The US placed emphasis on agriculture in the deal, citing a need to change its agricultural trade structure, likely a direct response to trade dependency on Chinese imports of US agricultural products.
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SUMMARY
On September 30th, North American countries agreed to a new free trade deal called the United States-Mexico-Canada Agreement (USMCA). This trade deal replaces the long-standing North American Free Trade Agreement (NAFTA) among the three countries. The US placed emphasis on agriculture in the deal, citing a need to change its agricultural trade structure, likely a direct response to trade dependency on Chinese imports of US agricultural products. China was a large of customer of US agricultural goods, but in the midst of the trade war the two countries’ relationship has been strained causing many farming communities to be hurt by the trade disputes. The USMCA grants US producers greater access to the Canadian and Mexican dairy, poultry and egg, and wheat markets, such as the expectation US milk sales to Canada will increase by $70 million USD once the agreement is in effect. US Agriculture Secretary Sonny Perdue testified before the Senate saying that the US has become too dependent on the Chinese market and that, in order to sustain in the long term, the US needs to diversify its agricultural exports. The US trade deficit with China continues to rise, now at $53 billion and soybean exports alone last month fell by $1 billion USD.
FAO GLOBAL ASSESSMENT
The US agriculture industry has suffered from the trade war thus far, with China imposing $34 billion USD of tariffs on US agriculture products. The US government response is unlikely to improve the situation for the agricultural sector in the short term, even with the implementation of the USMCA. The idea of diversifying of US agriculture seems better in the long term, for now, losing the Chinese market is hurting US farmers and has widened the trade deficit. US agriculture companies should look forward to the USMCA implementation in January, and prepare supply chains and sales avenues to take advantage of larger markets in Canada and Mexico. However, expect domestic producers to offer more competitive terms to avoid losing market share flood of US products
Related Links
- Reuters – S. working to diversify farm trade away from China – agriculture chief
- Wall Street Journal – What’s at Stake in the U.S.-China Agricultural-Trade War
- CNBC – US trade deficit widens to $53 billion as soybean exports plummet amid China trade battle
Analyst Bio
Levi Rasmussen – International Business Development
Levi is an International Business Development Intern, focusing on internal strategy and development of FAO’s consulting services. Levi Rasmussen studies International Business, Finance, and Mandarin at the University of South Carolina. At FAO Global and his studies, Levi puts particular interest in facilitating the connection and integration of U.S. and Chinese firms through consulting work and building understanding between culture in dealing with organizations from the East and West. Levi will continue his studies in International Business at the Hong Kong Polytechnic University in Spring 2019.
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