This article is part of a series that poses questions for key Trump Administration nominees for government agencies that intersect with farmers, rural communities and our food system. Read the rest of the series here.
Trade talk and tariffs were a theme throughout Donald Trump’s campaign. But no one predicted that just two weeks into his presidency, the U.S. would be on the brink of a trade war with its two closest economic (not to say geographical) partners, Canada and Mexico.
President Trump loves tariffs, once declaring “tariff” the most beautiful word in the English language. He invokes tariffs to threaten trade partners, indifferent as to whether the partner is a close ally, like Mexico, or a country with which relations are far more strained, as is the case with China. The president proposes tariffs as a revenue source to balance the cost of his proposed tax cuts, and as a bargaining chip that will somehow force neighboring countries to further restrict drug smuggling into the U.S., and to stop migrants from getting to the U.S. border. Tariffs are not just a beautiful word, seemingly, but also a miracle cure for assorted ills, economic and otherwise.
(To learn more about how tariffs actually work, read our recently updated Tariffs 101).
What is noticeably absent in all this talk of tariffs is any mention of tariffs as part of a trade strategy. In this last 10 days of manic headlines and tweets, the U.S. public has heard nothing about U.S. competitiveness, nor about U.S. job creation, nor securing industries vital to U.S. security. The executive order President Trump announced on Jan. 20, entitled America First Trade Policy, called for a series of investigations into unfair trading practices, to be delivered in April. That was not much time for the work, but it seemed there would be a process before instigating policy changes. Yet on Feb. 1, the president announced tariffs of 25% on Mexico and Canada and 10% on China to go into effect within days. His justification was to declare a national emergency (without supporting evidence). The administration apparently had made no provision to address the diplomatic and economic turmoil his declaration unleashed. Both Canada and Mexico managed to negotiate a reprieve just hours before the tariffs were due to take effect, while China is now retaliating as a 10% tariff was added to its U.S. exports on Feb. 4. No one in Mexico or Canada, however, imagines the threat has gone away.
The office of the United States Trade Representative (USTR) is situated in the Executive Office of the President. The USTR is a member of the Cabinet, nominated by the president and confirmed by the Senate. The USTR role is to advise the president on trade policy and to serve as the government’s chief trade negotiator. President Trump has nominated Jamieson Greer, a trade lawyer who served in Trump’s first administration as USTR’s chief of staff under Robert Lighthizer. It remains to be seen whether this administration’s USTR will mainly respond to new directives or if the office will also lead the development of new initiatives.
In advance of Greer’s confirmation process we have three questions that we believe are important for him to address.
Question 1: What in fact is the president’s trade policy?
We have seen no sign that the government intends to accompany tariff hikes with an investment strategy, such as increased public funding for sectors that might flourish in an environment with fewer imports. Rather, all public funding is currently under a cloud, and much of the investment secured by the Biden Administration for domestic economic development has been frozen or eliminated.
For example, the U.S. imports 40% of its food (by value); half of that total is fruits and vegetables. There would be important environmental and rural economic benefits to reducing the scale of fruit and vegetable production and re-localizing their markets (not to the exclusion of trade but nested in less concentrated and exploitative value chains). But as Mexico and Canada are important sources of food and agricultural commodities, the abrupt imposition of very high tariffs on these countries will create an immediate price shock for the U.S. firms importing the food, as they are the ones that must pay tariffs. That cost will inevitably be passed on to food processors and retailers who buy the commodities, and ultimately to household consumers.
Can the nominee explain how the tariffs fit with the administration’s trade ambition? Indeed, can the nominee explain what role trade is expected to play in the next four years?
Question 2: How will U.S. trade policy in this administration work with other countries?
We are alarmed by the administration’s evident lack of respect for international trade institutions, including treaties that were created under U.S. leadership, including the World Trade Organization (WTO) and the continental agreement, USMCA, which replaced NAFTA. Note that USMCA, which binds the U.S. to Mexico and Canada economically, was renegotiated by the previous Trump Administration.
The president is making tariff threats without regard to the target country’s history with the U.S., whether there are military or other treaties binding us, or how close relations might be with the tens of millions of U.S. residents. Over 32 million people of Mexican descent live in the United States, and more than a million Canadians. The U.S. census shows that 4.7 million people describe themselves as Chinese American, 60% of whom were born outside the U.S. Trade relationships often reflect and at the same time serve to deepen closer cultural ties, and they have political implications, too. Across the continent, the three countries have a long history of putting out each other’s forest fires, rescuing each other’s distressed ships or re-routed planes, and consuming each other’s food and culture.
What role do U.S. trade relations play in the broader scope of U.S. foreign relations, in the view of this administration? Can the USTR explain the benefits of a trade strategy that disregards negotiation and diplomacy for unilateral announcements of tariffs? Is there a method to the aggressive brinkmanship on display this past week, not least with countries that have been strong allies for more than a century?
Question 3: Who will compensate the farmers and other producers caught in the crossfire of trade wars?
We have seen demonstrated again this week that the arbitrary imposition of tariffs will result in retaliatory tariffs from trading partners. Canada announced a first wave of counter tariffs that will go into immediate effect were the U.S. to proceed with the tariffs they threatened, with a much larger package of tariffs to follow within weeks. U.S. agriculture is particularly vulnerable to this retaliation. When Trump imposed tariffs on steel and other goods during his first administration, China raised tariffs on U.S. farm goods. U.S. exports of corn and soy were suddenly priced out of that market. The administration then paid out $28 billion to farmers from the USDA’s Commodity Credit Corporation, breaking its international treaty obligations at the WTO and adding to the U.S. public debt. That compensation helped the agricultural sector to survive the turmoil, but the disruptions very likely contributed to further corporate concentration in agriculture as independent operators saw their economic independence further eroded.
U.S. farm policy drives farmers to produce commodity crops at low prices in ever higher volumes, depending on exports to absorb the excess. Since the first Trump administration, China has diversified its sources of grain imports to other countries. Other countries, seeing they, too, are liable to U.S. tariffs, are likely to follow. Other suppliers, like Brazil, now appear more dependable trading partners. There is no doubt Canada and Mexico are talking with other former U.S. allies with a view to diversifying their markets and reducing their dependence on the U.S.
The multinational corporations that control grain trading operate in Brazil, as they do all over the world. Their business will continue. But U.S. farmers cannot move their farmland abroad. Food and commodity producers are place-based, they need markets that will buy from them where they are. If the administration is no longer committed to an export solution for surplus production on U.S. farms, where are the markets expected to come from? Does this interest in making imported food cost more suggest a commitment to supporting competitive domestic markets for food instead, by continuing USDA’s work to limit corporate concentration, re-establish agricultural market price transparency, and ensure decent wages for all food and farm workers? Trade policy could support these goals. But not through the capricious imposition of tariffs liable to trigger retaliation on export-dependent producers. What is the long view for U.S. agriculture and trade?
