Project Summary

This research project will measure how foreign trade shocks affect agriculture in the United States. Agriculture is the industry that has the most to gain from international trade, being disproportional more affected by the recent increase in trade protectionism. The retaliatory tariffs imposed by foreign trading partners targeted agricultural and food producers, prompting the federal government to implement a massive bailout program. There is only anecdotal evidence regarding the trade and income effects of these trade policy changes. This project will close the research gap by thoroughly assessing the trade effects of foreign trade policy shocks and evaluating the impact on the viability of agriculture in the United States. Using high-frequency and product-level trade data, I will assess how foreign trade shocks affected U.S. exports of agricultural and food products. I will use these estimates to construct measures of exposure to foreign trade shocks at the county level, which I will relate to detailed information on farm performance. The principal outcome of interest is farm income. I hypothesize that depending on the type of foreign trade shock, the effects of foreign competition will vary according to production choice, sub-industry, and farm characteristics. I will explore these differences to better understand the heterogeneous response to foreign trade shocks. To measure the long-term effects of foreign trade shocks, I will explore high-resolution data on farmland values and farm bankruptcies. The empirical approach will account for farm characteristics and other demand and supply shocks, such as the COVID-19 pandemic. This research program responds directly to the goals outlined in the AFRI Priority Area 'Agriculture Economics and Rural Communities' by providing essential knowledge on the functioning of markets in light of foreign trade shocks. The project will enhance market efficiency and performance and contribute to the EWD's goal of 'Sustaining the Economic Viability of Farm Operations' in the United States.