Category: Trade

The recent Southern Ag Today policy/trade article on December 12 by Goyal et al discussed the state-level economic consequences for potential trade policy shifts following the 2024 U.S. presidential election. In summary, their analyses investigated the worst-case scenario if the US where to impose a 60% tariff on Chinese goods, including a 10% tariff on imports from other countries. Such an action, as indicated by Goyal et al, could result in a 60% tariff on US agricultural exports and further tariffs from other trading partners. Their projected export losses under this scenario for 2025 by commodity and state are replicated in Table 1 below:

Table 1. State Level Shocks by Commodity Grouping Based on Worst-Case Scenario*
States	Cotton	Poultry	Soybeans	Beef	Pork	Feeds	Dairy	Corn	Wheat	Others	Total
TX	-$847	-$153	-$11	-$340	-$32	-$95	-$184	-$76	-$81	-$1,398	-$3,217
AR	-$196	-$237	-$567	-$17	-$7	-$39	$0	-$43	-$9	-$907	-$2,022
NC	-$112	-$258	-$239	-$9	-$281	-$36	-$10	-$42	-$30	-$779	-$1,796
GA	-$345	-$255	-$20	-$13	-$4	-$23	-$25	-$24	-$7	-$869	-$1,585
FL	-$20	-$13	$0	-$18	$0	-$5	-$25	-$3	$0	-$1,356	-$1,440
KY	$0	-$59	-$350	-$30	-$17	-$74	-$10	-$73	-$37	-$771	-$1,421
MS	-$175	-$143	-$424	-$8	-$9	-$29	-$1	-$32	-$4	-$452	-$1,277
TN	-$104	-$35	-$276	-$20	-$13	-$37	-$5	-$43	-$28	-$426	-$987
OK	-$96	-$47	-$45	-$120	-$133	-$17	-$8	-$13	-$133	-$279	-$891
LA	-$52	-$33	-$203	-$7	$0	-$22	-$1	-$27	$0	-$534	-$879
AL	-$107	-$213	-$49	-$15	-$2	-$15	$0	-$17	-$11	-$290	-$719
VA	-$26	-$58	-$93	-$14	-$7	-$20	-$17	-$18	-$12	-$351	-$616
SC	-$59	-$60	-$50	-$5	-$4	-$13	-$2	-$16	-$7	-$268	-$484
*60% tariff on US agricultural exports plus additional tariffs from other trading partnersSource: Southern Ag Today, December 12, 2024 (Goyal et al)

Of interest would be the total economic impacts (including multiplier effects) based on this worst-case scenario. Using the direct impacts from Table 1 (excluding the category grouping “Other” because of uncertainty what that grouping entails), an input-output model (IMPLAN) can provide this information. IMPLAN model output includes descriptive metrics of the economy such as total industry output (a measure of economic activity) and total value added. Total industry output (TIO) is defined as the value of production by industry per year. Total value added or gross regional product is defined as all income to workers paid by employers; self-employed income; interests, rents, royalties, dividends, and profit payments; and excise and sales taxes collect by business from individuals. It is equivalent to a state’s Gross Regional Product, which is analogous to Gross Domestic Product for the entire U.S.

Based on the IMPLAN state model runs using 2023 data and reporting the economic information in 2025$, the backward linked^[1] results are displayed in Table 2. The direct impacts for economic activity, -$8.7 billion, are what was presented by Goyal et al. The indirect impacts, which account for the decrease in economic activity from input suppliers, total -$3.1 billion. Decreased household spending, or the induced impacts, totals -$2.0 billion. The total economic impacts are close to -$14.0, a -$5.2 billion difference from the direct impact of -$8.7. The decrease in Gross Regional Product totaled -$6.6 billion. Tax impacts as a result of Goyal et al’s worst-case scenario analysis totals -$992.0 million.

Table 2. Estimated Economic Impacts from Worst-Case Scenario (2025$)*
	TIO (EconomicActivity)	Gross Regional Product	Taxes
	(billion $)		(million $)
Direct1	-$8.7	-$3.7	-$342.7
Indirect2	-$3.1	-$1.6	-$373.8
Induced3	-$2.0	-$1.2	-$275.5
Total4	-$13.9	-$6.6	-$992.0
*60% tariff on US agricultural exports plus additional tariffs from other trading partners1Direct effects are those what was presented by Goyal et al.2Indirect effects are those attributable to the input supplying businesses (e.g., expenditures on raw materials, supplies, and other operating expenses).3Induced effects are created as the new income generated by the direct and indirect effects is spent and re-spent within the region.4Total is the sum of the direct, indirect, and induced effects.

This short, quick analysis gives an example of how an initial change in direct spending has ripple effects throughout the economy. Not only are the commodities in question affected,  but input suppliers and household spending also feel the negative shock in this example. Consequently, tax receipts are affected as well.

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^[1]Describes the interconnectedness of an industry with its supply chain and “looks backward” to its necessary intermediate inputs to produce its output. In input-output modeling, Type I multipliers measure these backward linkages, whereas the Type SAM multipliers expand on these linkages to include household spending (IMPLAN Glossary “Backward Linkage”, 2017). 

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References

Goyal, R., S. Steinbach, Y. Yildirim, and C. Zurita. 2024. “State-Level Effects of Potential Trade Policy Shifts on Southern U.S. Agriculture.” Southern Ag Today. December 12.

IMPLAN Group LLC, IMPLAN System (2023 data and Cloud Platform V. 24.6 Release), 16905 Northcross Dr., Suite 120, Huntersville, NC  28078. Available at implan.com.

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Menard, R. Jamey. “Estimated Total Economic Impacts from Trade Policy Shifts-Worst-Case Scenario Revisited.” Southern Ag Today 5(4.4). January 23, 2025. Permalink

The U.S. agricultural trade outlook for 2025 is clouded with uncertainty driven by both global economic dynamics and domestic policy shifts. As shown in Figure 1 below, the USDA projects that agricultural exports could reach $170 billion—a slight decrease from the 2024 calendar year. Imports are expected to reach a record $215.5 billion. If both projections are accurate, these trade patterns would result in a record $45.5 billion agricultural trade deficit.

Figure 1: USDA Outlook for Agricultural Trade

However, prospective changes in domestic trade policy loom large over these projections. The incoming Trump administration has signaled plans for sweeping tariffs, including a proposed 60% tariff on Chinese goods and a 10% tariff on all other imports. These measures aim to protect domestic industries, but they risk triggering retaliatory tariffs from key trade partners. A resurgent trade war could severely restrict access to critical export markets, particularly China, the largest buyer of U.S. soybeans prior to the previous trade war. Retaliatory actions could further depress already struggling commodity prices and deepen challenges for U.S. farmers.

The USDA’s outlook underscores that exports to traditional markets such as Mexico and Canada are forecasted to remain strong, driven by demand for corn, beef, and dairy. However, exports to China are expected to decline further, exacerbated by weakened soybean demand and competition from Brazilian suppliers. At the same time, the anticipated tariffs could raise costs for imported agricultural inputs, further squeezing U.S. producers. 

The broader economic context offers mixed signals. Easing inflation and steady global GDP growth may support international demand for U.S. agricultural products. However, a strong dollar continues to challenge U.S. export competitiveness, particularly as other nations’ currencies depreciate. Another main contributor to the loss of competitiveness of U.S. agricultural products in the international arena is the increase of cost of production 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.

The long-term impact of the Trump administration’s trade policies remains to be seen, but the path forward will require balancing protectionist strategies with the need to maintain and grow critical trade relationships to support the agricultural sector.

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Schaefer, K. Aleks, and Luis Ribera. “2025 U.S. Agricultural Trade Outlook: Navigating Uncertainty Amid Policy Shifts.” Southern Ag Today 5(2.4). January 9, 2025. Permalink

The European Union (EU) and Mercosur (Brazil, Argentina, Uruguay, and Paraguay) signed a trade agreement on December 6, 2024, after more than 25 years of negotiations. The agreement, yet to be ratified, has the potential to become the most significant EU partnership, encompassing over 700 million people. It emerges amid the U.S. discussion of raising tariffs. 

Highlights for Agriculture

The flow of agricultural products is more significant from Mercosur to the EU, as illustrated in Figures 1, 2, and 3. The EU-Mercosur Trade Agreement introduces significant changes to agricultural trade by establishing quotas and reducing tariffs over a phased period^[1], providing greater access to Mercosur countries.  For beef, an additional quota of 99,000 metric tons (CWE) will be introduced over five years with a 7.5% tariff, while the existing Hilton Quota (10,000 metric tons) will become tariff-free upon the agreement’s implementation. Poultry exports will benefit from a 180,000 metric ton (CWE) quota, phased over five years, with zero tariffs, while pork will have a 25,000 metric ton quota with a fixed tariff of €83 per metric ton, implemented over five years.

The agreement also includes quotas for sugar (180,000 metric tons with zero tariffs, including 10,000 metric tons reserved for Paraguay), ethanol (450,000 metric tons duty-free for industrial use), and corn (1 million metric tons at zero tariffs, increasing over five years). A 60,000 metric ton quota for rice will start at zero tariffs and gradually increase over five years. Additionally, orange juice tariffs will be eliminated over seven to ten years, with a 50% preferential margin during the transition. These provisions aim to expand market access for Mercosur’s agricultural exports while aligning with EU tariff structures.

Sustainability: Both blocs committed to following the Paris Agreement, combating deforestation, and reducing greenhouse gas emissions. The EU committed to using data from Mercosur authorities to assess Mercosur’s compliance with the requirements established by European bloc legislation. 

Challenges Ahead

The signing of the EU-Mercosur trade agreement represents a significant milestone. However, the agreement may face political challenges in the future. The EU member states and the European Parliament must review and approve the final text. France and Poland are likely to express opposition to the agreement. Additionally, the Mercosur nations will need to ratify the agreement in their respective congresses.

Implications for the United States

The EU-Mercosur trade agreement introduces competitive challenges for U.S. agricultural exporters by granting Mercosur countries preferential access to European markets and strengthening the EU’s position in Mercosur. Commodities such as beef (Fig. 1), corn/peanuts (Fig. 2), and soybeans (Fig 3) will face increased competition, with Mercosur benefiting from reduced tariffs and expanded quotas in the EU. At the same time, the agreement allows European goods to gain a stronger foothold in Mercosur countries, reducing U.S. export opportunities in high-value sectors like processed goods and dairy. The deal further challenges the U.S.’s ability to compete globally by setting a precedent for trade norms.

Figure 1 – 2023 Livestock Export Values by Product and Region (FOB, $ Millions)

Figure 2 – 2023 Crop Export Values by Product and Region (FOB, $ Millions)

Figure 3 – 2023 Soybeans Export Values by Product and Region (FOB, $Millions)

^[1] Sources: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/mercosur/eu-mercosur-agreement/factsheets-and-guides_en

https://agenciabrasil.ebc.com.br/economia/noticia/2024-12/entenda-como-ficam-exportacoes-agricolas-apos-acordo-mercosul-ue

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Calil, Yuri, and Pancho Abello. “EU-Mercosur Trade Agreement.” Southern Ag Today 4(52.4). December 26, 2024. Permalink

In our previous analysis, we explored the overall impact of potential trade policy shifts on Southern U.S. agriculture, highlighting significant risks to critical commodities. However, these impacts will vary widely across different states. This analysis focuses on the state-level effects, examining how the worst-case trade policy scenario (Scenario 2 in our previous study) could affect agriculture across individual states within the Southern U.S.

Our analysis focuses on the most extreme trade policy scenario following the 2024 U.S. presidential election. In this worst-case scenario, the U.S. imposes a 60% tariff on Chinese goods and a 10% tariff on imports from other countries. This could provoke severe retaliatory measures from China, including a 60% tariff on U.S. agricultural exports and additional tariffs from other trading partners. These disruptions could significantly impact Southern agriculture, a region heavily dependent on foreign markets. The impact would vary by state, depending on each state’s reliance on specific export markets. By focusing on this worst-case scenario, our analysis highlights the localized risks each Southern state might face.

Our analysis reveals significant economic vulnerabilities at the state level, particularly in critical agricultural commodities. As shown in Figure 1, Texas emerges as the most impacted state, with a projected total trade loss of $3.2 billion. The cotton industry could see an export decline of $847 million, while the beef and dairy sectors are expected to lose $340 million and $184 million, respectively. These figures underscore Texas’s heavy reliance on these major agricultural products, making it highly susceptible to trade disruptions that could severely affect its economy.

Arkansas and North Carolina also face substantial economic challenges as well, with total projected losses of $2.0 billion and $1.8 billion, respectively. As shown in Table 1, Arkansas’s soybean industry could see a decline of $567 million in export value. The poultry and pork sectors in North Carolina are particularly vulnerable, with expected losses of $258 million and $281 million, respectively. These sectors are critical to the state’s agricultural output, and such large-scale impacts could have far-reaching consequences for producers and the broader regional economy.

Other Southern states are similarly at risk, with significant commodity-specific losses under the worst-case scenario. For example, Georgia’s cotton and poultry industries could see combined losses exceeding $600 million, with cotton alone projected to decline by $345 million, as detailed in Table 1. Alabama’s poultry sector is expected to suffer a $213 million loss, a significant blow to the state’s agricultural revenue. Kentucky’s soybean exports could also drop by $350 million, while Oklahoma’s wheat and livestock sectors face a combined projected loss of $386 million. These projected trade impacts emphasize the profound impact trade policy shifts could have on critical agricultural commodities across the region.

Our analysis highlights the severe economic impact that potential trade policy shifts could have on Southern U.S. agriculture under the worst-case trade policy scenario. Texas could face losses of $3.2 billion, with significant hits to its cotton, beef, and dairy industries. Arkansas and North Carolina also stand to lose billions, especially in soybeans, poultry, and pork. These figures underscore the urgent need for targeted, state-specific strategies to mitigate these risks and support the most affected sectors. Policymakers must address these vulnerabilities to safeguard the region’s agricultural economy.

Figure 1. 2025 State-Level Export Loss Projections for the Worst-case Scenario.

Table 1. Projected 2025 Export Losses by Commodity and State for the Worst-case Scenario (million $).

Learn More

Kim, D., Steinbach, S., Yildirim, Y., & Zurita, C. (2024). Understanding Trade Strategy Impacts on Soybean Exports and Farm Income in North Dakota. CAPTS White Paper 2024-01. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4920301.

Goyal, Raghav, Sandro Steinbach, Yasin Yildirim, and Carlos Zurita. “Trade Policy Scenarios after the U.S. Presidential Election and What They Could Mean for Southern U.S. Agriculture.” Southern Ag Today 4(44.4). October 31, 2024. https://southernagtoday.org/2024/10/31/trade-policy-scenarios-after-the-u-s-presidential-election-and-what-they-could-mean-for-southern-u-s-agriculture/

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Goyal, Raghav, Sandro Steinbach, Yasin Yildirim, and Carlos Zurita. “State-Level Effects of Potential Trade Policy Shifts on Southern U.S. Agriculture.” Southern Ag Today 4(50.4). December 12, 2024. Permalink

On September 28, India lifted its export ban on non-basmati white rice and replaced it with a minimum export price (MEP) policy of $490/metric ton. On October 20, India announced the removal of the MEP policy on non-basmati white rice and the removal of export duties on other rice products (e.g., parboiled, husked, and paddy rice), effectively freeing rice exports. While this measure was expected anytime and the global rice market was already factoring in the change to some extent, the announcement is creating shockwaves throughout the global rice market.

India implemented the export ban on July 20^th, 2023 (see https://southernagtoday.org/2023/07/27/shaking-the-global-rice-market-india-bans-exports-of-white-non-basmati-rice/) amid fears of a short rice crop due to the projected dry Monsoon that never materialized. India harvested a record rice crop (137.8 million metric tons) in 2023/24, but the export ban remained in place. Fast-forwarding to the current year 2024/25, the weather has been beneficial, and India is projected to harvest a new record crop (estimated at 142 million metric tons in October according to USDA) and carry record-high stocks. In summary, India’s production performance has been outstanding, which undermined the rationale for keeping the export ban for so long. 

Since late September when India started easing exports, Asian rice prices have been under downward pressure despite the strong import demand, primarily from Indonesia and the Philippines. For instance, the export price of Thai 5% rice dropped below $500/metric ton in mid-October for the first time since July 2023 (Creed Rice Market Report, 2024; USDA, 2024a), while that of Pakistani 5% rice dropped more drastically as Pakistan competes more directly with India in many African markets. The latest Creed Rice Market Report (November 6^th) suggests India’s export price for non-basmati white 5% rice is around $465/metric ton.

In contrast, rice prices in the Western hemisphere are still at a much higher level than those in Asia, and the downward pressure has not been felt so hard, at least not yet. For example, the average export price for Southern 4% long-grain rice average $779/metric ton in 2023/24 and has hovered around $800/metric ton since August. Export prices out of Mercosur have also fluctuated between $770-790/metric ton in the last few weeks. While Western hemisphere long-grain rice has historically enjoyed a price premium relative to Asian long-grain rice, we should expect an increasing downward price pressure in the coming weeks and months as India’s rice harvest and the Mercosur’s rice crop advances.

The million-dollar question for the U.S. rice industry is how will prices adjust this coming year, and the answer is: it depends. First, it will depend on the (most likely) downward adjustment in Asian export prices, which in turn depends (among other things) on how much rice India exports. A quick analysis using the Arkansas Global Rice Model (AGRM) and assuming India exports according to USDA projections in October (21 million metric tons) bring prices to $450/metric ton. However, if India decides to liquidate some stocks as well further increasing exports, prices may drop even further. Second, it will depend on the level of market integration with Asia. While historically Asian rice has not been prominent in the Western hemisphere, its presence is growing. The more market integration, the more pressure we should expect to receive, and an increasing price gap between Asian and Western Hemisphere rice could fuel market integration. Third, it will depend on the rice crop in Mercosur (South American countries that compete with U.S. long grain rice). USDA projects a slight increase in planted area relative to last year, which could result in more competition in core U.S. export markets.

Finally, it is important to discuss how much room there is for price adjustments and profitability. The November WASDE report (USDA, 2024b) maintains long-grain farm prices unchanged at $14.50/hundredweight ($319/metric ton). Using that farm-price as a reference and the University of Arkansas Division of Agriculture 2025 Rice Enterprise Budgets (Figure 1), we estimate the average net returns to range from $22.25 to $103.28/acre for the different rice production systems, significantly lower than last year’s net returns, which ranged from $97.50 to $153.70/acre. We estimate the 2025 breakeven prices to range from $13.26 to $14.22/hundredweight (cwt) across production systems. The downward pressure on prices due to India’s liberalization of rice exports could push farm prices further down in the coming months, which could further decrease the economic returns and affect the 2025 rice planting intentions.                      

Figure 1. Arkansas: Projected 2025 Net returns and Breakeven Price.

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References

Creed Rice Market Report. 2024. Several issues. Available at https://www.riceonline.com/

University of Arkansas Division of Agriculture. 2024. 2025 Arkansas Crop Enterprise Budgets. Available at https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

USDA. 2024a. Rice Outlook. October 2024. Available at https://www.ers.usda.gov/publications/pub-details/?pubid=110218

USDA. 2024b. WASDE Report. November 2024. Available at https://www.usda.gov/oce/commodity/wasde

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Durand-Morat, Alvaro. “What to Expect from India’s Removal of the Export Ban on White Non-Basmati Rice.” Southern Ag Today 4(46.4). November 14, 2024. Permalink