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January 25, 2017

U.S. Withdrawal from TPP opens Door for Brazilian Agriculture

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

With the announcement that the United States will withdraw from the TPP (Trans Pacific Partnership), farmers in Brazil feel this will open the door for more Brazilian agricultural exports to the remaining participating countries. The withdrawal of the U.S. from the TPP is considered good news, at least in the near term for Brazilian agriculture. The same could also be said of Argentine agriculture as well.

The 12 original countries in the partnership are some of the principal destinations for Brazilian agricultural exports. Brazil and the U.S compete for the same world markets for grain and meats. Approval of the TPP would have given an advantage to the U.S. by lowering the tariffs on agricultural products going into the TPP trading block. That advantage now will not happen allowing Brazil to compete even more for these markets.

Additional announcements by President Trump that he wants to reopen the North American Free Trade agreement is more good news for the Brazilian agricultural sector. If Canada and Mexico face increased tariffs to ship their products to the U.S., they will retaliate with increased tariffs on American agricultural products going into Canada and Mexico. This in turn, would make Brazilian products even more competitive going into those markets.

There is little agricultural trade between Brazil and the U.S., so withdrawing from TPP and NAFTA would have only minor impact on the agricultural trade between the two countries. It could have major impact on the competition between Brazil and the U.S. in other world markets.