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Consequences of potential Mexican tariffs on U.S. corn

An ag economist says if Mexico imposes tariffs on U.S. corn exports, there would be far-reaching consequences for American agriculture.

Mexican government officials this week threatened to introduce legislation that would stop corn imports from the U.S. based on President Trump’s trade rhetoric.

Jaya Jha specializes in the macro-economics of international trade at Colby College in Maine.

She tells Brownfield any retaliation by Mexico will likely cause the U.S. Dollar to strengthen.

“One percentage appreciation of the U.S. dollar is going to lead to, according to my research, a fall in U.S. agricultural exports of about 3.4 percent.”

Specifically for corn, her analysis shows every one percent appreciation of the dollar leads to more than a one percent drop in U.S. exports.

But Jha says the ripple effect would be felt across all sectors.

“How it effects exchange rates, which then goes on to hurt exports through that indirect channel.  Exports of everything.  If the exchange rate rises, U.S. ag exports overall are going to suffer.”

In the last six years, Mexico’s share of overall ag export value to the United States has risen to more than 13 percent.

That country also purchases nearly a quarter of U.S. corn exports, valued at an estimated $2.4 billion dollars in 2015.