Agriculture in North Carolina, its rural economy, and even the state economy all face considerable risks if major trading partners such as China, the European Union, Canada, and Mexico retaliate against the U.S. to protest President Donald Trump’s more aggressive trade policy.
This paper attempts to estimate the impacts on several crops important to North Carolina’s agriculture industry — and on the economy as a whole — of retaliatory tariffs that may result from Trump’s tariff agenda.
To evaluate these impacts, the author looks to historical examples to gauge potential economic consequences of large disruptions in international trade as well as to estimations in the academic literature of the price sensitivities of certain commodities to a drop in exports.
The estimated losses would deal a significant blow to North Carolina’s economy. For what seem like plausible reductions in agricultural exports, the potential losses to the state’s farming industry included in this paper add up to $695 million. That represents approximately one-third of average net farm income in North Carolina.
Such a contraction would lead to a total of roughly 8,000 lost jobs, both directly in the agriculture industry along with the ripple effects from that lost revenue. The job losses would be concentrated in North Carolina’s rural communities.
Factoring in indirect effects on the rural economy of North Carolina adds additional estimated revenue losses on the order of $1.2 billion. That brings potential total economic losses due to trade policy retaliation to $1.9 billion, equal to over 2 percent of the gross state product of North Carolina.
The easiest way to avoid the risks from countries retaliating against the U.S. for placing restrictions on international trade is not to put restrictions on international trade in the first place.
If forced to deal with the likelihood of such retaliatory trade policies hurting North Carolina agriculture’s traditional export markets, however, North Carolina farmers have only a limited set of options for minimizing the damage. They can search for new markets, constantly protecting themselves against becoming too reliant on any one or a few trading partners. They can develop larger domestic markets for their commodities, such as through generic product advertising and funding new product development. They can also try to create value-added products derived from their bulk commodities, capturing a larger share of the food dollar and keeping more of the post-harvest income and jobs from further processing within North Carolina. Still, while all these are worth pursuing, they are not likely to be sufficient — especially in the short run — to mitigate the risks North Carolina farmers currently face from a potentially damaging tariff regime.
