However, in light of recently added tariffs and the U.S. strained outlook on NAFTA from President Donald Trump’s administration, trade partnerships with the top importers of American beef – and American agriculture goods in general – is being called into question.

“Ideally, if a country could select its trade partners, it would pick the customers that are the closest and the biggest buyer. That’s what we’ve done with China, Canada and Mexico,” says David Widmar, an agricultural economist specializing in agricultural trends and producer decision-making.

Widmar is also a researcher with the Center for Commercial Agriculture at Purdue University and co-founder of Agricultural Economic Insights. “They account for 50 percent of all agricultural exports. It starts to get challenging about where we’d have to go next.”

In response to changes from the U.S. government, agricultural exports with America’s top three trade partners could decline significantly, according to Tian Xia, associate professor of agricultural economics at Kansas State University. Once the three biggest markets are out of the game, U.S. traders will have to get more creative in the destination for exports.

Xia lists India; South Korea; Taiwan; and emerging markets in Southeast Asia such as Malaysia, Indonesia, Thailand, South Africa, Turkey and Nigeria as potential areas where U.S. traders could look to fill the gap left by Canada, Mexico and China.

“It’s a trickle-down situation. These new trade partners will likely not be as large or need the amount of exports that we currently produce, so more relationships will have to be maintained,” Widmar says. “New trade partners take a lot of time and investment to build to the level we’ve had with our existing partners.”

So how does potentially decreased trade affect the agriculture and beef industries?

“Agricultural and food prices and quantities in U.S. domestic markets will also change. In those U.S. ag and food industries with trade surplus, U.S. domestic prices will be lower,” Xia explains. “Quantities sold in U.S. domestic markets will be larger, but the total volume (domestic plus exports) sold by U.S. farmers will be lower. Industries may adjust their production capacity, and consolidation may happen in those industries.”

In the short term, uncertainty is the great challenge being presented to American agriculture. With trade agreements such as the North American Free Trade Agreement (NAFTA) in limbo, Widmar says it’s hard to predict what the next few years will look like for the agriculture economy.

“Uncertainty is always a dangerous and risky thing to have. There’s more now than we’ve seen in several years,” Widmar says. “NAFTA has been around since the mid-1990s. Until recently, it would have been unheard of for the U.S. to leave such a consistent trade agreement. There’s room for caution and concern in the coming year.”

According to the Office of the United State Trade Representative, NAFTA entered into force on Jan. 1, 1994. It followed the U.S.-Canada Free Trade Agreement in 1989. Bilateral talks to establish NAFTA began in 1991 with Mexico, Canada and the U.S.

The agreement eliminated tariffs between the three countries, which are among each other’s top trade partners. There was an exception on a limited number of agricultural products traded with Canada, but those exceptions were eliminated by 2008.

NAFTA also covers a variety of trade issues, such as country-of-origin labelling (COOL), customs procedures, investment, protection of intellectual property rights and more. Currently, the future of NAFTA hangs in consideration, with negotiating text and proposals remaining confidential.

“President Trump’s push to increase tariffs has resulted in foreign retaliation on U.S. agriculture through high tariffs on U.S. agriculture products,” Xia says. “It is most likely that U.S. farmers and ranchers will be hurt in both the short and long term unless the U.S. and foreign countries eventually negotiate and agree to lower or remove tariffs on agriculture products.”

Increased tariffs affect farmers and ranchers by dually affecting the anticipated cost for products as well as the ability to sell the product, Widmar explains. He references research being done by Purdue University following a tariff on U.S. soybeans from China. As a result, U.S. farmers produced fewer soybeans and exported to consumers outside of China. China also bought far fewer soybeans from the U.S.

“At the end of the day, the U.S. farmer was worse off, and the Chinese consumer was worse off,” Widmar says. “Trade agreements are about getting the consumers what they want. If we only had the U.S. consumer, the market would be limited in growth opportunities. There are faster-growing economies and markets for beef elsewhere.”

With new tariffs on beef exports for Canada, Mexico and China, the U.S. could see similar repercussions on both production and prices.

“These added tariffs mean the Canadian consumer would have to pay more for beef, and they’d be unhappy. American farmers will have to sell their product cheaper, and they’ll be unhappy too,” Widmar explains. “The administration is taxing the U.S. consumer, and the tariffs equate to punishing the consumer’s bottom line.”

Xia states that as tariffs rise, the demand for American goods decreases. With a fall in demand, farmers can also expect to see a drop in prices. Lowered prices will also equate to potentially decreased production and consolidation within the market.

“U.S. farmers will receive lower prices, sell less in total and their profits will be reduced,” Xia says. With free trade agreements and increased exports, Xia says farmers can expect the opposite: higher prices, more product sold and higher profits.

For producers concerned about encouraging trade and stability within the market, Xia offers a few steps.

1. Encourage U.S. government and foreign governments, especially those of major current and potential future destinations for U.S. agriculture products, to adopt free trade policies, including lower tariffs and nontariff trade barriers.

2. Diversify the destinations for U.S. agricultural products. Try not to rely on one foreign market too much. Always keep looking for emerging markets.

3. Adjust production procedures and product characteristics to satisfy the unique demands of various foreign consumers, which are usually different than those in U.S. domestic markets.  

Bridget Beran is a freelancer based in Kansas.