Trade is a hot topic in agriculture this week, with a recent announcement of a planned 25% tariff by the U.S. on goods from Canada and Mexico. Presumably, that will include agricultural imports as well. Canada and Mexico are top partners for imports of agricultural products into the U.S., according to USDA in 2023 accounting for $40 billion and $45 billion, respectively, in agricultural product imports for consumption in the U.S., or about 44% of all U.S. agricultural imports. 

That matters for at least three reasons: 

1. That’s a large share of food imports that could see an increase in cost, and that will almost certainly get translated to the U.S. consumer to some degree. 

2. About 75% of those imports from Mexico (and about 25% of those from Canada) are horticultural goods (e.g., fruits and vegetables) that are often minimally processed, meaning a higher share of the U.S. consumer price is based on the cost of the product itself. 

3. Also noteworthy in trade with Mexico is that the seasons of the largest volumes of U.S. imports have historically been counter-seasonal to U.S. production. While this trend has shifted somewhat in recent years as Mexican production has expanded not just in volume but across months of the year, Mexico is still a primary supplier of many fruits and vegetables at times when no one else is supplying them, and substitutes would almost certainly come at a higher cost.

4. Bonus reason- Avocado price shock. (Okay, I’m kidding that it’s a main reason, but only sort of, because Mexico is the primary supplier of avocados to the U.S. too, and the Super Bowl on Feb 9 is the peak of annual demand for avocados in the U.S.). 

   
   

And what do I mean the trade fairy isn’t coming to save us? 

Well, a lot of U.S. agriculture relies on trade, and for some crops such as cotton and almonds that export share is the majority of production. For certain crops and livestock products, you could make a reasonable argument that the markets for those products would collapse or require incredible restructuring if major export markets were unavailable. For example, we’re not spinning most of our cotton in the U.S., and we’re not raising enough animals to feed all the soybeans or corn we grow, and we don’t eat all the parts of the chickens or hogs we raise. If those products weren’t being exported, the incentives on what to produce would be incredibly different.And the markets for products we don’t trade widely are often intertwined in some way with the markets for agricultural products we do trade. 

For many decades a portion of the growth in U.S. agricultural production has been because we have international markets for those products. Why has an expansion in acres of certain crops been needed? Because there have been willing buyers for that production. But observing global market sentiment as it has evolved in recent years, while we may at present have buyers for a lot of that production at the moment, it seems those are often “begrudging buyers” more than “enthusiastic buyers”. Buyers who are buying because they can’t produce something themselves, right now. Buyers who need U.S. production for a larger strategic avoidance of reliance on a single supplier. 

Consumer sentiment is shifting too. While consumers are still price conscious, consumer awareness of the food system has increased since the pandemic. Recent major food safety recalls also heighten consumer awareness of just where their food comes from. And while consumers often try to meet this intrinsic desire for connection with their food through certifications that don’t actually meet that need (more to come on this in a future post). Some portion of consumers does notice where their food is grown. 

Looking at agricultural trade relationships with imports from many of the nations in the Global South, the “competitiveness” of the production is often based on cheap labor, looser regulations or adherence to safety on crop production practices, and an incentivization to use up whatever natural resources are available as quickly as possible.

Take for example, some of the fruit and vegetable production expansion in Kenya. Some of it is happening in regions that simply do not have adequate water supplies to sustain the production of water-intensive horticultural crops like peppers or tomatoes. So while in the near-term there are certain incentives in place for these approaches, a broader and longer-term view suggests that their sustainability, and the sustainability of many other similar situations, will be limited in the future. 

So while the necessity of shifts in trade reliance and relationships can be debated and assessed from a variety of angles, it seems that it could provide some valuable perspective to those who farm and ranch in the U.S. to take a step back and ask, “What happens if the trade fairy isn’t coming to save us? What then? What does that mean for farmers, land use, food systems at large? What opportunities are available in this moment for making beneficial adjustments in food and agricultural systems? ” 

I certainly don’t have all the answers. But I haven’t seen a trade fairy lately. 

This topic is part of a series of topics on what I’m calling “The Possibilities Grow Between”. More on that here.