The Trade Truce

Jun 18, 2021

A trade squabble between the U.S. and the EU years in the making is finally coming to a close — and U.S. agriculture is stoked.

Refresher: The quarrel began nearly 17 years ago over a disagreement regarding subsidies given to aircraft manufacturers Boeing (U.S.) and Airbus (France).

More recently, in 2019, the World Trade Organization (WTO) told the U.S. that it could slap the EU with tariffs because of its Airbus subsidies. And the U.S. did just that — on a variety of unrelated products, including French wine and German cookies.

Not to be outdone, back in November the EU said, “Well, we’ll show you…” and it hit the U.S. with retaliatory tariffs. And because those tariffs focused on commodities, fruit, tractors, and other products, U.S. ag took a big hit.

Calling a truce: The two trade giants agreed to a temporary tariff suspension back in March. But this week, they officially buried the hatchet.

Soundbite: The truce “will certainly be good news for American agriculture. We will continue to … look for opportunities to expand more new and better markets,” said Ag Secretary Tom Vilsack.

Those earlier 15-25% tariffs had hit U.S. producers hard. Wheat exporters, in particular, were basically sucker-punched. Being a high-volume, low-margin crop, wheat sales to the EU were pretty much red-lighted by the 25% tariff. But now that everyone is playing nice again, hard red spring wheat is on its way, skipping back across the pond.

Where this goes: With the ag tap of food products/machinery once again flowing freely, companies such as John Deere, Caterpillar, Hershey, and Ocean Spray are poised to reap the benefits.