Wondering how the USDA calculated estimated damage from trade disruptions?
USDA today (Sept. 13) released a detailed accounting of how damages were calculated. USDA’s Office of the Chief Economist developed an estimate of gross trade damages for commodities with assessed retaliatory tariffs by Canada, China, the European Union, Mexico, and Turkey to set commodity payment rates and purchase levels in the trade mitigation package announced by USDA on Sept. 4, 2018. USDA employed the same approach often used in adjudicating World Trade Organization trade dispute cases.
“We have pledged to be transparent about this process and how our economists arrived at the numbers they did,” Agriculture Secretary Sonny Perdue said. “Our farmers and ranchers work hard to feed the United States and the world, and they need to know that USDA was thorough, methodical, and as accurate as possible in making these estimates. It was a large and important task, and I thank Chief Economist Robert Johansson and his staff for their hard work.”
Here’s a Market Facilitation Program example of corn:
Step 1: In 2017, China and EU combined imported $309 million of corn from the United States.
Step 2: With additional 25% tariff from both countries, the combined imports from the United States is estimated to be $117 million.
Step 3: Estimated gross trade damage = $117 million - $309 million = -$192 million
Initial MFP rate = $192 million/14.6 billion bushels = $0.01/bu.
See the entire report here.