Category: Trade

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

To say that international trade has dominated the news in recent weeks would be an understatement. Last month, President Trump followed through on his promise to impose 25% tariffs on Canada and Mexico, and an additional 10% on China. While Mexico—and to a lesser extent, Canada—received another temporary reprieve, the threat of tariffs still looms.

It is crucial to understand the potential impacts of these tariffs on U.S. agriculture. In his recent State of the Union Address, as well as in subsequent social media posts, President Trump claimed that the new round of tariffs would result in increased domestic agricultural sales. There is an element of truth to this claim. According to economic theory, tariffs can lead to a rise in domestic sales—if the imported product directly competes with a similar domestic product. However, this does not apply to commodities like soybeans or cotton, as the U.S. exports far more of these products than can be consumed domestically. For example, more than 70% of U.S. cotton production is exported. In fact, these sectors are particularly vulnerable because they are often the target of retaliatory tariffs. Also, any increase in domestic sales resulting from tariffs has less to do with firms facing less competition and more to do with the fact that tariffs lead to higher domestic prices. These higher prices, in turn, encourage more domestic producers to sell their products. While this benefits producers, it unfortunately disadvantages importing firms and consumers, with the disadvantages far outweighing any gains. 

Imports should not be regarded solely as competition to American production. This perspective neglects the essential role imports play in meeting demands that exceed domestic capabilities. International trade is far more complex than the simplistic notion that “exports are good, imports are bad.”

Tequila, an agricultural product imported entirely from Mexico and cannot be produced elsewhere, serves as a prime example for examining the harmful impacts of proposed tariffs. U.S. imports of distilled spirits have soared by over 300% since 2000, largely driven by the extraordinary growth in tequila imports. Between 2000 and 2024, tequila imports skyrocketed by 1,400%, rising from $350 million to $5.4 billion (Figure 1). In 2024, U.S. agricultural exports totaled $176 billion, while imports reached $214 billion, resulting in an agricultural trade deficit of $38 billion. Remarkably, tequila alone accounts for over 14% of this deficit, despite being a single, highly differentiated product. Over the past decade, our growing taste for tequila has driven a more than five-fold surge in demand and imports. Imagine the outrage if tequila imports were banned simply to address the agricultural trade deficit.

I recently conducted research on the impact of a 25% tariff on Mexico and Canada on U.S. imports of distilled spirits (https://doi.org/10.1002/agr.22034). My findings indicate that such a tariff would reduce imports by over $1 billion, far outweighing any potential tariff revenue gains. This overall decline is primarily driven by a significant drop in tequila imports, though imports of other spirits would also decrease due to complementarities in importing.

It could be argued that these losses would primarily impact the exporting country—Mexican tequila companies. However, this perspective overlooks the fact that U.S. tequila consumption also supports American bars, retailers, wholesalers, and distributors. When factoring in the downstream economic impact, the losses become even more substantial. Clearly, it would be difficult to prove that American largess is enriching Mexican agave farmers at the expense of U.S. agricultural producers.

Figure 1. U.S. Imports of Tequila and Other Spirits: 2000 – 2024

For more information:

Muhammad, A. (2025), Trump Tariffs 2.0: Assessing the Impacts on US Distilled Spirits Imports. Agribusiness. https://doi.org/10.1002/agr.22034

---

Muhammad, Andrew. “Rethinking Tariffs: Tequila Shows There’s More to Imports Than Competition.” Southern Ag Today 5(12.4). March 20, 2025. Permalink

Brazilian beef was first banned in Japan in 2012 due to concerns over Bovine Spongiform Encephalopathy (BSE), also known as Mad Cow Disease. Brazil is currently in talks with Japan to begin beef shipments once again. Although Japanese imports of Brazilian beef were negligible prior to 2012, the possible reentry of Brazilian beef into the Japanese market could pose a significant challenge to U.S. beef exports. 

The importance of Japan to global beef trade and U.S. beef exports cannot be overstated. Japan is the third largest beef importing country in the world and the second largest market for the U.S. In 2024, U.S. beef exports reached $10.5 billion. That year, exports to Japan accounted for 18% of the total (USDA, 2025a, 2025b). While Japan is important to U.S. export disappearance, the U.S. is especially important to Japan as its leading supplier. In 2024, for instance, Japan imported $1.8 billion worth of U.S. beef. This was 43% of Japan’s total beef imports, exceeding imports from Australia ($1.7 billion and 39%), and significantly larger than countries such as Canada, New Zealand, and Mexico. Despite the current strong position of U.S. beef in Japan, this could be challenged by the reentry of Brazilian beef into the Japanese market.

Around the time of the U.S.-China trade war in 2018, Brazil emerged as the leading global beef exporter, surpassing the U.S., Australia, and India (Figure 1). The rise of Brazil as a major beef exporter is largely due to increased demand in China. (https://southernagtoday.org/2023/01/12/chinas-import-of-u-s-beef-continues-to-increase-but-how-does-the-u-s-compare-to-other-competing-countries/). As China emerged as the leading beef importing country (almost $14 billion in 2024), Brazil became its leading supplier accounting for 45% of total Chinese imports in 2024, far exceeding other exporting countries.

With exports already exceeding those of major exporters such as the U.S. and Australia, does Brazil have the capacity to gain a significant share of the Japanese foreign beef market? In 2024, cattle and beef production in Brazil was based on 192.5 million head of cattle (including all beef and dairy cows and calves). Over the past couple of years, Brazil’s national cow herd has been liquidating, leading to higher supplies of slaughter cattle and total production. Last year, Brazil’s national herd was reduced by 2% and was expected to continue shrinking midway through 2025 (Aquino, 2024). Despite the shrinking herd, Brazil has maintained its share of world trade. Given the expectation of rebuilding, Brazil’s herd could rebuild at a higher pace to capitalize on the new demand from the Japanese market.

Future Japanese demand will be based on a combination of quality and quantity. Over the last few decades, Japanese beef consumers have trended more towards the preferences of the typical U.S. beef consumer. Products like ground beef, steaks, burgers, and fajitas have become increasingly popular in Japan. The key question is whether Brazil can match the quality of U.S. beef in Japan. Quantity is a lesser obstacle for Brazil with this potential market opportunity.

Figure 1. Beef and Veal Exports (Top Countries): 2000 – 2025(F)

References

Aquino, Camila. (2024). Livestock and Products Semi-annual: Brazil. Report Number: BR2024-0001. USDA, Foreign Agricultural Service.

USDA. (2025a). Production, Supply, and Distribution Online (PSD Online). Foreign Agricultural Service. https://apps.fas.usda.gov/psdonline/app/index.html#/app/home

USDA. (2025b). Global Agricultural Trade System (GATS). Foreign Agricultural Service. https://apps.fas.usda.gov/gats/default.aspx

---

Muhammad, Andrew, Charles Martinez, and Md Deluair Hossen. “Market Showdown: U.S. Beef Faces New Challenges in Japan Amid Brazilian Reentry.” Southern Ag Today 5(10.4). March 6, 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