During the first term of President Trump, American farmers took a significant hit due to trade tensions with China. Now, facing the possibility of another trade war, things could turn out even worse.
Recently, China’s Ministry of Finance indicated plans to impose tariffs up to 15% on a variety of U.S. agricultural imports including chicken, wheat, corn, and cotton. This move is part of China’s response to the escalating tariffs by the United States on its products. In addition, China intends to levy 10% tariffs on imports such as sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy.
Canada also announced plans to impose 25% retaliatory tariffs on $20.5 billion worth of American goods, although they haven’t specified which products yet. Mexico, on the other hand, is expected to reveal its countermeasures soon. This followed President Trump’s recent imposition of 25% tariffs on goods from both neighboring countries.
Targeting farms is strategic due to the significant share of agricultural exports from the U.S., according to Lynn Kennedy, an agricultural economics professor from Louisiana State University. Politics likely play a role as well.
Mr. Kennedy explains, "Rural areas traditionally lean conservative, aligning with President Trump’s or the Republican base, where many of the agricultural states lie." This new round of retaliatory tariffs, much like during the previous administration, risks dragging down American exports and crop prices. Major buyers such as China, Canada, and Mexico could seek alternatives like Brazilian products.
According to the Department of Agriculture, China was responsible for purchasing $24.7 billion, or 14%, of U.S. agricultural exports by 2024. However, Mexico and Canada bought even more: $30.3 billion and $28.4 billion, respectively.
For farmers like Mark Legan in Putnam County, Indiana, the situation is particularly worrisome. Mexico is his primary market for pork exports, while China is crucial for his soybean sales, which he supplies to Cargill and Archer Daniels Midland locally.
Reflecting on the tough days of the first Trump term when China increased its purchasing of Brazilian soybeans, Legan says, "My income took a significant hit," adding that his pork sales to China also went down. With potential retaliatory steps by Mexico, his concerns are mounting.
"We’re now facing significant hurdles with these tariffs, trying to get our soybeans and pork into these markets," Legan shared. "Uncertainty is part of farming life with factors like weather and animal health, but these tariffs add a new layer of unpredictability to manage."
Industry bodies have been vocal against the broad-brush tariffs. Shannon Douglass, president of the California Farm Bureau, pointed out that such measures risk inciting retaliation, which could hurt the farmers they’re supposed to protect. Gregg Doud, leader of the National Milk Producers Federation, noted the organization’s fight against emerging trade barriers that threaten U.S. dairy sales.
Although Canada has not detailed its specific targets for retaliatory tariffs yet, last month’s plan included numerous U.S. products like orange juice and peanut butter. Adding to the turmoil, Ontario’s Premier Doug Ford has instructed an embargo on U.S.-made liquor from the region’s alcohol distributor.
This tumultuous trade environment puts both small and large agricultural producers in a tough spot, as anticipated price drops combine with rising costs. Soybeans, making up half of U.S. agricultural exports to China, are already losing ground to Brazilian exporters. Consequently, futures for U.S. soybeans dipped by 1%, with corn and wheat futures also experiencing declines.
Mr. Kennedy highlighted that many farmers have already planted this year’s crops, relying on expected prices that are now uncertain. This adds complexity for communities already dealing with disruptions in federal program funding under Trump’s administration. Farmers, burdened by debts for equipment, may face dire financial situations if tariffs continue to erode their market competitiveness, warns Jill McCluskey, also an expert in agricultural economics.
While organic producers mostly supply domestic markets and may initially dodge the worst impacts, Kate Mendenhall of the Organic Farmers Association notes higher machinery repair costs due to parts coming from Canada.
Unexpected consequences are likely, she remarked, and additional costs are predicted, given that 85% of potash for fertilizers comes from Canada.
American Farm Bureau Federation President Zippy Duvall said, "Tariffs, expected retaliations included, add strain on rural America, escalating costs and limiting markets for U.S. agricultural products, posing an economic risk farmers might struggle to endure."
Last month, Ken Seitz, CEO of Nutrien, a major Canadian fertilizer company, acknowledged that American farmers will bear the brunt of these tariffs post-spring planting.
Farmers have traditionally found themselves caught in trade disputes. During Trump’s first term, China responded to U.S. tariffs by imposing new levies, impacting $26 billion worth of agricultural exports according to the USDA. This led to U.S. soybean exports, notably to China, dwindling. A report indicates that renewed trade tensions could cause another steep decline in corn and soybean exports, making it tough for American producers to regain lost market share.
Trump previously countered China’s tariffs with subsidies for U.S. farmers. Whether a similar response unfolds now, or how aid might reach both large and small farmers, remains uncertain.
Farmers, emphasized Betty Resnick from the American Farm Bureau Federation, primarily want to earn through market sales rather than rely on government assistance. Yet, as market access shifts, they need to ensure their survival.
Reporting assistance by Kevin Draper.
