Now is Not the Time for New Tariffs and Trade Wars

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Posted by Alex Hendrie on Monday, July 27th, 2020, 3:43 PM PERMALINK

Recent reports indicate that the United States is considering launching a trade investigation related to phosphate fertilizer imports. 

If this investigation proceeds, it could lead to new tariffs on farmers at a time that the U.S. economy is already weak because of the Coronavirus pandemic. Instead, the Department of Commerce and U.S. International Trade Commission should reject any effort to impose new tariffs and duties on phosphate fertilizers. 

On June 26, 2020, a countervailing duty (CVD) petition was filed against the import of phosphate fertilizers from Morocco and Russia. If this petition is successful, taxes on phosphate fertilizers could increase through a tariff of between 30 and 70 percent. In turn, this would result in significant new costs to farmers and increase the price of several commonly used crops. 

Farmers depend on phosphate fertilizers to produce several crops including corn, soybeans, cotton, wheat, and sugar beets. The cost of these fertilizers represents a significant portion of the costs of producing these crops.      

Imposing tariffs is the equivalent of increasing taxes on American consumers and American producers who use imported products. They fall particularly hard on industries that rely on imported products as an input, resulting in higher prices, leading to increased costs for consumers, lowering wages and leading to fewer jobs for American industry. They also lead to retaliatory actions from trading partners, resulting in fewer American products being exported to foreign markets which cost jobs and wages in the U.S. 

This damage is not hypothetical – over the past few years, trade wars have led to billions of dollars in losses for the agriculture industry, which has slowed revenues and led to bankruptcies and job losses. 

It has also forced the U.S. government to spend an unprecedented amount of federal dollars assisting agriculture. In fact, the U.S. government has already spent $32 billion this year in economic aid to farmers due to the damage caused by trade wars and COVID-19. 

Instead of launching trade wars and subsidizing farmers, we should look to promote fair and free trade that allows American exporters access to foreign markets.     

Ultimately, new phosphate fertilizer tariffs should be rejected as they will harm American farmers, reduce supply, increase prices, and endanger our economic recovery.

Photo Credit: United Soybean Board

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