Historically, U.S. agricultural trade has experienced a trade surplus, where exports are higher than imports (Figure 1.). In fact, since 1989 which is as far back as USDA Foreign Agricultural Service (FAS) Global Agricultural Trade System (GATS) has available data on agricultural trade, there were only two years with agricultural trade deficit, imports higher than exports, 2019 and 2022. USDA FAS expects that 2023 not only will show a trade deficit, but that the trade deficit will be increasing over time. The trade deficit was $3.5 billion in 2022 and it is expected to be $16.7 billion and $30.5 billion in 2023 and 2024, respectively (official 2023 numbers will be reported in February 2024).
However, when U.S. agricultural trade is presented in volume as opposed to value, the story is very different (Figure 2). The U.S. has never experienced a trade deficit and is very far from experiencing one where exports to imports ratio has been 3.2 over the last 10 years. The main difference between value and volume in agricultural trade is the agricultural products that the U.S exports and imports. The main U.S. agricultural products exported are soybeans, corn and wheat and they are sold for the most part in bulk. On the other hand, the main agricultural products imported by the U.S. are more high value consumer-oriented products, mainly distilled spirits, wine & wine products, and beer, as well as high value fresh produce such as fresh fruits and vegetables. These imported products are of much higher in value than the exported products and vice versa when volume is used as a measuring unit.
Figure 1. U.S. Agricultural Trade, Billion Dollars
Figure 2. U.S. Agricultural Trade, Million Metric Tons
Earlier this year (June 29, 2023) I wrote an article about U.S. whiskey exports rising even as agricultural exports declined overall.[1] The main point of that article was that whiskey sales to foreign markets have been continually increasing, in terms of both volume and value, and that the European Union (EU) stood out as a major destination, accounting for a large share of this recent rise. Currently, the EU accounts for over 50% of total U.S. whiskey exports (Figure 1).[2] This could have all been wiped away due to the lingering effects of the trade war.
Between June 2018 and January 2022, the EU imposed a 25% retaliatory tariff on American whiskey in response to the tariffs the Trump Administration imposed on foreign steel and aluminum. Consequently, U.S. whiskey exports to the EU decreased by over 30% between 2018 and 2020 (from $552 million to $368 million). The Biden Administration was able to negotiate a temporary tariff suspension starting in January 2022. Whiskey sales to the EU increased to $565 million that year and are expected to reach nearly a billion dollars by the end of 2023 (USDA, 2023) (Figure 1). The tariff suspension was set to expire this December, and as of January 2024 the EU would have imposed a 50% tariff on imports of U.S. whiskey if the suspension deadline was not extended. Fortunately, on December 19, 2023, the Biden Administration was able to secure an extended suspension of the retaliatory tariffs until March 31, 2025 (DISCUS, 2023).
This pending 50% tariff raised questions about its potential impact on U.S. whiskey sales to the EU. This question is now academic since the tariff reprieve was extended last week. It is important to note that whiskey is the leading U.S. distilled spirits export, accounting for more than two thirds of all distilled spirits sales to foreign markets in 2022 and 2023. Thus, any decline in whisky exports will have had a significant impact on the U.S. distilled spirits sector overall. If the 25% tariff experience is an indication how the EU market would have responded to an even higher tariff, it is safe to say that U.S. distilled spirits sector dodged a major bullet. Hopefully, all of this will get resolved before March 31, 2025.
Figure 1. U.S. Whiskey Exports to the EU and World: 2018-2023
Note: Whiskey is the generic term that includes whiskey of all types (e.g., malt, corn, rye) and bourbon and is defined according to the Harmonized System Classification (HS) HS 2208.30 whiskies. Source: USDA (2023)
References
Distilled Spirits Council of the United States (DISCUS). 2023. Statement on the U.S. and EU Agreement to Extend the Suspension of EU Tariffs on American Whiskey until March 31, 2025
The U.S. has established itself as a prominent exporter of agricultural and food products to the Association of Southeast Asian Nations (ASEAN), which includes major U.S. trading partners like Vietnam, the Philippines, and Malaysia. According to USDA, from 2010 to 2022, there was a notable upward trend in agricultural and related products exports to ASEAN, reaching a high of $15.80 billion in 2022. The U.S. consistently holds the position of the second-largest agricultural exporter to ASEAN. The average annual growth rate for U.S. agricultural exports to the region stood at more than 4% over this period, far outpacing the less than 2% percent growth for exports to other regions.
In the present landscape of global trade, the U.S. encounters significant trade barriers in the ASEAN region. The U.S. has a free trade agreement (FTA) with Singapore, but with no other ASEAN country. U.S. agricultural exports are subject to substantial applied average tariff rates in the remaining member states of ASEAN, ranging from 2.7% in Malaysia to 27.7% in Thailand. Notably, the Philippines, Vietnam, Indonesia, and Thailand, which impose import duties exceeding 10% on U.S. agricultural goods, are key export destinations. Specific product categories, such as beverages, tobacco, dairy, fruits and nuts, and sugar products are subjected to effective ad valorem average tariff rates exceeding 10%, thereby diminishing the competitiveness of these U.S. commodities in the ASEAN marketplace. Additionally, the proliferation of non-tariff measures (NTMs) has a substantial impact on U.S. agricultural exports to ASEAN. These NTMs range from import licensing mandates, health and safety regulations, and technical standards, to sanitary and phytosanitary measures, including the complexity of bureaucratic procedures. Such impediments escalate the cost of doing business, thereby hindering U.S. exports to ASEAN.
The network of bilateral and regional FTAs that ASEAN economies have established with their trading partners, such as the Regional Comprehensive Economic Partnership (RCEP), further complicates U.S. competitiveness. ASEAN countries have engaged in extensive FTA networks, offering their partners considerable tariff and non-tariff benefits, which include significant tariff reductions. For instance, Vietnam has enacted various bilateral and regional FTAs, including RCEP and the EU-Vietnam FTA. Indonesia has fortified its trade links with thirteen bilateral and regional FTAs, demonstrating its dedication to global trade. The Philippines (10 FTAs), Thailand (14 FTAs), and Malaysia (16 FTAs) have expanded their global trade relations. These widespread agreements, present challenges for U.S. agricultural exporters as ASEAN countries deepen trade with countries that compete against U.S. exports.
Figure 1. Applied tariffs and U.S. agricultural export to ASEAN
The U.S. is the largest chicken meat producing country in the world. According to the U.S. Department of Agriculture, production in 2022 was almost 21 million metric tons (MT) (ready to cook equivalent), with the next largest country (Brazil) producing around 14.5 million MT. While most of this production is consumed domestically, between 10% and 20% of total production is exported each year (USDA, 2023a). In 2022, U.S. exports of poultry products – including chicken, turkey, and other fowl – accounted for $6 billion in global sales, making poultry products a top ten U.S. agricultural export. The leading poultry export for the U.S. is frozen chicken leg quarters (henceforth leg quarters), which accounted for $1.9 billion in export sales in 2022, nearly a third of all U.S. poultry exports (USDA, 2023b).
Important to U.S. poultry exports is the country of Angola, which is located on the western Atlantic coast in the South African region. In 2022, Angola was the leading foreign destination for U.S. leg quarters in terms of value ($219 million) and the second largest foreign market in terms of volume (168 thousand MT). However, U.S. leg quarter exports to Angol have varied significantly over the last decade (See Figure 1), decreasing from a peak in 2014 ($243 million) to only $83 million in 2016. After 2016, U.S. exports recovered but immediately fell again during the pandemic in 2020. Since 2020, U.S. leg quarter exports to Angola significantly increased to $219 million in 2022. However, as Figure 1 shows, this was mostly due to higher chicken prices.
Unfortunately, the U.S. is facing increasing competition in Angola from rising domestic production as well as competition from Brazil. In 2022, for instance, Angola’s imports of frozen chicken cuts (including leg quarters, other cuts, and offal) from the U.S. were up 23% (volume) in 2022, whereas imports from Brazil were up 32% (UN Comtrade, 2023). Despite U.S. leg quarter exports to all destinations being down by only 8% in terms of volume in 2023 (year-to-date as of August), exports to Angola were down 25% (USDA, 2023b). Figure 2 shows Angola’s frozen chicken cut imports in 2021 ($201 million) by exporting source. The U.S. was the leading supplier, accounting for 63%; Brazil accounted for 22%. 2023 year-to-date data for the U.S., as well as 2022 data for Angola, suggest that Brazil will likely account for more than a third of total imports by the end of 2023, while the U.S. share will likely decrease to slightly more than 50%.
Figure 1. U.S. frozen chicken leg quarter exports to Angola: 2010 – 2022
Source: U.S. Department of Agriculture (USDA, 2023b).
Figure 2. Angola frozen chicken cuts imports (including leg quarters, other cuts, and offal) in 2021 by Source ($201 million)
Source: Observatory of Economic Complexity (OEC) (2023).
U.S. Department of Agriculture (USDA). 2023a. Livestock and Poultry: World Markets and Trade. Foreign Agricultural Service, Washington, DC.
U.S. Department of Agriculture (USDA). 2023b. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, DC. https://apps.fas.usda.gov/gats/default.aspx
Hides in the leather business typically refer to the skin of large animals while skins typically refer to smaller livestock. Raw cattle hides are generally grouped with offal items when discussing total animal value, but hides and skins are an important contributor to the total value of most cattle as the leather is commonly used for belts, shoes, wallets, jackets, car seats and interior, etc. Hide selections are grouped in several ways but are typically based on being branded or native (i.e., not branded), steers and heifers versus cows, dairy cows versus beef breeds, hides from mature bulls, and light versus heavy hides. The value of the hides is further based on the quantity of defects they contain as it relates to holes, cuts, lesions, or grain defects, often caused by injuries, horns, flies, ticks, grubs, and poor skinning and fleshing practices.
Supplying its massive leather production industry, China has been the largest importer of hides and skins for both the U.S. and the world. However, imports over the past few years have been declining. In 2013, raw cattle hides and skins were a major agricultural export for the U.S., reaching $2.3 billion, with China accounting for 63%. However, as of 2022, U.S. exports were only $876 million, and it appears that exports in 2023 will be even lower (USDA, 2023). At first glance, it would not be unreasonable to think that raw hides and skins were affected by the U.S. trade war with China. Clearly, the tariffs the Chinese government imposed on U.S. hides and skins, on top of the tariffs that the U.S. government imposed on finished leather products resulted in direct and indirect negative impacts on U.S. exports of hides and skins to China. However, taking a longer view of the data, U.S. exports to China have been declining for nearly a decade.
Figure 1 show Chinese imports of raw cattle hides and skins from the U.S., Australia, Canada, and all remaining countries combined (rest of world) since 2015. Note that Chinese imports exceeded $2.5 billion in 2015 but decreased to around $1.8 billion in 2016 and 2017. While imports fell even more in 2018 and 2019 during the trade war, this appears to be a part of an overall declining trend. For instance, imports from the U.S. fell by 66% during this period, but imports from Australia and the Rest of World also fell by 71% and 68%, respectively. According to USDA (2018), a combination of both internal and external factors has contributed to this reduced demand and has increased the cost of producing leather domestically. These factors include growing competition from synthetic materials, rising labor costs, and stricter environmental regulations. Although modest, import increases in 2021 and 2022 relative to 2020 may be a sign of a possible recovery.
Figure 1. Chinese imports of raw cattle hides and skins: 2015-2022
Note: Raw cattle hides and skins are defined according to the Harmonized System Classification (HS) HS 4101 raw hides and skins of bovine and equine animals (not tanned, parchment-dressed or further prepared). Source: Trade Data Monitor® (2023)
References
U.S. Department of Agriculture (USDA). 2018. Chinese Demand for Imported Hides Beginning to Weaken. Foreign Agricultural Service GAIN Report: CH186027.
