Trump trade policy: Playing a game of chicken with American agriculture

Not withstanding, the president’s rhetoric, after 14 months of what appeared to be stressful negotiations, the new NAFTA (the U.S.-Mexico-Canada Agreement or USMCA) ended up looking a lot like the old NAFTA with relatively small changes in the agricultural provisions. The good news was not really that that there was promise of additional access to Canada’s dairy, poultry and eggs sectors (the benefits from which have been estimated to be small, increasing NAFTA exports by about 1 percent). Nor was it that the new agreement contains many modernization features (many of which had been negotiated in the TPP agreement). Far more significantly, the new agreement maintained the tariff concessions that had been negotiated in 1992 under the original NAFTA that substantially expanded access to Canadian and Mexican markets for U.S. agricultural producers. However, even the benefits from the original and new NAFTA agreements are currently being compromised by other trade actions initiated by the Trump administration. In response to the so-called Section 232 tariffs imposed against exports of steel and aluminum to the United States, Canada and Mexico have imposed retaliatory tariffs against a variety of U.S. agricultural products including pork and cheese. Those actions are estimated to reduce U.S. agricultural exports by as much as $2 billion, more than offsetting any gains associated with the changes embedded in the new NAFTA agreement.