian agricultural exports, 29% of respondents feel that scenario is very likely, while 46% say it’s likely; 11% feel a trade war that hurts ag exports is unlikely.

Livestock producers tend to see a trade war as more likely (88%) than mixed (72%) or primarily crop producers (75%).

In terms of how Canada should respond to the tariffs, 34% of respondents said “all of the above” to including export tariffs on key items to the U.S., dollar for dollar retaliation and cutting off certain U.S. imports into Canada; 23% of farmers see an export tariff on key items like potash and energy as the best response as the best singular option.

· Tariff impact support for some industries. Canadian government officials have said that they would consider bailing out businesses and supporting workers who are most affected. Some industries would be swiftly disrupted: Agriculture, automobiles and energy suppliers, pillars of all three economies, would be upended by blanket tariffs.

Tariff aid for U.S. farmers. During her Senate confirmation hearing on Jan. 23, USDA Secretary nominee Brooke Rollins addressed concerns regarding potential tariffs and their impact on U.S. farmers. She acknowledged the possible adverse effects of such tariffs on the agricultural sector and emphasized her preparedness to implement support measures to mitigate these impacts. Rollins stated that she had consulted with former USDA Secretary Sonny Perdue, who oversaw $23 billion in trade aid to farmers during the previous Trump administration, and expressed readiness to execute a similar approach if necessary. She affirmed her commitment to working with the White House to ensure that any negative consequences of tariff implementations on farmers and ranchers are effectively addressed. While acknowledging the potential challenges posed by the proposed tariffs, Rollins conveyed confidence in Trump’s understanding of the agricultural community’s concerns. She described Trump as “the consummate dealmaker” who recognizes the significant support he has received from rural America and the agricultural sector.

U.S. farmers and various trade groups are very apprehensive about not only the potential negative impacts of tariffs on the U.S. ag sector, but what they do to garner new trade agreements, especially as they see China, Brazil, Russia and Ukraine announcing new trade accords or in the process of inking new ones.

Upshot: This latest tariff announcement underscores the escalating tensions in international trade policies and the potential for significant economic consequences if the disputes deepen. The tariff moves will test (1) the limits of Trump’s honeymoon period in his second term in the White House; (2) the U.S. economy and its tentative victory over inflation; (3) American consumers’ appetite to swallow fresh price increases; and (4) the patience of allies. The move against allies Canada and Mexico is a signal that no country is safe from his push to reshape global trade. Big experiment, big impacts, big risks, both economically and politically.

Trump Moves Forward With Plans to Impose 25% Tariffs on Canada and Mexico Starting Saturday

Thu, 30 Jan 2025 22:59:43 GMT

President Donald Trump announced that his administration will impose 25% tariffs on imports from Canada and Mexico starting Feb. 1, citing concerns over trade deficits, illegal immigration, and the fentanyl crisis.

Speaking from the Oval Office, Trump justified the tariffs as a response to what he described as excessive migration, drug trafficking, and unfair trade practices. While he suggested the tariff rate could rise further, he indicated that a decision on whether oil imports would be exempted would come soon.

“Mexico and Canada have never been good to us on trade. They’ve treated us very unfairly on trade,” Trump said, pointing to the huge trade deficits between those countries and the United States. Trump also complained about fentanyl entering the country, especially from Mexico.

Trump also reiterated plans to impose tariffs on China over its alleged role in fentanyl trafficking and suggested additional sectoral tariffs on industries such as pharmaceuticals, semiconductor chips, and steel. The policy shift signals a potentially disruptive turn in North American trade relations, threatening key industries like automotive and energy.

Market Reacts
Market reactions were immediate, with oil prices rising above $73 a barrel, the U.S. dollar strengthening, and the Canadian dollar and Mexican peso dropping. The move has triggered warnings of economic fallout, with both Canada and Mexico vowing to respond with retaliatory measures.

Five Key Questions to Ask

There are five key questions regarding tariff situation:

Will they be announced Sat., Feb. 1?
Will there be a last-minute agreement with Canada and/or Mexico?
What authority will be used to implement any tariffs?
Will there be any exemptions? Ongoing negotiations suggest a possible shift toward targeted measures, particularly affecting steel and aluminum, while oil may receive exemptions.
Will there be an implementation grace period to enable more negotiations?

Tariffs as a Tool to Pressure Canada and Mexico
The proposed tariffs are intended to pressure the two countries into negotiating on migration, drug smuggling, and reforms to the USMCA. The strategy reflects Trump’s preference for using tariffs as a tool to secure compliance with U.S. demands, as seen in a recent, albeit reversed, threat against Colombia.

While both Canada and Mexico have made overtures to address U.S. concerns, Trump’s administration remains unsatisfied. Canadian officials have prepared a list of retaliatory measures and expressed frustration over unclear demands and limited communication. Mexico, meanwhile, has stepped up efforts to curb migration and drug trafficking but faces similar obstacles in negotiating directly with Trump’s yet-to-be-confirmed economic team.

If enacted, the tariffs could disrupt key industries, particularly the ag sector and automotive manufacturing, where supply chains depend on cross-border collaboration. Critics warn of potential economic fallout, including higher consumer prices and a possible recession in Canada.

Despite these risks, Trump’s advisers, including Commerce Secretary nominee Howard Lutnick, advocate for a “tariffs-first” approach to bring trade partners to the table.

If tariffs going into effect on Feb. 1 and the tariff threats materialize, it potentially triggers a new trade war on the continent.

Too Soon?
Some feel Feb. 1 will be too early for any serious tariffs action. Reasons: Trump wants his top trade officials (Commerce Secretary, U.S. Trade Representative, Treasury Secretary, etc.) at their desks. That may take beyond Feb. 1, depending on Senate confirmations.

Also, Trump’s 23 trade executive orders assigned a review of prior trade agreements, trade deficits, practices, etc., with an April 1 deadline. One task involves the White House Office of Management and Budget assessing how foreign government subsidies impact U.S. procurement, with that report due by April 30.

Trump’s Pick for Commerce Secretary Back Tariffs, Slams Canada on Dairy
Howard Lutnick, President Trump’s nominee for Commerce Secretary, strongly defended tariffs and criticized Canada over dairy trade during his Senate confirmation hearing.

Lutnick accused Canada of treating U.S. dairy farmers “horribly” and vowed to secure better trade conditions under the USMCA, which President Trump wants a renegotiation on an accelerated timeline.

Of note: Canadian Pacific Kansas City says it expects shipments in North America to grow this year despite the looming threat of tariffs from the Trump administration.

Lutnick dismissed concerns that tariffs drive inflation, citing China and India’s policies, and expressed support for broad-based tariffs over a selective approach.

Lutnick also linked Trump’s proposed 25% tariffs on Canada and Mexico to border security and fentanyl concerns.

Lutnick said he prefers an “across-the-board” approach to imposing tariffs on foreign goods to put pressure on other countries to lower their own barriers to U.S. exports.

“Our farmers, our ranchers and our fishermen are treated with disrespect” by countries around the world, Lutnick said. “We need the disrespect to end.”

To accomplish that, Lutnick said he favors using across-the-board tariffs on all imports from a particular country, rather than a much more targeted approach.

“I think when you pick one product in Mexico, they’ll pick one product,” Lutnick said. “You know, we pick avocados, they pick white corn, we pick tomatoes, they pick yellow corn. All you’re doing is picking on farmers, which is just not going to happen.”

Canada Gears Up for Potential Trade Tensions with Trump

Tue, 07 Jan 2025 17:41:24 GMT

As expected, Prime Minister Justin Trudeau announced his resignation after more than nine years in office, citing declining approval ratings and internal party discord.

Trudeau, currently the longest-serving leader among G7 nations, plans to step down as head of the Liberal Party within months but will remain prime minister until a successor is chosen. Parliament is suspended until March 24 as the leadership transition unfolds.

“Canadians deserve a real choice in the next election, and it has become obvious to me, with the internal battles, that I cannot be the one to carry the Liberal standard,” Trudeau said.

The incoming Liberal leader will become Canada’s 24th prime minister but faces an uphill battle, with the Conservative Party currently favored to win the next election.

Meanwhile, Mark Carney, the former governor of the Bank of Canada and Bank of England, said he’s considering entering the race to replace Justin Trudeau as Canada’s prime minister. Canada’s currency strengthened after Trudeau said he plans to resign.

Bottom line:

Trudeau’s resignation reflects a culmination of long-standing issues, including declining popularity, internal party dissent, and external political pressures. Conservative leader Pierre Poilievre amplified demands for Trudeau’s resignation and early elections.

Gearing Up for Trade Tensions

As President-elect Donald Trump’s inauguration nears, Canada is preparing for potential trade challenges following Trump’s threat of a 25% tariff on Canadian imports. The Canadian government is considering a proactive approach, including the possible early release of a retaliatory tariff list.

A report from The Globe and Mail reveals that Canada might unveil a list of American goods subject to retaliatory tariffs ahead of time. This strategy was deliberated during a Canada/U.S. cabinet committee meeting on Jan. 6, 2025, though no final decision has been made.

Outgoing Prime Minister Justin Trudeau and his cabinet have been holding strategic meetings, emphasizing the importance of the issue. Canadian officials, including Trudeau, have engaged with Trump’s team to mitigate tensions. Ontario Premier Doug Ford proposed restricting energy supplies to certain U.S. states as a retaliatory option.

Says a Canadian contact: “This retaliatory list idea is very similar to past Canadian strategies and will likely strategically target certain states to influence reaction.”

Your Next Read:

GOP to Propose ‘Biggest Bill in American History'; Includes Tax Cuts, Deregulation and Border Security

Important Trade Talks Dominate this Year's MILK Business Conference as Farmers Watch Incoming Administration

Tue, 17 Dec 2024 20:25:54 GMT

Trade was a big part of the discussions that occurred last week at the 2024 MILK Business Conference, especially on how things could change with the incoming Trump administration. Dairy producers are keeping a keen eye on what potential tariffs could mean for top dairy trading partners. U.S. Farm Report host, Tyne Morgan, explains more.

“It’s amazing how quickly rhetoric can change,” Morgan says. “Last year here at the MILK Business Conference, the focus was on the lack of attention on trade with the current administration. Today, we’ve put the focus back on trade and what the Trump administration could mean for ag both in terms as to what’s at risk and what dairy could possibly gain.”
In the latest Farm Journal Ag Economists’ Monthly Monitor, Morgan asked this question:

Ag Economists’ Monthly Monitor

(Farm Journal)

“No surprise, 63% said China,” Morgan says. “But 37% says it’s Mexico.”

The National Corn Growers Association and the American Soybean Association recently conducted analysis just looking at China and what Trump’s possible 60% tariff on China could mean.

“In that type of situation, we’re looking at a 60% tariff on U.S. corn and soybeans, [which] translates to a 13 cent per bushel drop in corn price in the projection modeling that [National Corn Growers] did,” says Krista Swanson, lead economist at National Corn Growers Association. “But that doesn’t account for Mexico. And if we have a situation with Mexico, that’s a whole different ballgame because over 40% of our corn exports have gone to Mexico this year. They are a really critical trading partner for corn.”

According to Morgan, there is another big wild card when it comes to trade.

“During the first Trump administration, the U.S. struck a trade deal with China. Much of that created new and more demand for many U.S. ag goods. We actually had record corn exports to China as a result of Phase 1. But will Trump pick up where he left off? If so, that could actually be good for U.S. ag trade,” Morgan says.

Canada and U.S. Dairy

While Canada may not top the list as the biggest concern for agriculture if trade hiccups emerge, it is a big issue for U.S. dairy. And the potential for conflict is already stirring as U.S. dairy leaders question Canada’s commitment to the United States Mexico Canada Agreement (USMCA) signed during the last Trump administration.

According to the International Dairy Foods Association (IDFA), members have yet to receive the full range of dairy access promised by Canada under the agreement.

“Clearly the contract that we wrote isn’t fully being abided by,” says Mike North, president of producer division at Ever.Ag. “So, if we are going to spend some time to review this and revisit the language around dairy, I don’t know that we need to change it, but from a behavior standpoint we just need to get execution of the language that already exists.”

U.S. Dairy Product Exports to Canada

(USDA)

How big is this market? According to the USDA, from 2010 to 2021, U.S. dairy product exports to Canada (adjusted for inflation) rose 48% from $466 million in 2010 to $691 million in 2021.

Your Next Read: Schreiber Foods Announces New Expansion to Missouri Cheese Plant

Could Trump Actually Be Good for U.S. Ag Trade?

Tue, 19 Nov 2024 20:52:49 GMT

President-elect Donald Trump has released a slew of key cabinet and advisory picks at a historic pace the past two weeks, but the agriculture industry is waiting on two key selections — Secretary of Agriculture and the U.S. Trade Representative.

The Financial Times previously reported Robert Lighthizer could make an encore performance as the U.S. Trade Representative under Trump , but nothing official has been announced.

“Trump and Bob Lighthizer are two peas in a pod when it comes to using tariffs to get what they want in amongst our trading allies,” says Jim Wiesemeyer, Pro Farmer Washington correspondent.

If it’s a repeat of the last time, Lighthizer held that seat, there will be an increased focus on trade and using tariffs, which comes as no surprise since that was a major point on the campaign trail

“President-elect Trump was so strong on doing tariffs before that, it’s very likely that he’ll follow through now,” Mary Kay Thatcher, who’s the senior lead for federal government relations at Syngenta, told “AgDay’s” Michelle Rook. “I mean, he’s talked about at a minimum 20% tariffs on everybody. He’s talked about 60% on China, who will likely fall to two or three, but still a very important market. And he’s talked about putting them on Mexico. If Mexico doesn’t stop as many people coming across the border.”

Tariffs were the talk of the campaign trail, not just on commodities, but even ag equipment that’s imported on.

Ag groups want a focus back on trade, but they are also concerned it could come at a cost.

“Mexico, Canada, China are always our No. 1, No. 2 and No. 3 three ag markets,” Thatcher says. “And so, a lot of concern in agricultural circles about the fact that most likely that’s where the retaliation starts first.”

Reality of a Growing Ag Trade Deficit

As tariff talk heats up, there are still tariffs in place today, and a growing ag trade deficit that’s glaring for U.S. agriculture. The ag trade deficit is expected to balloon to $42 billion in 2025, under the current administration. And Indiana farmer Kip Tom, who served as the ambassador to the United Nations in the first Trump administration, argues the focus back on trade could bode well for ag.

“When Trump was president, we did nearly 50 trade deals around the world,” Tom told “AgDay’s” Clinton Griffiths in an interview. “He did the Phase One deal with China. And granted, we didn’t get to Phase Two or Phase Three, but the reality is he got to put together and he got started following the trade war that we had with him for a little bit. So, I think trade is going to be No. 1.”

Tom says Trump’s next four years will be looking at new trade deals, but today, groups like U.S. Meat Export Federation (USMEF) also want any trade negotiations to do no harm, especially considering some meat exports have actually grown this year, in spite of the widening U.S. ag trade deficit.

“I think if you look at 2024 pork exports, we’re pulling our weight. We’re going to have record volume and record value this year, approaching $8.5 billion or so on the pork side,” says Dan Halstrom, CEO of USMEF.

Mexico Becomes U.S. Top Buyer

Halstrom says record demand from pork is broad based, but the No. 1 buyer is Mexico.

“Mexico is being driven by everything,” Halstrom says. “I mean, food service, retail, convenience stores. The buying power of the Mexican trade has been record breaking but also a little bit amazing.”

Earlier this year, Mexico bumped out China as the top trading partner for the U.S. But in the final days of Trump’s presidential campaign, he threated to impose 25% tariffs on all Mexican imports if Mexico didn’t tighten the border. And Mexico’s economy minister said it’s considering retaliatory tariffs of its own.

“I think as long as we don’t have any disruption, then yes, I think the strong export pace is very well positioned to continue,” Halstrom says. “Of course, you have new administrations coming in with a lot of talk about the U.S.-Mexico-Canada Agreement (USMCA). But as long as we stay within the confines of the USMCA agreement and follow that, I think we’re well positioned to continue this momentum in Mexico.”

Dairy and the Importance of USCMA

Another protein seeing positive demand from Mexico through the USMCA is dairy.

“When the administration first negotiated USMCA, which was do no harm to what’s working well, and for us, dairy continues to be overall a really positive relationship. So, working to help preserve that,” says Shawna Morris, executive vice president of trade policy and global affairs at National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council.

The relationship with Mexico within USMCA has been a positive for dairy, but it’s the Canadian side of the agreement that needs work, according to Morris.

“I mean, they’re flat out not doing what they promised to do. And I just don’t see any way around calling them on the carpet for that,” Morris says. “Yes, they eked out a win in the last dispute settlement case the U.S. brought against them, but if one judge had changed their mind, though, we would have been on the winning side. It’s just a three-person panel. This isn’t gospel here; we’re talking about what Canada’s doing is shady. It needs fixed.”

She says between the way Canada administers the dairy tariff rate quota quantities to U.S. competitors, to their excessive exports of dairy protein, dairy is a piece of USMCA that needs to be addressed.

“The last administration tried to deal with that in USMCA,” Morris says. “We had some disciplines to try to tackle it in the agreement. And Canada has found some workarounds that both of those issues are going to need to be on the table. I think just in terms of UCMCA, it’s clean-up and follow through.”

The Biggest Wild Card: China

Even with southeast Asia, Latin America and Mexico carrying the weight for dairy exports, China is still the biggest wild card. We asked Morris if China does retaliate against Trump’s threatened 60% tariffs, if it would have the same impact as it did during the last trade war.

“China, even though it has pulled back on its global dairy imports, it’s still our third-largest export market,” Morris says. “So, it’s a pretty sizable market and difficult to place out into other markets the volume of that production, but I think what we also saw the first time around, in addition to the pain and disruption caused by the retaliatory tariffs that were imposed, was at the end of the process progress having been made.

Phase One Trade Deal with China

Progress in the form of the U.S. China Phase One agreement, which as Tom noted, was negotiated under Trump’s first term. Morris describes that deal as useful for dairy.

“We had a number of different non-tariff barriers, issues that were a drag on our ability to be able to reliably export to that market. And the phase one agreement included progress and dealt with a whole handful of those,” Morris says. “So, I’d say, yes, there’s upheaval. We’ve also seen from the first time around that that can yield significant progress in certain respects, and we’re hopeful that that’s more of what we’ll see this time around.”

China has also scaled back on their buys of U.S. pork, with exports down 11% so far this year, but Halstrom points out even with increased tariffs now entering the picture again, tariffs the past four years never went away.

“The thing to remember on these tariffs is, we’ve had a tariff now for quite a few years on China, on both beef and pork, and it’s not the ideal situation, but it doesn’t it doesn’t eliminate trade,” Halstrom says. “We ended up doing $2 billion in sales on beef with a tariff in 2022, I believe was the year. A lot of that came as a result of the phase one agreement in 2020, but people sometimes forget that there was a tariff involved, and we still had a pretty good outcome.”

Two weeks after the election, and Trump’s playbook seems to be unfolding quickly with all his cabinet picks. But some argue those tariffs might just be threats at first.

“Here’s what the Republicans tell me,” Wiesemeyer says. “Trump isn’t going to invoke these across-the-board tariffs right away. He’s going to use that as leverage to countries looking at their trade relationship with the U.S., and his key word is ‘reciprocity.’ If you don’t treat us like we treat you, then I’m going to invoke tariffs.”

Those close to Trump seem to be in alignment: the U.S. needs fair trade.

“When we’re spending $500 billion in China, and they’re only spending $350 billion with us, we need to level that out a little bit. And maybe it means more agriculture trade going into China to balance that trade out,” Tom says. “I’m very optimistic on trade with Trump. I have no doubts that we’ll get things put together. He knows farmers don’t like to get their money from the government; they like to get it from the market. And so, I’m really excited about that when we talk about trade. But yet, I know everybody’s pretty edgy about it at this point in time.”

Your Next Read: Do Tariffs Work? The Answer Isn’t As Straightforward As You May Think

Trump Threatens 200% Tariff If Deere Moves Manufacturing to Mexico

Tue, 24 Sep 2024 01:39:32 GMT

Former President Donald Trump on Monday made significant statements regarding John Deere and its plans to move some production to Mexico. Trump threatened to impose a 200% tariff on John Deere products if the company proceeds with its plan to relocate some of its manufacturing operations to Mexico. He made this announcement during a policy roundtable in Smithton, Penn., organized by the Protecting America Initiative.

Trump’s threat comes in response to John Deere’s recent announcement about moving some of its production to Mexico, which has already resulted in job cuts at certain facilities in Iowa. Trump expressed concern about the impact on American workers, stating, “It’s hurting our country. It’s hurting our workers.”

When contacted for a response, John Deere referred to a section on its website titled “Deere Commitment to U.S. Manufacturing,” which highlights its investments in American facilities and workforce. The company stated that to keep its U.S. factories focused on high-value activities, it sometimes needs to move less complex operations, such as cab assembly, to other locations.

Following Trump’s remarks, shares of Deere fell approximately 1.6% in after-hours trading shortly after the market closed on Monday.

This threat to John Deere appears to be an extension of Trump’s economic policy, which has consistently emphasized the use of tariffs. He has previously made similar threats to automakers producing vehicles in Mexico. Trump’s focus on protecting American manufacturing jobs is a key element of his campaign strategy, particularly in battleground states like Pennsylvania where he held this event.

Trump’s comments about John Deere seem to have been spontaneous, inspired by John Deere tractors displayed at the event venue. This marks the first time Trump has specifically targeted John Deere with such a threat, expanding his tariff warnings beyond the automotive industry to include agricultural equipment manufacturers.

A Look at the USMCA

Several aspects of the USMCA, negotiated by the Trump administration, help facilitate U.S. manufacturers like John Deere moving some production to Mexico:

Duty-free access: The USMCA maintains duty-free trade between the U.S. and Mexico for most goods, allowing companies to manufacture in Mexico and export back to the U.S. without tariffs.
Rules of origin: The USMCA has rules of origin requirements that goods must meet to qualify for duty-free treatment. Manufacturing in Mexico can help companies meet these requirements for North American content.
Increased regional content requirements: The USMCA raises the regional value content (RVC) requirement for automobiles from 62.5% under NAFTA to 75%. This incentivizes more production and sourcing within North America, including Mexico.
Labor Value Content (LVC) provision: The agreement requires 40-45% of auto content to be made by workers earning at least $16 per hour. This can make Mexico an attractive option for U.S. companies looking to meet this requirement while still benefiting from lower overall labor costs. While the USMCA includes stricter labor standards for Mexico, wages are still significantly lower than in the U.S. for most workers. Mexican workers often make 3-4 times less than U.S. counterparts. • Streamlined supply chains: The USMCA facilitates the movement of goods between the U.S., Mexico, and Canada by reducing trade barriers and tariffs. This makes it easier for U.S. companies to integrate Mexican operations into their supply chains.

Potential for Relocation

The USMCA rules may encourage some manufacturers to relocate certain production processes within North America to meet content requirements, which could involve significant upfront costs but potentially lead to long-term savings.

Your Next Read: EXCLUSIVE: John Deere Speaks Publicly For the First Time About Layoffs, New Challenges in the Ag Economy

U.S. Ag Chief Seeking 'Creative' Ways to Sell Dairy in Canada After Trade Dispute Loss

Thu, 30 Nov 2023 18:13:07 GMT

U.S. Agriculture Secretary Tom Vilsack said on Wednesday that the Biden administration was looking for “creative” ways to sell more U.S. dairy products in Canada after a trade dispute panel ruled in favor of Canadian restrictions on dairy import quotas.

Vilsack told Reuters that the U.S. Department of Agriculture and the U.S. Trade Representative’s office were weighing next steps in the long-running dispute over Canada’s largely closed dairy market, but declined to say whether they would bring new challenges under the U.S.-Mexico-Canada Agreement on Trade (USMCA).

“What I can tell you is that we’re going to continue to look for creative ways to promote and sell dairy products in Canada, and to basically get our fair share of the market up there - as the Canadians promised,” Vilsack said during a meeting with Reuters reporters and editors in Washington.

He did not identify specific steps, but said USDA and USTR would work to persuade Canada to provide market opportunities “in the same way they’re going to basically articulate the need for more openness to some of our markets. That advocacy is going to continue.”

A three-person panel rejected U.S. arguments that Canada was improperly limiting U.S. access to its dairy market by allocating most import quotas to Canadian processors of powdered milk, cheese, ice cream and other dairy products based on a market-share approach

The case was the second time that USTR had raised a complaint about Canada’s implementation of limited market access granted in the 2020 USMCA trade deal. USTR won the first round, forcing revisions to Canada’s quota practices, but argued that these prevented retailers and food service operators from purchasing cheaper finished U.S. dairy products.

The USMCA agreement kept in place Canada’s decades-old supply management system, which restricts domestic production of dairy, eggs and poultry to stabilize incomes of dairy farmers while protecting them from import competition with high tariffs.

Vilsack said USDA and USTR would focus on enforcing the dispute panel’s 2022 decision to “make sure that the acknowledgement and direction from the first decision is carried forward.” In that decision, a USMCA dispute panel ruled that reserving 80%-85% of the tariff rate quotas for Canadian processors violated the agreement

He said Canada’s supply management system was resulting in Canadian consumers “spending a heck of a lot more for dairy products than they should.”

But he acknowledged that the system is entrenched in Canadian politics, with a strong advocacy system. Canada’s roughly 10,000 dairy farmers form one of the country’s most influential political lobbies. Most farm in Quebec and Ontario, the provinces with the most parliamentary seats.

U.S. Dairy Organizations Say the Recent USMCA Announcement is Major Setback

Wed, 29 Nov 2023 17:27:34 GMT

Several dairy organizations are disheartened by the U.S.-Mexico-Canada Agreement (USMCA) dispute panel that is allowing Canada to restrict the dairy access that the United States negotiated for in the USMCA pact weakens the agreement’s value to the U.S. dairy industry.

Jim Mulhern, president and CEO of NMPF said in a release statement, “It is profoundly disappointing that the dispute settlement panel has ruled in favor of obstruction of trade rather than trade facilitation.

An earlier panel ruled in January 2022 that Canada had improperly restricted access to its market for U.S. dairy products. In response, Canada made insufficient changes to its dairy tariff rate quota (TRQ) system, resulting in an outcome that still fell far short of the market access the U.S. expected to receive under USMCA. To address that shortcoming, the U.S. brought a second case to challenge the changes that Canada instituted. Last week the three-member panel established under the USMCA ruling concluded that Canada had not acted unreasonably.

“Despite this independent panel’s adverse ruling, we’d like to thank the Biden Administration and the many members of Congress who supported us for their tireless pursuit of justice for America’s dairy sector. We urge Ambassador Tai and Secretary Vilsack to look at all available options to ensure that Canada stops playing games and respects what was negotiated,” Mulhern states.

“Despite the conclusions of this report, the United States continues to have serious concerns about how Canada is implementing the dairy market access commitments it made in the agreement,” U.S. Trade Representative Katherine Tai said in a statement.

Edge Dairy Farmer Cooperative, one of the largest dairy co-ops in the country, also expressed disappointment in the ruling by a dispute settlement panel established under the U.S.-Mexico-Canada Agreement. U.S.

“U.S. dairy was optimistic USMCA would bring new opportunities, but both sides must play by the rules. We are disappointed by the ruling but do not consider this issue settled. U.S. trade officials must continue finding ways to uphold the commitments Canada — and all U.S. trade partners — make under trade agreements,” Edge Dairy President Brody Stapel said. “USMCA promised opportunity for American dairy farmers — an estimated 50% annual increase in export value. Unfortunately, processors of high-quality dairy products still cannot find ways to get their product onto Canadian grocery store shelves. This issue remains a key focus for Edge, and we will continue supporting U.S. trade officials in finding a path forward.”

“We will continue to work to address this issue with Canada, and we will not hesitate to use all available tools to enforce our trade agreements and ensure that U.S. workers, farmers, manufacturers and exporters receive the full benefits of the USMCA,” Tai said.

Friday’s announcement was a major setback, according to U.S. dairy industry groups.

“This ruling has unfortunately set a dangerous and damaging precedent,” said Krysta Harden, president and CEO of the U.S. Dairy Export Council.

The North American Free Trade Agreement rewrote the rules of trade between the three countries more than a quarter of a century ago. Mexico’s borders have been largely open to free trade, which has meant a flood of imports, primarily from the United States. In contrast, Canada has protected its markets from U.S. milk production which far exceeds what Canadian farmers produce.

USMCA Trade Panel Rejects U.S. Complaint About Access to Canada Dairy Market

Tue, 28 Nov 2023 22:40:16 GMT

A trade dispute settlement panel set up under a major North American free trade agreement has rejected a U.S. complaint that Canada is improperly limiting access to its dairy market, an official report showed on Friday.

The United States had accused Canada of not meeting obligations under the 2020 United States-Mexico-Canada Agreement to open its market to foreign producers.

The three-person independent panel ruled that Canada had not acted unreasonably. Their report was released on Friday.

U.S. Trade Representative Katherine Tai said in a statement that she was “very disappointed” by the ruling.

“The United States continues to have serious concerns about how Canada is implementing the dairy market access commitments it made in the Agreement ... we will not hesitate to use all available tools to enforce our trade agreements,” she said.

Trading partners say that although Canada has over the years agreed in a number of deals to allow somedairy market access to foreign firms through a system of tariff-rate quotas, it was in fact improperly allocating most of them to domestic firms.

“Canada is very pleased with the dispute settlement panel’s findings, with all outcomes clearly in favour of Canada,” Trade Minister Mary Ng said in a statement.

In January 2022, an earlier USMCA panel said Ottawa had violated the accord by not opening up the domestic market enough. Canada then amended its policies.

The USMCA agreement kept in place Canada’s decades-old supply management system, which restricts domestic production of dairy, eggs and poultry to stabilize incomes of dairy farmers and protect them from import competition with high tariffs.

Canada’s roughly 10,000 dairy farmers form one of the most influential political lobbies. Most farm in Quebec and Ontario, the provinces with the most parliamentary seats.

A Hail Mary for Trade: Trump Team’s 2017 Mission to Save NAFTA and American Farmers

Mon, 01 May 2023 20:50:00 GMT

Trade was a pinnacle piece of the Trump administration’s agenda. Between China and renegotiating the North American Free Trade Agreement (NAFTA) , trade was a highly debated topic during Trump’s four years in office. And thanks to the efforts of two agricultural leaders on Trump’s team, making the case for the importance of trade for farmers is what helped not only save NAFTA but possibly changed the course of history.

It was the last full week of April 2017, and Ray Starling, who served as Special Assistant to the President for Agriculture, Trade and Food Assistance during the Trump administration, had just received some important news. The information came from his boss Gary Cohen , President Trump’s director of the National Economic Council.

“We have it on good authority that the president is going to terminate NAFTA this Friday. The lawyers are working on the language, and you just need to get prepared for that,” remembers Starling.

Starling knew that terminating NAFTA could have very negative impacts on U.S. farmers. However, few people knew that such a decision from President Trump was imminent. Secretary of Agriculture, Sunny Perdue , had just been confirmed the prior day, and both Starling and Perdue knew they needed to get information to the president.

“I knew how to navigate the West Wing. I was going to take him to the Oval Office, and we were going to sneak in and talk the president out of terminating NAFTA. That was our plan,” says Starling.

Reince Preibus was the president’s chief of staff at the time. He stopped the pair and advised they could not just “stop by” to see the president without an appointment; however, the doors to the Oval Office soon opened and Starling and Perdue had their chance. The pair produced a color-coded map of the counties President Trump had carried in the 2016 presidential election, and Sec. Perdue shared the potential impact with the president.

“And he says, ‘If you terminate NAFTA without something else being in place, these are the people you’re going to be hurting,’ and he circled the Midwest and the reddest most central part of the country,” Starling recalls.

While Perdue continued talking with the president, Starling stepped outside the Oval Office to make quick calls to others in the West Wing who could come support their cause.

“By the time this meeting ended there had to be 15 to 20 people standing inside the Oval Office, and the president basically said, ‘I’m really glad you all came in here, we’re going to reconsider this decision,’” says Starling.

Starling shares the story in his recently released book, “ Farmers versus Foodies. ” He says few people know how close the country was to losing the important trade deal.

“By sneaking the secretary into the Oval Office, we had essentially changed the course of history in so far as it came to terminating that particular trade agreement that particular week,” says Starling.

While that meeting helped save NAFTA and set the course for the U.S. Mexico Canada Agreement (USMCA), today, Starling is General Counsel for the North Carolina Chamber of Commerce and speaks and consults with groups on topics related to agriculture.

You can listen to the full story on Farming the Country podcast with Andrew McCrea.

Related News:

Dairy Industry Remains Hopeful About NAFTA 2.0 Deal

Deadline Looms, but still no Movement on U.S.-Mexico Corn Trade Dispute, Grassley says

Dairy Report: U.S. Files Second Case Against Canada Under the USMCA

Thu, 23 Feb 2023 22:31:01 GMT

The U.S. Trade Representative Office formally filed its second case against Canada under the U.S. Mexico Canada Agreement (USMCA). This is the second case the U.S. has filed against Canada over dairy market access. The U.S. won its first case in January of last year as a dispute settlement panel determined Canada undermines the value of its dairy tariff rate quotas for U.S. farmers and exporters by limiting access to end-quota quantities negotiated under USMCA.

“Canada thus far has not provided real market access for our dairy products,” says Doug McKalip, Chief Ag Negotiator for the U.S. Trade Representative. “This second case will allow us to focus specifically on the issues that still remain with the Canadian market for dairy.”

Canada failed to meet the deadline of February 3rd last year to bring its policies into compliance or face possible tariffs or other possible measures from the U.S.

For more industry news, read:

U.S. Seeks New Dispute Panel Over Canadian Dairy Imports

Wed, 01 Feb 2023 17:09:47 GMT

The United States on Tuesday said it was seeking a second trade dispute settlement panel over Canada’s dairy import quotas, charging that Canada was still not meeting obligations to open its market to American producers.

The U.S. Trade Representative’s office said it was challenging Canada’s revised tariff-rate quota (TRQ) allocations that were put in place last year after a previous dispute panel decision under the U.S.-Mexico-Canada Agreement on trade.

USTR said in a statement that Canada was unfairly using a market-share approach for determining quota allocations, and had imposed new conditions that effectively prohibit Canadian retailers, food service operators, and other types of importers from utilizing import quota allocations.

Limited access to Canada’s dairy market for U.S. producers was granted as part of the renegotiation of the former North American Free Trade Agreement (NAFTA) in 2018, but tensions over dairy trade ran high even as the USMCA deal was being signed by then-president Donald Trump.

U.S. producers were unhappy with the way Canada had allocated TRQs, which allow specific quantities of products from raw milk to cheese to cross the border at lower or zero tariffs, reserving them exclusively for Canadian processing firms. After months of consultations, USTR requested a dispute panel in 2021, which ruled that Canada’s practices violated its USMCA obligations.

“Although the United States won a previous USMCA dispute on Canada’s dairy TRQ allocation policies, the Canadian government’s revised measures have not fixed the problem,” Ambassador Katherine Tai said in a statement, adding that she would use all available tools to ensure that U.S. farmers, dairy processors and workers receive the “full benefits of the USMCA.”

Canada’s trade minister, Mary Ng, said in a statement issued in Ottawa that she was ‘disappointed’ in the U.S. move and would defend Canada’s longstanding Supply Management system that protects Canadian dairy farmers with production quotas and high tariffs on dairy imports.

“We will stand firm against attempts to re-negotiate during this dispute settlement panel process,” Ng said. (Reporting by David Lawder in Washington, Additional reporting by Steve Scherer in Ottawa; Editing by Andrea Ricci)

Another Look at Canada’s Dairy Tariff-Rate Quota

Fri, 23 Dec 2022 17:28:29 GMT

The issue over Canada’s dairy Tariff-Rate Quota isn’t over yet. The U.S. Trade Representative Office announced it’s requesting new dispute settlement consultations with Canada.

The Office saying since initiating consultations with Canada back in May, it has identified additional aspects of Canada’s measures appear to be inconsistent with the country’s obligations under the U.S. Mexico Canada Agreement (USMCA).

Agriculture Secretary Tom Vilsack saying, “Canada remains in violation of its commitment under the USMCA by not removing its trade restrictions on American dairy producers.”

In January, a dispute settlement panel agreed with the U.S. noting that Canada was breaching its USMCA commitments by reserving most of the end quota quantity in its dairy Tariff-Rate Quotas for the exclusive use of Canadian processors.

U.S. Expands Dairy Clash with Canada Through the USMCA

Wed, 21 Dec 2022 22:03:15 GMT

The U.S. is requesting dispute-settlement cosulations for a third time over Canada’s dairy quotas, saying it has found more areas of “deep concern” and that the nation’s measures are inconsistent with it’s obligations under the U.S.-Mexico-Canada Agreement (USMCA) .

Washington is expanding its challenge to include Canada’s use of a market-share approach for determining the quotas, according to the Office of the U.S. Trade Representative. It said Ottawa’s method prohibits eligible applicants--including retailers and food-service operators--from accessing allocations.

Under the USMCA that took effect in July 2020, Canada conceded to granting more duty-free or lower tariff access across dairy products though a tariff-rate quota, or TRQ, with products including:

Milk
Cream cheese
Yogurt
Ice cream

But Canada was allocating a bulk of those imports to processors, limiting the ability of other groups like retailers to buy U.S. products.

“We remain very concerned by Canada’s refusal to honor USMCA commitments,” Ambassador Katherine Tai said. “Rather than work toward meeting its obligations, Canada persists in implementing new dairy policies that are inconsistent with the USMCA, and which continue to deny U.S. workers, farmers, producers, and exporters the full benefits of market access they were initially promised.”

The U.S. previously won a case under USMCA dispute settlement procedures, but has rejected Canada’s solution to the situation and requested additional consultations in May on the policies. Those discussions raised additional concerns by the U.S. and prompted this latest request for formal discussions on the issues.

If there is no eventual solution, the U.S. can request another dispute settlement panel be established.

More on policy :

How the $1.7 Trillion Omnibus Spending Package Might Impact Your Operation
4 Ways to Advocate for Ag in the New Farm Bill

U.S. Requests New USMCA Dispute Consultations on Canadian Dairy Tariff-Rate Quota Policies

Tue, 20 Dec 2022 18:41:16 GMT

United States Trade Representative Katherine Tai today announced that the United States is requesting new dispute settlement consultations with Canada under the United States – Mexico – Canada Agreement (USMCA) regarding Canada’s dairy tariff-rate quota (TRQ) allocation measures. Since initiating consultations with Canada in May 2022, the United States has identified additional aspects of Canada’s measures that appear to be inconsistent with Canada’s obligations under the USMCA, and U.S. concerns have only increased.

With this new request, the United States expands its challenge of Canada’s dairy TRQ allocation measures to include Canada’s use of a market-share approach for determining TRQ allocations. Canada applies different criteria for calculating the market share of different segments of applicants, and Canada is failing to allow importers the opportunity to fully utilize TRQ quantities. The United States continues to challenge Canada’s dairy TRQ allocation measures that impose new conditions on the allocation and use of the TRQs, and that prohibit eligible applicants, including retailers, food service operators, and other types of importers, from accessing TRQ allocations. Through these measures, Canada undermines the market access that it agreed to provide in the USMCA.

“We remain very concerned by Canada’s refusal to honor USMCA commitments,” Ambassador Katherine Tai said. “Rather than work toward meeting its obligations, Canada persists in implementing new dairy policies that are inconsistent with the USMCA, and which continue to deny U.S. workers, farmers, producers, and exporters the full benefits of market access they were initially promised. We remain steadfast in our commitment to use all tools available to enforce our trade agreements and ensure that our dairy industry can offer a wide range of high-quality American products to Canadian customers.”

“Canada remains in violation of its commitments under the USMCA by not removing its trade restrictions on American dairy producers,” Secretary of Agriculture Tom Vilsack said. “Obtaining access to the Canadian market for U.S. producers and exporters is an important priority for this Administration and the U.S. Department of Agriculture and the Office of the U.S. Trade Representative will continue to work in lockstep and use every tool at our disposal to achieve market access.”

The United States has raised concerns under the USMCA previously about Canada’s dairy TRQ allocation measures. In January 2022, a USMCA dispute settlement panel found Canada’s dairy TRQ allocation measures to be inconsistent with Canada’s USMCA obligations. In response to the adverse findings of the panel, Canada introduced changes to its TRQ allocation measures, but these new policies are still inconsistent with Canada’s obligations under the USMCA. In May 2022, the United States requested consultations with Canada to address its updated dairy TRQ allocation measures. Since initiating those consultations, the United States has identified additional areas of deep concern, and this new request for consultations provides an avenue to formally address U.S. concerns. If the United States and Canada are not able to resolve the matter through consultations, the United States may request the establishment of a panel under the USMCA.

USTR officials worked closely with staff from the U.S. Department of Agriculture throughout the first dispute and since the initiation of consultations in May 2022. Both agencies will continue working together, in consultation with stakeholders, to obtain Canada’s full compliance with its USMCA dairy commitments.

Background

A tariff-rate quota applies a preferential rate of duty to an “in-quota” quantity of imports and a different rate to imports above that in-quota quantity. Under the USMCA, Canada has the right to maintain 14 TRQs on the following types of dairy products: milk, cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk powders, concentrated or condensed milk, yogurt and buttermilk, powdered buttermilk, whey powder, products consisting of natural milk constituents, ice cream and ice cream mixes, and other dairy.

In notices to importers that Canada published in June and October 2020 and May 2021 for dairy TRQs, Canada set aside and reserved a percentage of the quota for processors and for so-called “further processors”, contrary to Canada’s USMCA commitments. As a result of this restriction, Canada was undermining the value of its dairy TRQs for U.S. farmers and exporters since entry into force of the USMCA by limiting access to in-quota quantities negotiated under the Agreement.

In January 2022, a USMCA panel agreed with the United States that Canada’s allocation of dairy TRQs, specifically the set-aside of a percentage of each dairy TRQ exclusively for Canadian processors, was inconsistent with Canada’s commitment in Article 3.A.2.11(b) of the USMCA not to “limit access to an allocation to processors.” The Panel additionally found that the Agreement makes no distinction between initial processors and “further processors”, and that therefore, the restriction in Article 3.A.2.11(b) applies to all processors, including specific subsets.

On March 2, 2022, Global Affairs Canada initiated public consultations regarding proposed changes to its policies with respect to the allocation of Canada’s USMCA dairy TRQs and explained that the changes are intended to implement the findings of the USMCA Panel. On May 16, 2022, Canada published the changes as final. The United States clearly stated that it rejects the changes Canada has implemented as a resolution to the dairy dispute because the new policies continue to be inconsistent with Canada’s obligations under the USMCA. On May 25, 2022, the United States requested dispute settlement consultations with Canada. Since initiating those consultations, the United States has identified additional aspects of Canada’s TRQ allocation measures that are inconsistent with Canada’s obligations under the USMCA.

Through its revised dairy TRQ allocation measures, Canada denies access to TRQ allocations to all types of importers except for processors, distributors, and, in some cases, further processors. This means that Canada continues to exclude other eligible applicants, such as retailers and food service operators. Additionally, Canada allocates its product-specific dairy TRQs based on a calculation of an applicant’s market share. The methodology for calculating market share differs depending on the type of applicant, which has the effect of ring-fencing large shares of the quota and limiting access to those shares exclusively to processors. For all of Canada’s dairy TRQs, Canada also requires that applicants be active during all 12 months of a 12-month reference period, potentially excluding otherwise eligible applicants, in particular new entrants. Finally, Canada’s policies for the return and reallocation of unused allocations (“turnback policies”) allow the return of allocations without potential penalty and late in the quota year. The turnback policies thus fail to ensure that there is a mechanism for the return and reallocation of unused allocations in a timely and transparent manner that provides the greatest possible opportunity for the TRQ to be filled.

What Should We Do With Canada?

Thu, 22 Sep 2022 02:16:05 GMT

The following commentary does not necessarily reflect the views of AgWeb or Farm Journal. The opinions expressed below are the author’s own.

Since the War of 1812, the relationship between the U.S. and Canada has been as good as any neighborly relationship could be, given it’s lasted a couple of centuries, give or take. We haven’t tried to invade our brethren to the north for more than 200 years, and save for Stanley Cup domination and that curling defeat in the Winter Olympics earlier this year, we’ve gotten along pretty well.

So why can’t we get along with Canada on trade issues?

Our respective dairy markets couldn’t be more different. Canada is carefully controlled under supply management. Ours is a free market system that gives producers the freedom to produce as much as they want (although some coops and processors have implemented their own supply management programs). The Canadian supply management system has kept herd sizes low while dairies in the U.S. continue to grow, with large herds soaking up the cows from smaller dairies as they go out of business.

My parents told me never to do business with family members, and maybe that’s the problem. Those kinds of partnerships always look good on paper and start out swimmingly, then inevitably go south as time goes by. There is always that moment in time when one brother says or does something to make the other brother mad. What starts as a crack grows to a canyon.

The canyon of discontent between our two countries started last February when Canada put the Class 7 pricing system in place. Suddenly, the market for a few U.S. processors dried up, and with it the milk supply contracts for about 100 producers. As a result Canadian imports of milk protein solids dropped 37% in 2017, or about $50 million in value. Meanwhile Canadian cheese production, which is a heavy user of milk protein solids, grew by 7%.

My friend Stan Van Keulen, who dairies near Vancouver, says Class 7 was just a “business transaction” Canada put in place to become competitive.

“Our processors decided to buy from Canada and not the U.S,” he says. “If U.S. processors wanted to continue to ship product to Canada, they could have dropped their price.”

Tensions between Canada and the U.S. grew when President Trump decided to open negotiations around the North American Free Trade Agreement (NAFTA). Class 7 has been a burning ember of debate in these negotiations. The U.S. wants Class 7 thrown in the dumpster along with the Canadian supply management system. Doing so would break down the fence and allow greater market access for U.S. dairy products.

But as Van Keulen says, “be careful what you ask for.” Breaking down trade barriers would also create greater market access for our competitors. It would also allow Canadian dairy producers the chance to expand. Canada would instantly become a larger player on the world market, and a bigger U.S. competitor. Usually in business you want less competition, not more.

Dairy producers on both sides of the border are waiting to see what NAFTA 2.0 holds. While an “agreement in principle” is due any day now, there’s nothing in the agreement pertaining to dairy. It’s like negotiators decided to focus on what both sides could agree on before tackling something neither could come to a consensus around. Don’t look for a NAFTA resolution anytime soon. Shaun Haney of realagriculture.com in Canada says years passed between when Canada and the EU had an agreement in principle on the Comprehensive Economic and Trade Agreement (CETA) and when the agreement was actually signed. The same would probably hold true for NAFTA.

While negotiators and politicians on both sides of the border continue to debate, producers go on producing milk. After all, Van Keulen’s dairy in Vancouver is not much different than say, John Jacobs’ dairy north of Green Bay, Wis. They’re both milking cows and relying on the resulting income to help their business survive and thrive. Perhaps a group of Canadian producers should sit down with U.S. producers over a few beers and get the whole thing hashed out.

Because in the end, it really comes down to creating a viable economy for both Canadian and U.S. dairy producers. So let’s let Canada have their system and we’ll have ours. Sure Canada is a significant trading partner for U.S. dairy products—No. 3 on the list—and we should keep that relationship and grow it if we can. But as we try to knock out another brick in the wall and gain greater access, let’s not forget the other burgeoning and untapped markets. After all, it’s always better to do business with members of someone else’s family.

What do you think? What should we do with Canada? Leave them alone or break down trade barriers? Let me know at mopperman@farmjournal.com