In the race to August 1, the European Union, Indonesia and Japan issued frameworks in recent weeks for advancing trade with the United States. As part of the Indonesia framework, the White House announced Indonesia would eliminate 99% of tariff barriers for all U.S. and agriculture products and an agreement to purchase $4.5 billion worth of agricultural products. As part of the agreement with Japan, Japan will increase the quota for rice imports and has committed to purchasing $8 billion worth of U.S. goods. Although details are few, the EU and United States reached a framework deal over the weekend that may lower some tariffs on agricultural goods.
Reports indicate the United States and EU will have zero-for-zero tariffs on some agricultural products. The tariff rates for wine and spirits are not yet established. The remaining tariff level will be set at 15%, up from the 10% bar reset on April 9 and in line with the other renegotiated deals in recent weeks. National Grain and Feed Association President and CEO Mike Seyfert said this is a “meaningful step forward in opening one of the world’s most restrictive markets to American producers.” Seyfert added NGFA is “encouraged by the president’s call to diversify agricultural trade with the EU, and we look forward to ongoing discussions to build on that goal.”
Japan is expected to immediately increase imports of U.S. rice by 75%, representing a major expansion of import quotas. In addition, the framework establishes Japan will purchase $8 billion in U.S. goods, including corn, soybeans, fertilizer, bioethanol and sustainable aviation fuel.
In the 2023-24 marketing year, Japan was the second largest importer of U.S. corn; the third largest importer of U.S. sorghum; the fourth largest importer of U.S. barley; and the ninth largest importer of U.S. distillers dried grains with solubles, totaling 14 million metric tons in corn-equivalent exports or $5.95 billion, the U.S. Grains Council shared. “This deal is an embodiment of our countries’ longstanding partnership and includes ethanol and SAF that fits into Japan’s policies of increasing the use of renewable fuels, that include U.S. ethanol,” said USGC President and CEO Ryan LeGrand.
USA Rice President and CEO Peter Bachmann added, “Japan is consistently among our top export markets in terms of both value and volume, but this will be the first opportunity since the 1990s to further that market access.” From 1999 to 2024, Japan imported an annual average of 326,828 MT of U.S. rice, valued at approximately $222.7 million per year (not adjusted for inflation). U.S. rice that enters Japan outside the tariff rate quota system faces a tariff of 341 yen per kilogram, which in U.S. dollars is roughly $2.33 per kg or $2,330 per MT, USA Rice reported.
The framework with Indonesia also addresses non-tariff barriers for U.S. agriculture. Specifically, Indonesia will address and prevent barriers to U.S. agricultural products in the Indonesian market, including by: (1) exempting U.S. food and agricultural products from all of Indonesia’s import licensing regimes including its commodity balance policy; (2) ensuring transparency and fairness with respect to geographical indications including meats and cheeses; (3) providing permanent Fresh Food of Plant Origin (FFPO) designation for all applicable U.S. plant products; and (4) recognizing U.S. regulatory oversight, including listing of all U.S. meat, poultry and dairy facilities and accepting certificates issued by U.S. regulatory authorities.
While U.S. soybeans and soy products already enjoyed duty-free access into the market, the framework also announced a commitment from Indonesia to purchase $4.5 billion worth of U.S. agricultural products, including soybeans and soybean meal. In marketing year 2023/2024, Indonesia imported $1.23 billion of U.S. soybean products, making the country U.S. soy’s fifth largest trading partner by volume according to USDA’s Foreign Agricultural Service.
The Trump administration is preparing a list of agricultural products to be exempt from reciprocal tariffs. The Office of the U.S. Trade Representative has been assembling a list of raw commodities that are not produced in the states to “shape bilateral trade talks and potentially offer tariff relief for U.S. importers,” according to Agri-Pulse. If the exemptions materialize, importers could see some relief for products such as fruit, vegetables, seafood, coffee, cocoa, some seed oils and other critical inputs for food manufacturers. Some sources say the list of raw materials and agricultural goods could be incorporated into country-specific trade agreements, like those the president has made with the UK, Vietnam, Indonesia, Philippines and Japan.
Our Take:Both the Indonesia and Japanese frameworks claim purchase promises that could benefit agriculture. The ethanol industry continues to find wins in the early trade frameworks negotiated. Indonesia and Japan are especially important markets for U.S. distillers grains that continue to grow. Last year Indonesia was the fourth-largest export market in 2024, and Japan ranked eighth. The new agreement with Japan opens the door to strengthen the long-standing rice-trading relationship between the United States and Japan and comes just ahead of the annual technical meeting between the U.S. rice industry and Japanese importers. If fully realized, the EU deal represents a major milestone for the two largest world’s economies. However, lack of details on agricultural goods that may qualify for the zero tariff reiterates the unknowns of the full value proposition for increasing U.S. agricultural exports to the region. -JF