Industry responds to tariff cease-fire, which could pave way for USMCA passage

By Kristine Sherred

- Last updated on GMT

The American Bakers Association is 'relieved' the US, Mexico and Canada have agreed to cease imposing and retaliating with tariffs. Pic: Getty Images/Kameleon007
The American Bakers Association is 'relieved' the US, Mexico and Canada have agreed to cease imposing and retaliating with tariffs. Pic: Getty Images/Kameleon007

Related tags Agriculture agribusiness Wheat Corn Soybean American bakers association tariff USMCA Trade deal North american free trade agreement

Players in the US bakery and grain sector have applauded the decision to lift tariffs associated with the pending US-Mexico-Canada Agreement (USMCA).

The American Bakers Association said it is ‘relieved’ to see the tariffs on Mexican and Canadian steel and aluminium cut.

“Bakers, like all manufacturers, are highly sensitive to price increases for the steel used in our equipment,”​ said the trade group’s president and CEO Robb MacKie.

Archer Daniels Midland (ADM) concurred, stating it ‘strongly supports’ the USMCA.

What is the USMCA?

Last year, President Trump’s administration reached an agreement with Mexico and Canada to renegotiate the North American Free Trade Agreement (NAFTA), called the United States-Mexico-Canada Agreement (USMCA).

Getting rid of the tariffs on steel and aluminium on Canada and Mexico is viewed as a key hurdle to approval for the USMCA trade deal.

Canada and Mexico deemed the tariffs as an insult and many US businesses depending on metal products from the two countries took a financial blow. Despite this, Trump resisted removing the tariffs until last week.

The breakthrough is expected to help smooth ratification of the revision to NAFTA.

‘As a strong supporter of trade policies that help ensure food and agricultural products safely and efficiently meet consumer demand around the world, we appreciate the hard work that went into this agreement, and look forward to continuing to work with policymakers on this and other trade issues for the benefit of American agriculture,’ it said in a statement.

Last week, the US trade office agreed to remove tariffs on Mexican and Canadian steel and aluminium. US President Donald Trump’s administration requested both countries cut ‘all retaliatory tariffs’ on US-made goods in return.

Spur job growth

The National Association of Wheat Growers said farmers expect their representatives to support the USMCA, which the group claimed will spur job growth in rural America.

Chris Kolstad, a Montana wheat farmer and chairman of US Wheat Associates, added the tariffs were hindering trade agendas that open overseas markets.

He also recommended the removal of tariffs on automobiles, insisting any new tariff “would encourage our trading partners to retaliate against US farmers and agricultural exports, and further weaken international trade rules.”

In a statement, US Secretary of Agriculture Sonny Perdue called the announcement a “big win for American agriculture and the economy as a whole.

“Canada and Mexico are two of our top three trading partners, and it is my expectation that they will immediately pull back their retaliatory tariffs against our agricultural products.

“Congress should move swiftly to ratify the USMCA so American farmers can begin to benefit from the agreement.”

A perfect storm

The headache continues for the US grain sector, however, as Trump’s administration continues to punish China with similar tariffs.

On the same day as the USMCA announcement, the National Corn Growers Association called on the USDA to implement assistance measures for farmers.

According to the trade group’s data, corn growers have lost an average of $0.20 per bushel in the past year. In March and April 2019, that number grew to $0.40 per bushel. Those losses came despite a push by the administration in 2018 to set an assistance fund at $0.01 per bushel.

The corn growers said these trade disputes – coupled with EPA exemptions to oil refiners, inclement weather, falling farm incomes and ‘crumbling infrastructure’ – have ‘created a perfect storm for agriculture.’

The US federal government has provided $12bn in aid to farmers to offset the export losses, however, according to the Council on Foreign Relations, this strategy could lead to a dependency on such programs.

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