SPRINGFIELD – Illinois farmers will get a much-needed lift from two international trade agreements approved by the federal government this week, but experts are uncertain if their situations will improve in the long term.
After exchanging hundreds of billions of dollars of tariffs for more than a year, the U.S. and Chinese governments agreed to the first part of trade deal on Wednesday.
On Thursday, Congress passed the United States-Mexico-Canada Agreement, better known as USMCA, sending it to President Donald Trump to sign.
The average Illinoisan will likely not be much affected by the deals, experts say. Instead, the largest beneficiaries will be corn and soybean farmers who have been caught in President Trump’s trade conflicts with China and Mexico since 2018.
A cautious step forward
Illinois farmers have been especially hurt by China’s retaliatory tariffs in the ongoing U.S.-China trade war, forcing the federal government to issue $28 billion in aid nationwide.
Wednesday’s trade agreement with China, however, is more of a ceasefire than a peace agreement, said Jonathan Coppess, director of the Gardner Agriculture Policy Program at the University of Illinois at Urbana-Champaign.
“Really what it does is kind of stop the damage that was initiated with this tariff conflict that that the president started,” he said.
The deal should play out in two phases. Phase One, which began Wednesday, requires China to purchase $200 billion in U.S. goods over the next two years, including $32 billion of agricultural products.
Chief among them are soybeans and pork, in which Illinois ranks first and fourth, respectively, in U.S. production.
American soybean exports to China dropped 75 percent between 2017 and 2018, as China bought soybeans from other countries while exchanging tariffs with the U.S.
President Trump, however, said he will not lift America’s $360 billion of tariffs on Chinese goods until Phase Two is negotiated and implemented.
“We see this as a sign of brighter days to come,” Illinois Soybean Association President Doug Schroeder said in a statement. However, he added, “A long-awaited win for the soybean industry will come when the soybean tariffs are fully rescinded.”
Unfortunately, that could be awhile, said Todd Hubbs, a professor of agriculture economics at UIUC.
“It doesn’t sound like Phase Two is going to get done anytime soon,” Hubbs said, because U.S. leadership could change after November’s presidential election.
“I don’t think there’s any desire on either side right now to ruin the deal, … (but) I don’t see it happening before the election,” he said.
Carson Varner, a professor of international business at Illinois State University who also owns soybean land, says farmers like him are willing to suffer in only the short term.
“We’d much rather make our money selling soybeans” than receiving tariff aid, he said.
Varner is hopeful, though, that China and the U.S. can strike a deal. He predicts Phase Two will also allow Illinois to export more pork and agriculture equipment.
“(Trump) knows how to negotiate,” Varner said. “I think he told the Chinese he’s willing to walk away from a bad deal, and so I am optimistic that this thing is going to move forward.”
USMCA helps corn farmers, hurts car buyers
Despite President Trump calling the USMCA “one of the biggest trade bills ever made,” not much has actually changed from its beginnings as the Clinton-era North American Free Trade Agreement (NAFTA), Coppess said.
“We’re not talking about major reform of the trade agreement,” Coppess said. “If anything, the president has his trade agreement, so we can be assured at least for his time in office that maybe he won’t threaten these trading partners again.”
The agreement mostly reinforces trade the U.S. already does with Canada and Mexico, especially corn, of which Mexico is America’s top buyer and Illinois is America’s second-most producer.
“Every step toward USMCA passage is cause for celebration,” Illinois Corn Growers Association President Bill Leigh said in a statement.
The USMCA also increases U.S. dairy exports to Canada, but that will impact more dairy-heavy states like Wisconsin.
Both U.S. senators from Illinois, Democrats Dick Durbin and Tammy Duckworth, voted for the bill.
In statements, Durbin applauded its “bipartisan” support, while Duckworth said it “works for farmers and manufacturers and features enforceable labor standards to support American workers.”
Duckworth added, however, the deal “is not perfect” because it does not tackle climate change. But Varner argues enforcing U.S. environmental standards on Mexico is demanding too much.
“Don’t let the perfect be the enemy of the good,” he said.
One negative for regular Illinoisans is that the USMCA could increase the prices of new cars, because it ups the percentage of North American auto parts that vehicles must have to avoid tariffs.
Because companies often pass on increased production costs and losses from tariffs to consumers, the average American could see car prices increase between $470 and $2,200, according to the Center for Automotive Research.
Varner argues, however, the USMCA’s requirements regarding auto parts and higher wage standards are designed to spur investment in the U.S. and increase domestic manufacturing.
“I think it would cost a lot more if we abandon these deals,” he said.
President Trump is expected to sign the USMCA next week. Mexico approved it last year, while Canada is expected to approve it later this year to officially make it binding.
