USMCA Could Reduce Tariff Aid Payments

With commodity prices under significant pressure, producers who grow grains, raise hogs and milk cows are relying on tariff aid payments to help pay their bills. The new North American Free Trade Agreement, now called the U.S.-Mexico-Canada Agreement (USMCA) could reduce those payments.

According to Reuters, Agricultural Secretary Sonny Perdue says tariff payments could be reduced if retaliatory tariffs from Canada and Mexico are removed.

“We will be recalculating along as we go,” Perdue said in a phone interview with Reuters. Perdue is referring to the second series of aid payments USDA has said is a possibility.

“If the tariffs do come off and the tariff impact lessens it will have some impact over the mitigation efforts because mitigation efforts were based on the fact that they would be tariff damage related,” he said.

Farmers were initially frustrated with the payment rates and could be more frustrated if the USMCA reduces future payments.

“For corn, it’s a penny on half your production. I’m behind him,” says Mike Schropp an Iowa farmer. “The tariff subsidy money was a kick in the crotch for the dairy industry.”

Still, retaliatory tariffs on ag products will likely continue until steel and aluminum tariffs imposed by the U.S. are lifted.

“The [USMCA] deal matters longer term, but in the short term what we were hoping is to see those tariffs against our exports lifted that has yet to happen,” says Chris Galen vice president of the National Milk Producers Federation. “There is still some concern here that there’s no timetable yet for lifting those tariffs.”

The USMCA is not a done deal. It needs to be approved by the leaders of each of the three countries involved, which for the U.S., includes Congressional approval.