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How Commodity Markets Drive USA-Brazil Trade Relations

  Brazil, as the largest and most influential country in Latin America, has become a prominent advocate for developing nations in establishing regional and multilateral trade policies. The United States and Brazil have developed a productive relationship as they work towards promoting trade liberalization. They have made efforts to find a compromise with the European Union in the World Trade Organization's Doha Round and have established bilateral working groups to address trade and other related matters. However, they have contrasting approaches to trade policy, disagree on the regional implementation of the Free Trade Area of the Americas (FTAA), and have shared concerns on certain trade policies and practices. The trading policy of Brazil is influenced to some extent by economic considerations. The "trade preferences" also mirror deeply ingrained macroeconomic, industrial, and foreign policy. While the trade strategy of the United States prioritizes the negotiation of

The Impact of Trade Tariffs on USA-Brazil Commodity Exchange

 There has been a global push to lower tariffs, but more lately, trade strategies have included raising tariffs where they are already allowed. The United States started two major trade cases in 2017 to look into how aluminum and steel imports affected U.S. national security and to see if China's intellectual property policies could be enforced under U.S. trade law. Under Section 232 of the Trade Expansion Act of 1962, the U.S. Department of Commerce started a probe in April 2017 to find out if steel and aluminum products were being brought into the country in large enough amounts or in ways that put national security at risk. The President told the U.S. Trade Representative (USTR) to start a Section 301 investigation in August 2017 to find out if China's rules on intellectual property and technology transfer were unfair or discriminatory and if they made it harder or impossible for the U.S. to do business with China.

After the Section 232 investigation came to a good conclusion, the President put 25% tariffs on steel imports and 10% tariffs on aluminum imports from all suppliers, with a few countries getting special treatment.1. In reaction to these actions, six trading partners—Canada, China, the EU, India, Mexico, and Turkey—put tariffs on some U.S. agricultural goods that were sent to those countries. The USTR's Section 301 probe also found that China's policies could be changed, and they suggested putting a 25% tariff on a lot of Chinese goods. As a reaction, China put in place more retaliatory tariffs that affected thousands of agricultural goods and ranged from 5% to 25%. Soybeans and most pork goods, which are the main things the US sends to China, were both at 25%. Between retaliation under Section 232 and 301, China's retaliatory tariffs hit about 98% of U.S. agricultural exports to China in 2017. A smaller share of U.S. farm exports was aimed at Canada (16%), Mexico (14%), the European Union (7%), Turkey (18%), and India (43%); this was reported by Grant et al. 2021. In 2017, U.S. agricultural products that were targeted for retaliation were worth a total of $30.4 billion (Grant et al., 2021). Certain types of goods saw tariffs go up by as much as 140% (Regmi, 2019).


The retaliatory tariffs made the prices of U.S. farm goods that were brought in from other countries higher than similar goods made in the U.S. or from other countries. According to economic theory, people in the countries that are putting tariffs on these goods will buy fewer of them. As a result, U.S. agriculture exports to those countries will go down. There may be chances for U.S. companies to sell their goods to other trade partners that aren't retaliating, but generally, trade has slowed down because new deals have had to be made with other countries, transportation has had to be arranged, and other things. For instance, in 2018, the value of U.S. agriculture exports to China dropped by just over $10.3 billion because of tariffs that were put in place in response (figure 1). The retaliatory taxes seemed to have had the biggest effect on soybeans, wheat, and corn. The value of U.S. exports to China dropped by over 60% (figure 2). But compared to soybeans ($12.2 billion), wheat ($351 million) and corn ($142 million) were not very valuable U.S. exports to China in 2017. During the same time period, U.S. agricultural exports to countries that weren't retaliating went up by $9.7 billion, which shows that trade was deflected, at least in terms of the big picture.


It's hard to say how recent retaliatory tariffs on U.S. agricultural exports have affected the economy because of all the changes happening in global food markets and other things that may be affecting trade. For example, from July 2017 to June 2018, U.S. soybean exports to China were worth $11.3 billion. But between June 2018 and July 2019, or one year after the reciprocal tariffs were put in place, they dropped by 72 percent to $3.2 billion. In the same way, US farm exports to China dropped by $10.9 billion, or 58%, during the same time period.
But comparing things before and after doesn't take into account other things that might be hurting U.S. exports besides the retaliatory tariffs. For example, the United States had a record soybean crop of more than 4.5 billion bushels in the 2018–2019 marketing year thanks to great weather (Hitchner et al., 2019). Usually, when this much soybeans are harvested, the United States could send more soybeans to China than planned. When this happens, comparing things before and after taxes is likely to understate how much they changed things. During the 2018–2019 retaliatory time, there were also other global supply and demand shocks that made things more difficult, such as African Swine Fever (ASF) in China (Nti et al., 2019), record supplies of livestock production in the U.S., and very bad planting conditions in the U.S. in Spring 2019. All of these shocks made it harder to figure out what caused the retaliatory taxes. When retaliatory tariffs on U.S. agricultural goods were announced, many studies tried to figure out what those tariffs would have done to agricultural markets before they happened (see box, “Quantitative Strategies to Isolating the Effect of a Policy Shock”). Ex-ante studies try to guess what prices and trade flows will be in the future by using historical data and known elasticity factors, before any counter trade policies take effect.

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How Commodity Markets Drive USA-Brazil Trade Relations

  Brazil, as the largest and most influential country in Latin America, has become a prominent advocate for developing nations in establishing regional and multilateral trade policies. The United States and Brazil have developed a productive relationship as they work towards promoting trade liberalization. They have made efforts to find a compromise with the European Union in the World Trade Organization's Doha Round and have established bilateral working groups to address trade and other related matters. However, they have contrasting approaches to trade policy, disagree on the regional implementation of the Free Trade Area of the Americas (FTAA), and have shared concerns on certain trade policies and practices. The trading policy of Brazil is influenced to some extent by economic considerations. The "trade preferences" also mirror deeply ingrained macroeconomic, industrial, and foreign policy. While the trade strategy of the United States prioritizes the negotiation of