For obvious reasons, most of the attention that’s been paid to President Donald Trump’s various tariff schemes has focused on the across-the-board tariffs he’s imposed on our biggest trading partners, Canada, Mexico, and China.
But Trump has another, even more elaborate, and more costly, tariff scheme that he plans to roll out next month—one he alluded to a few days ago in a Truth Social post he wrote to “the Great Farmers of the United States.” Trump told the farmers to “get ready to start making a lot of agricultural product to be sold INSIDE of the United States” because “tariffs will go on external product on April 2nd.”
Trump was referring to his plan to put “reciprocal tariffs” in place on all U.S. imports, meaning that he will impose tariffs on other countries’ imports that are equal to the tariffs they impose on us. So, if a country has a 30% tariff on coffee, Trump will put a 30% tariff on all coffee imports from that country.
Reciprocal tariffs may seem intuitively appealing, simply because they’re a tit-for-tat policy—we’ll do to other countries what they’re doing to us. But the reality is, they’re a disastrously bad idea, especially when it comes to agriculture.
To begin with, reciprocal tariffs require us to inflict harm on American consumers and American businesses that rely on imported goods just because other countries are willing to inflict harms on their consumers and businesses in order to protect local industries. That’s a little like jumping off a bridge just because other kids are doing it. A reciprocal-tariff plan also effectively allows other countries to dictate our trade policy, which is not something the U.S. should let our trading partners do.
Higher prices, zero payoff
Reciprocal tariffs are particularly bad when it comes to the very thing Trump focused on in his post: farming. That’s because Trump’s plan will result in raising tariffs—and therefore consumer prices—not just on food products that we could, theoretically, produce more of in the U.S., but also on food products that we don’t—and, in some cases, realistically can’t—make at high volumes. As Trump’s post suggests, he wants his tariffs to lead to American farmers growing more.
But in many cases, all these reciprocal tariffs will do is make consumers pay more for food, without having any real impact on domestic production.
Take, for instance, coffee and tea. At the moment, the U.S. has no tariffs on so-called green-bean coffee imports, while countries that we import coffee from—like Brazil, Colombia, and Indonesia—often have meaningful tariffs on coffee imports into their own countries. But since we export very little coffee, that doesn’t hurt the U.S. (The only coffee grown here is in Hawaii, and it’s a tiny amount relative to how much coffee we consume.) In other words, the tariffs those countries impose on coffee have no real impact on the U.S. economy.
The same is true of tea. We import almost a half-billion dollars of tea a year because the U.S. has never been a tea-producing nation. (Almost all the tea we do produce is grown on small farms.) So the fact that tea-producing countries have tariffs on tea imports, again, has no meaningful impact on the U.S. economy. Their tariffs don’t limit U.S. tea production or the number of tea-producing jobs. From our perspective, they’re more notional than real.
The problem, though, is that Trump doesn’t care. Even though these countries’ coffee and tea tariffs don’t really matter to us, Trump is going to put equivalent tariffs on our imports of their coffee and tea. And that will matter quite a lot to U.S. coffee and tea drinkers, and to the businesses that sell coffee and tea, all of whom are now going to be paying much higher prices—for no good economic reason.
The same is true of many of our fruit and vegetable imports. The U.S., for instance, has a very small banana industry, in large part because our climate is not ideally suited to banana growing. (Most of the bananas we do produce are grown in Hawaii.) So we, of course, import almost all our bananas. Trump’s plan will, again, make us pay more for bananas, without resulting in a big boom in U.S. banana production.
We also import billions in fruits and vegetables year-round from places such as Mexico, not just because of cost, but because we’ve gotten used to being able to eat whatever produce we want whenever we want (rather than having to eat only the fruits and vegetables grown when they’re in season). Raising tariffs on strawberries is not going to lead to a huge boom in U.S. strawberry-harvesting in December. But it will lead to our having to pay higher prices on strawberries.
Yes, we have no bananas
At its core, what Trump’s reciprocal-tariff plan ignores is the reality of what economists call comparative advantage; namely, that it’s economically beneficial for everyone if countries focus on what they do best, relatively speaking, rather than trying to do everything.
Comparative advantage is especially important in agriculture, simply because of the realities of climate and soil. The U.S. is great at growing grains, raising livestock, and growing certain fruits and vegetables. But it makes more sense for Brazil and Colombia to grow coffee or Honduras to grow bananas, and for us to import them—than for the U.S. to try (futilely) to become a coffee- and banana-growing powerhouse.
On top of all this, while the reciprocal-tariff plan is not going to do much to help American farmers, the myriad trade wars Trump has already started are very likely going to hurt American farmers, who, in 2023, exported $174 billion of agricultural products (including most notably, grain and feed, soybeans, nuts, livestock, and some fruits and vegetables).
That’s because when we impose new tariffs, our trading partners don’t sit by quietly: They retaliate. China’s finance ministry, for instance, announced that it will be imposing new 10% to 15% tariffs on imports of U.S. soybeans, chicken, pork, and beef. And Canada just imposed 25% tariffs on billions in U.S. goods, including orange juice, peanut butter, and wine, and will impose tariffs on beef, pork, dairy, and fruits and vegetables in three weeks if Trump hasn’t lifted his tariffs by then.
Retaliation is not a trivial problem. People have somehow forgotten this, but Trump’s trade war with China in his first term resulted in U.S. farm exports dropping by nearly $26 billion. Trump covered for it by redirecting Department of Agriculture funds to recompense the farmers, but all that meant was that U.S. taxpayers effectively paid the price for his love of tariffs.
“Trade wars are good and easy to win,” Trump has famously said. But the reality, especially when it comes to agriculture, is that they are pointless conflicts in which just about everyone loses.
No comments