US trade deficit likely to worsen, study finds

A growing U.S. trade deficit will worsen in coming years as fruit and vegetable imports exceed exports, according to a recent study.

Shifting global dynamics, including political and economic factors, are projected to worsen the trade deficit in coming years, according to a recent University of Illinois study.

In the study, Row Crops and the U.S. Agricultural Trade Deficit: Recent Trends and Policy Issues, researchers from the University of Illinois Urbana-Champaign and Texas Tech University examined recent developments affecting U.S. trade in row crops such as corn, soybeans, wheat and cotton.

“For most of recent history, the U.S. was a net agricultural exporter. But in the last couple of years, that has reversed, and what used to be a persistent surplus has turned into a persistent and growing deficit, where we’re importing much more than we export,” said William Ridley, lead author of the study and associate professor in the Department of Agricultural and Consumer Economics at the University of Illinois’ College of Agricultural, Consumer and Environmental Sciences. “Current projections estimate that the agricultural trade deficit will reach $49 billion by the end of 2025.” 

Ridley conducted the study with Stephen Devadoss, professor of agricultural and applied economics at Texas Tech.

The researchers highlighted several factors influencing agricultural production and exports, including cuts in public funding for university research.

“There’s a strong link between research funding and productivity, and productivity affects the position of the U.S. agricultural sector globally. That also includes funding of research to mitigate the effects of climate change on the agricultural industry,” Ridley said in a news release.

The study noted that imports have risen sharply, particularly fruits and vegetables such as avocados from Mexico. While the U.S. remains a major producer of commodities including corn, oilseeds and cotton, exports are stagnant or declining.

“Row crops are the backbone of U.S. agricultural exports, but markets are shifting as trade conflicts create uncertainty and instability. One of the main factors causing exports to nosedive is the ongoing trade dispute with China,” Ridley said in the release.

As the U.S. imposed tariffs on Chinese imports, China retaliated with tariffs on U.S. agricultural commodities such as soybeans, wheat, corn and cotton. Those products were strategically targeted by China because of their importance to U.S. exports and because they are primarily produced in states that support the Republican administration, the researchers noted.

The U.S. is also losing its competitive edge to other big grain producers, including Brazil, Canada, Australia and Ukraine, the study found. 

China, meanwhile, is expanding efforts to bolster its own self-sufficiency through major investments in research and development and by increasing the use of genetically modified crop varieties.

Ridley pointed to U.S. efforts to forge new bilateral trade agreements with different countries as reason for optimism.

“Economists view expanded access for our exports as a good thing to strive for if you want to ensure the viability of U.S. agriculture,” Ridley said. “Negotiating trade agreements isn’t an easy thing to do, but it’s something we should continue to pursue.”

The research was supported by a grant from the USDA’s National Institute of Food and Agriculture.