Author: Luis Ribera

Since “Liberation Day” back on April 1, 2025, and even before that, trade has been a major news topic.  The current administration’s strategy to use tariffs and the size of the U.S. economy as leverage to change trade relationships with the rest of the world has generated a lot of uncertainty in the market.  Both ag and non-ag industries have reacted to the almost daily trade talk news. Arguments for and against tariffs are all over the place, with the main question being, who is going to pay for the tariff hikes? 

To better address this question, it is important to differentiate between short- and long-term effects as the market adjusts to news regarding tariffs. Tariffs are a tax imposed on imported goods and services.  Sellers will do their best not to pass the tax to the consumers as that will probably reduce the quantity demanded and potentially reduce their market share to competitors less affected by tariffs.  Therefore, to keep their market share, sellers might absorb some of the impact of the tariffs in the short run waiting for the results of trade negotiations.  However, if sellers believe that the new tariff rates will remain in place for the long run, they might decide to pass the cost of the tariffs to consumers as their profit margins are probably reduced.

To illustrate, Table 1 shows the monthly percent changes in CPI for all urban consumers, which shows that there has not been a major change in CPI after “Liberation Day.”  The latest figures for July 2025 show that the CPI for all items is 0.2 percent, while food remained unchanged and energy decreased 1.1 percent.  In addition, the un-adjusted 12-month CPI ending in July 2025 shows 2.7 percent for all items, which is within normal ranges, especially coming off a historic high inflation over the last couple of years.  Food items went up 2.9 percent, with the largest increase being in food away from home at 3.9 percent, while energy went down by 1.6 percent. Will this continue over the intermediate- and long-run? Only time will tell.

Table 1. Percent Changes in CPI for All Urban Consumers (CPI-U): U.S. city average

	Seasonally adjusted changes from the preceding month
	Jan. 2025	Feb. 2025	Mar. 2025	Apr. 2025	May2025	Jun. 2025	Jul. 2025	Un-Adjusted 12-month*
All Items	0.5	0.2	-0.1	0.2	0.1	0.3	0.2	2.7
Food	0.4	0.2	0.4	-0.1	0.3	0.3	0.0	2.9
Food at home	0.5	0.0	0.5	-0.4	0.3	0.3	-0.1	2.2
Food away from home	0.2	0.4	0.4	0.4	0.3	0.4	0.3	3.9
Energy	1.1	0.2	-2.4	0.7	-1.0	0.9	-1.1	-1.6
Energy commodities	1.9	-0.9	-6.1	-0.2	-2.4	1.0	-1.9	-9.0
Gasoline (all types)	1.8	-1.0	-6.3	-0.1	-2.6	1.0	-2.2	-9.5
Fuel oil	6.2	0.8	-4.2	-1.3	0.9	1.3	1.8	-2.9
Energy Services	0.3	1.4	1.6	1.5	0.4	0.9	-0.3	7.2
Electricity	0.0	1.0	0.9	0.8	0.9	1.0	-0.1	5.5
Utility (piped) gas service	1.8	2.5	3.6	3.7	-1.0	0.5	-0.9	13.8
All Items Less Food and Energy	0.4	0.2	0.1	0.2	0.1	0.2	0.3	3.1
Commodities Less Food and Energy	0.3	0.2	-0.1	0.1	0.0	0.2	0.2	1.2
New vehicles	0.0	-0.1	0.1	0.0	-0.3	-0.3	0.0	0.4
Used cars and trucks	2.2	0.9	-0.7	-0.5	-0.5	-0.7	0.5	4.8
Apparel	-1.4	0.6	0.4	-0.2	-0.4	0.4	0.1	-0.2
Medical care commodities	1.2	0.1	-1.1	0.4	0.6	0.1	0.1	0.1
Services less energy services	0.5	0.3	0.1	0.3	0.2	0.3	0.4	3.6
Shelter	0.4	0.3	0.2	0.3	0.3	0.2	0.2	3.7
Transportation services	1.8	-0.8	-1.4	0.1	-0.2	0.2	0.8	3.5
Medical care services	0.0	0.3	0.5	0.5	0.2	0.6	0.8	4.3
*Ended July 2025 Source: Consumer Price Index Summary, U.S. Bureau of Labor Statistics (BLS)

References

Bureau of Labor Statistics. “Consumer Price Index Summary.” Economic News Release. Published August 2025.

---

Ribera, Luis, and Landyn Young. “How is the Consumer Price Index Impacted by Trade Talks.” Southern Ag Today 5(34.4). August 21, 2025. Permalink

Over the past few decades, international trade has undergone significant transformations as countries strive to lower barriers and create a more interconnected global economy. While reductions in tariff rates have been a welcome advancement, the complex landscape of non-tariff measures (NTMs) has added new layers of challenges to achieving freer trade. Understanding how these policies impact trade dynamics is essential for navigating the ever-changing world of global commerce.

Since 1996, the average most favored nation (MFN) tariff rate for World Trade Organization (WTO) member countries has fallen by nearly half, from 13.2 percent to 7.4 percent in 2021. MFN rates are given to all WTO members unless an agreement allows for a lower rate to be given, this would be the trade-weighted effective rate or preferential rate. When comparing simple average rate to the trade-weighted MFN rate there was a 3.7 percent spread in tariff rate during 2021. The trade-weighted effective rate brings the world average down even further, to 2.5 percent in 2021. While the overall reduction of tariff rates is good news for reducing trade barriers, non-tariff measures (NTMs) play a major role as well.

Applied tariffs are the actual rates charged on products whereas bound tariff rates are the maximum upper bound that can be applied on a product without having to compensate the affected party. All rates discussed throughout this article are applied and include both ad valorem as well as ad valorem equivalents for non-ad valorem tariff rates. 

NTMs are policy measures other than tariffs that can affect international trade such as regulations, standards, and procedures, impacting quantity traded, prices, or both. In 1994, a total of 293 NTMs were in place between all WTO countries. These included 264 anti-dumping policy lines and 29 countervailing lines. These have grown drastically over time with the largest increase being the growing number of Sanitary and Phytosanitary (SPS) policies. While SPS measures are tracked through 2021, limited data exist on NTM.  In 2021 a total of 20,726 SPS measures were in place for WTO markets, a 134 percent increase from 2010.  In addition, in 2018 there were 1,858 dumping reported. This rapid increasing trend of NTMs should be a concern for those of us that support freer trade.

In recent decades, the reduction of tariffs has significantly opened up opportunities for U.S. trade. However, the increasing prevalence of NTMs highlights the need for continuous monitoring and policy adjustments to foster a truly free trade environment.

Source

Snoussi-Mimouni, Monica and Edvinas Drevinskas. “Tariffs applied by WTO members have almost halved since 1996”, World Trade Organization. April 2023.

World Trade Organization. WTO Stats. https://stats.wto.org/. Online public database. Accessed March 2025.

---

Ribera, Luis, and Landyn Young. “Understanding Trade Barriers: Tariff and Non-Tariff Measures.“ Southern Ag Today 5(14.4). April 3, 2025. Permalink

In a previous article, we wrote about How U.S. Tariff Rates Compare to Other WTO Countries using weighted average tariff rates. The tariff rates discussed in that article are the Most Favorable Nations (MFN), which are the tariff rates applied to WTO members. However, many WTO countries also have other bilateral or multilateral trade agreements such as USMCA, CAFTA-DR, and Mercosur, to name a few. Participating countries in those trade agreements negotiate lower or preferential tariff rates among themselves using the MFN tariff rates as the starting point. In this article, we will examine the tariff rate reciprocity between the U.S. and its top five agricultural trading partners. This issue is especially important given the recent announcement by the President to increase U.S. tariffs to “reciprocal” levels.

Out of the top five agricultural trading partners, the United States has a trade agreement with Canada and Mexico—called the United States-Mexico-Canada Agreement—and with Japan—called the U.S.-Japan Trade Agreement. The United States had a two-year trade agreement with China in 2020 and 2021, and no trade agreement exists between the United States and the EU. The figure below shows the preferential weighted average tariff rate the United States charges for agricultural products imported from its top trading partners in green. On the other hand, the right side of the figure, in red, shows the preferential weighted average tariff that trading partners impose on U.S. agricultural exports. Finally, the table shows the value of U.S. agricultural imports and exports to and from each trading partner, the preferential weighted average tariff rate, and the differential, i.e. imports minus exports tariff rates. In other words, the difference between the U.S. tariffs on imported products minus the tariff the importing country imposes on U.S. exports. If the differential is negative, it means that the trading partner imposes a higher tariff rate than the United States. To illustrate, the United States imposes a 0.1% tariff on agricultural products from Canada while Canada imposes a 7.3% tariff on U.S. agricultural products, resulting in a tariff rate differential of -7.2 %. Similarly, the United States imposes a 3.3% tariff on Chinese agricultural products while China imposes a 16.1% tariff on U.S. agricultural products (tariff rate differential of -12.8%). Focusing solely on agricultural trade, the United States has a negative tariff rate differential with all trading partners ranging from -1.5% to -15.1%. Mexico is the only exception where U.S. tariffs are relatively larger (1.2% tariff rate differential).

(Note: In this article, we are addressing applied tariffs and not Non-Tariff Measurements (NTMs), which can be a considerable trade barrier mechanism.)

---

Ribera, Luis, and Landyn Young. “Do Major U.S. Ag Trading Partners Apply Tariff Reciprocity?” Southern Ag Today 5(8.4). February 20, 2025. Permalink

There has been a lot of talk about trade and tariffs since the new presidential administration was elected last November. It seems like this administration will use tariffs as a negotiation strategy to push their agenda in the international arena. Most economists would agree that, in general, international trade brings positive overall effects and that the lower the tariffs the more products are traded. We have discussed in previous articles the Importance of Agricultural Trade and Why is Trade Freedom Important?. U.S. agriculture is highly dependent on foreign markets as about one-third of U.S. farm income comes from exports. In addition, U.S. consumers have benefited from low import tariffs on food as well as a very robust domestic food production to enjoy the most affordable food in the world. U.S. consumers spend around 6.8 % of their disposable income on food at home which makes it the lowest out of 104 countries. 

Now, why would anyone want to disrupt something that seems to be working well for U.S. consumers? A favorite phrase for economists to use to answer complicated questions is “it depends.” This is a time to use those words as it depends on how you are looking at the issue. On the one hand, low tariffs have benefited U.S. consumers overall, on the other hand, other countries have higher import tariffs that may deter U.S. products to reach foreign markets or increase their share in those markets. The figure displays the weighted average Most Favorable Nations (MFN) tariff rates for fellow G20 countries for agricultural and non-agricultural products. This is the most commonly used aggregation method because it considers the relative importance of trade flows. The United States ranks towards the bottom of the list on tariff rates for both agricultural and non-agricultural products with 4.0% and 2.1%, respectively. Canada and Mexico, our largest trading partners have 14.4% and 7.3% respectively for ag products, while China has 13.1%. Our intention is not to justify the usage of tariffs as a strategy to push agendas but rather to present the issue from a different perspective. Regardless of your position on this issue, most would agree that lowering tariffs across the board would be the most beneficial outcome.

(Note: South Korea was left out of the figure as they have the highest weighted average tariff rates for ag products of all the WTO countries at 94.0% and distort the scale of the figure.)

Source

Valdes, Constanza, Jayson Beckman, Yacob Abrehe Zereyesus and Michael E. Johnson. Data on Expenditure on Food and Alcohol, 2023. January 2025. USDA Economic Research Service.

World Trade Organization. WTO Stats. https://stats.wto.org/. Online public database. Accessed January 2025.

---

Ribera, Luis, and Landyn Young. “How Does U.S. Tariff Rates Compare to Other WTO Countries?” Southern Ag Today 5(6.4). February 6, 2025. Permalink

In previous Southern Ag Today articles, the rising agricultural trade deficit was reported.  The latest USDA Outlook for U.S. Agricultural Trade report (August), forecast a $30.5 billion trade deficit for FY 2024 with exports at $173.5 billion and imports at $204 billion (Kenner et al., 2024).  Moreover, for FY 2025, USDA forecast an even larger trade deficit at $42.5 billion with exports at $169.5 billion and imports at $212 billion. As mentioned in previous articles, when we measure trade in volume the U.S. enjoys a 3.2 export to import ratio over the last 10 years, meaning that the U.S. exports more than three times the volume that we import.  The reason is that we tend to export products that are sold in bulk, such as soybeans, corn and wheat and we import more high value agricultural and food products such as beer, wine, spirits and fresh fruits and vegetables.

One of the main contributors to the loss of competitiveness of U.S. agricultural products in the international arena is the increase of cost of production. Figure 1 shows how the cost of farm inputs has risen in recent years. In 2018, U.S. farmers spent a total of $354 billion on inputs, however, by 2023 farmers spent $481.9 billion, an increase of 36 percent. Southern states (categorized by the USDA to include Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, and South Carolina) together saw farm inputs rise 37.65% over this time. The inputs purchased by these seven states accounted for 10.4 percent of the total for the United States.  Texas, grouped into the Plains region, accounted for 6.35 percent of the U.S. total. Of the southern states, Florida experienced the highest rise in cost of inputs during this time, increasing 58.65 percent from 2018 to 2023. 

---

Ribera, Luis, and Landyn Young. “Increase in Cost of Production Contributing to Trade Deficit.” Southern Ag Today 4(42.4). October 17, 2024. Permalink