President Trump may follow through as early as today on last week's announcement that he will impose import duties of 25 percent on steel and 10 percent on aluminum (see USA Rice Daily, March 2, 2018). [Trump did announce steep tariffs Thursday afternoon] Threats of retaliation have raised fears in U.S. agriculture because farm exports are an easy target for foreign governments seeking to push back on U.S. import restrictions. The European Union quickly issued a retaliation list that targeted imports from the United States of steel, apparel, and agriculture goods, including U.S. rice.
"The President is acting under authority of Section 232 of the Trade Expansion Act of 1962 which allows for import restrictions for national security reasons," said USA Rice COO Bob Cummings. Members of Congress, private sector groups, and foreign governments have weighed in urging restraint and, if imposing tariffs is warranted, to selectively apply the duties to specific countries.
The EU has threatened to challenge the higher import duties in the World Trade Organization. "This is a little-used provision of U.S. trade law and questions about the policy objectives of higher import duties, and how and on which countries they will be applied has raised tremendous uncertainty which is not helpful to U.S. rice producers and exporters," said Cummings.
The EU is a 55,000 metric ton market for U.S. exporters, valued at $42 million. "We have worked for a decade to rebuild the EU market following the Liberty Link incident and have seen renewed interest and demand for U.S. rice in recent years. U.S. rice exports to the EU are already constrained by a complex and discriminatory system of quotas and duties, and any increase in tariffs would set back our progress," said Cummings.
Prospective market access could also be at risk. The United States and China signed a phytosanitary agreement last year that brought a new market for U.S. milled rice closer than at any point after more than a decade of effort. Negotiations continue on implementation in a difficult overall trade relationship.
"We are well aware of the challenges created by China's domestic and international trade policies," said Michael Rue, California producer and chairman of the USA Rice Asia Trade Policy Subcommittee. "Our response should be tailored while we continue a focus on expanding U.S. exports in this market."
Analysis by the University of Arkansas shows a decline in U.S. rice production and exports of 1.3 percent and 3 percent, respectively, if countries retaliate on imports of U.S. rice. "While the estimates do not appear large, any drop in production and exports goes right to the bottom line of producers, millers, and exporters," concluded Cummings.