OPINION:
With gasoline prices over $4 a gallon, the highest level since 2022, it’s clear that the war with Iran is inflicting economic pain.
It’s not just at the pump. Food prices are poised to rise significantly if federal lawmakers do nothing to address a fertilizer crisis that was, in part, of their making.
The problem stems from countervailing duties that the Commerce Department imposed under President Biden on certain phosphorus-heavy fertilizers from Morocco and Russia. Countervailing duties are a kind of tariff designed to level the playing field for American businesses by offsetting foreign subsidies. The idea is to impose a tax equal to the foreign subsidy, thereby canceling it out and returning to fair competition.
That theory falls apart in times of emergency, such as the one we are facing today. The war with Iran has resulted not just in an energy shock but also a fertilizer shock because approximately 20% of global phosphate supply has been disrupted by the effective closure of the Strait of Hormuz.
Unlike the oil crisis, which has caused gasoline and diesel prices to skyrocket, the fertilizer crisis is more of a ticking time bomb.
The spring planting season is underway, and American farmers are facing exploding fertilizer prices as the world grapples with severely constrained supply. If those farmers cannot purchase enough affordable fertilizer, then application rates will be severely reduced and crop yields will be lower.
That will produce a supply crunch, driving food prices higher.
There simply is no substitute for synthetic fertilizer, without which literally half the world’s population would likely starve. Farmers have no cost-effective alternative, which is why higher fertilizer prices directly translate into higher food prices. This isn’t mere economic theory; it is borne out by the data.
Academic research from Texas A&M University’s Agricultural and Food Policy Center found that the countervailing duties on phosphorus-heavy fertilizers contributed to higher prices for farmers, which ultimately meant higher prices that families pay for groceries. The costs here weren’t trivial. They averaged more than $1 billion a year.
Yet a windfall went to one group: domestic producers. Firms such as The Mosaic Co. and J.R. Simplot Co., which make fertilizer stateside, were able to charge significantly higher prices because of countervailing duties, which made it prohibitively expensive for some foreign firms to sell their products in the U.S., thereby reducing competition.
Whether or not this is a sensible policy in peacetime, it certainly doesn’t make sense during a war, especially one creating a fertilizer crisis. Domestic producers simply don’t have the capacity to replace all the foreign supply lost by the chaos in the Middle East, including from Saudi Arabia, one of the world’s largest exporters of phosphorus-heavy fertilizers.
American farmers need access to as much supply as possible to help keep costs down and to ensure an adequate food supply. This is also a national security issue because a nation that cannot affordably and reliably feed itself has ceded some level of sovereignty.
Ideally, domestic fertilizer supply chains could compensate for disruptions abroad, but that’s not currently the case. Until that happens, we need to stop the bleeding. That means removing the countervailing duties until this global emergency has subsided. Effectively forbidding imports during a crisis does not strengthen national security; it undermines it.
Many in the agricultural community see empirical evidence that the countervailing duties on Morocco and Russia have been set too high, resulting in excessive reductions in foreign fertilizer supplies and artificially pushing up prices. These costs were passed along to American families.
These concerns should be thoroughly examined now during the mandatory five-year “sunset” review.
Regardless of whether these countervailing duties are ultimately renewed or allowed to expire, a temporary suspension should be granted immediately because of the global fertilizer crisis.
The Trump administration needs to pull out all the stops to ensure American farmers have access to ample fertilizer at affordable prices. Otherwise, we will certainly be facing even higher grocery bills later this year.
• E.J. Antoni, Ph.D., is chief economist and the Richard Aster fellow at The Heritage Foundation and a senior fellow at Unleash Prosperity, which was co-founded by Stephen Moore, a former Trump economic adviser and senior fellow at America First Policy Institute.
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