Trade War Escalates as China, Mexico, Canada Retaliate

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March 04, 2025

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by Lily Kuo, David J. Lynch and Amanda Coletta (Washington Post) China and Canada will impose their own tariffs on billions of dollars worth of U.S. goods, and Mexico plans to announce new levies soon, as Trump’s tariffs take effect. -- ... China imposed tariffs of up to 15 percent on a raft of U.S. farm products and blacklisted more than 20 U.S. companies, marking a major escalation in a brewing battle between the world’s two largest economies. The move targets some of the United States’ most important exports to China, including soybeans, meat and grains.

Trump is increasing tariffs on Chinese products by 10 percentage points, bringing the total tax on some Chinese products to 45 percent. He is also imposing 25 percent tariffs on goods from Mexico and Canada, in the most serious threat yet to 31 years of free-trade treaties in North America. The levies went into effect at 12:01 a.m. Eastern time Tuesday, after Trump confirmed Monday that he would not extend a month-long delay on his plan.

On Monday evening, Canadian Prime Minister Justin Trudeau decried Trump’s “unjustified decision” and said he would respond with tariffs on roughly $107 billion worth of U.S. products. About $21 billion in U.S. goods would be hit immediately. The remainder would take effect in 21 days, Trudeau said.

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Trump said he did not expect Beijing to “retaliate too much,” but only hours later, China’s State Council, the equivalent of its cabinet, announced a 15 percent tax on U.S. goods including chicken, wheat and corn. Other American products — including soybeans, sorghum, beef, pork, seafood, dairy products and fruits and vegetables — will be subject to a 10 percent levy.

Fifteen U.S. companies, including Leidos and General Dynamics Land Systems, were placed on a list that bars them from importing goods that can be used for military purposes. Another 10 American companies were barred from trading with or investing in China.

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China is the largest market for American farm products, accounting for 17 percent of total U.S. agricultural exports in 2023, according to data from the U.S. Department of Agriculture.

China last year imported almost $20 billion in soybeans, corn, cotton and the other U.S. farm products that will be subject to the new tariffs, according to USDA data. Those products accounted for about 80 percent of all U.S. agricultural exports to China. READ MORE

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Excerpt from Wall Street Journal: American farmers will support President Trump’s tariffs even if it hurts them monetarily, Republican Sen. Roger Marshall of Kansas said on Monday evening, in a rare instance of a GOP lawmaker and Trump ally admitting that the new duties could have negative economic effects.

“Even though Canada and Mexico were the number one trade partners for Kansas agriculture, I think that my farmers are willing to be patriots and stand beside President Trump to make their families safer,” Marshall said outside the Senate chamber. Trump should consider policies to soften the blow of tariffs on the agricultural sector, Marshall added, similar to the subsidy payments he doled out to farmers during his first term to counteract tariff retaliation from the Chinese government. Those could involve strengthening renewable fuels policies like E-15 ethanol rules, 45Z tax credit, and enhancing renewable airline fuels, he said. READ MORE

Excerpt from AgWeb: While the full economic consequences of the trade war remain to be seen, Secretary of Agriculture Brooke Rollins has promised to have a plan, such as the Market Facilitation Program (MFP), ready for farmers, if needed. In 2019, MFP provided direct payments to producers impacted by retaliatory tariffs, resulting in the loss of traditional exports.

“Everything is on the table right now. Everything. I know that President Trump, whom I speak with regularly, realizes the state of the farm economy in this country,” Rollins said on Sunday at Commodity Classic. “The last time, I know, he pushed Secretary Perdue to ensure we were able to make whole–as best as we could–some of those, and hopefully most of those, if not all, who had been hurt. We’re building the team at USDA to ensure we have the structure and the plan in place to allow us to move very quickly.”

In an interview with Farm Journal at Commodity Classic, USDA Economist Seth Meyers says he has been instructed by Secretary Rollins to be ready for a relief program, and he’s started calculating what possible relief could look like.

“Calculating something right today would not be helpful because we don’t know where we’re going to be, but absolutely, the Secretary instructs: ‘You need to be ready, have your pencil sharpened and have your tools available. Think about how you would proceed,’” Meyers says. “We are ready in that backstop. It won’t be easy. We’ve talked a lot about different countries. We’ve talked about reciprocal trade, but we are indeed sharpening our pencils to be able to do what she’s asked us to do.”

Here are the key details of the U.S. tariffs and retaliation from Canada, Mexico and China.

U.S. Tariffs Imports.jpg

(Farm Journal)

Canada responded swiftly with plans to impose 25% tariffs on nearly $100 billion of U.S. imports over two tranches. Mexican President Claudia Sheinbaum plans to announce retaliatory tariff and non-tariff measures against the U.S. at an upcoming rally in Mexico City’s central square.

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Impact on Farm Machinery
Equipment makers are concerned about the additional duties, especially after a rough year for the industry.

“We have spent decades laying down supply chains across the world. Our industry is global — 30% of all equipment made in the U.S. is destined for export. Canada is our largest market outside of the U.S.,” says Johan “Kip” Eideberg, senior vice president – government and industry relations, Association of Equipment Manufacturers (AEM). “If we want to create more jobs here in America, we need to sell more equipment and that means selling to customers outside of the U.S.”

As detailed in From the Factory to Your Fields: Where Farm Equipment Is Made, the ag equipment manufacturing industry is fully integrated across the three North American allies involved in the so-called “trade wars.”

“Anytime you disrupt those tightly connected supply chains — and tariffs would be a direct disruption — it’s going to have a serious impact on equipment manufacturers and on our farmers,” Eineberg says. “Given that Canada is our largest export market, we’re sending almost $10 billion worth of goods to Canada every year, there’s a lot at stake here.”

In 2018, Eineberg estimates, tariffs on steel, aluminum and farm inputs from China drove up the cost of making equipment in the U.S. by about 9 percentage points.

“Obviously, manufacturers will try to absorb as much of that as they can, but inevitably some of it will be passed down to the consumer, which in this case is our farmers and ranchers,” he adds.

AEM is also sounding the alarm on the compounding effect of tariffs, specifically due to the tight integration of manufacturing cycles on both sides of the border. There are often cases, Eineberg says, where components and raw materials are shuttled three to five times across the border between different factories in the manufacturing process. That means each time a piece of steel or other raw material being manufactured into a component for a tractor crosses the border, the tariffs multiply.

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Impact on Rural America and Fertilizer
American Farm Bureau President Zippy Duvall expressed alarm about potential harm to farmers resulting from imposing stiff tariffs on the top three agricultural markets by value for the U.S.

“Farm Bureau members support the goals of security and ensuring fair trade with our North American neighbors and China, but, unfortunately, we know from experience that farmers and rural communities will bear the brunt of retaliation.” Duvall says.

Of note, more than 80% of the U.S. supply of potash, a key fertilizer product, comes from Canada.

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Impact on Soybeans
During the 2018 trade war with China, U.S. agriculture experienced more than $27 billion in losses, with soybeans accounting for 71% of those losses, according to the American Soybean Association (ASA). Unlike in 2018, farmers are in a more tentative financial situation in 2025. Commodity prices are down nearly 50% from three years ago, while the costs for land and inputs, such as seed, pesticides and fertilizer, are high.

In an ASA statement, it says for years the organization’s farmer-members have consistently maintained their position that they do not support the use of tariffs, which threaten important markets and raise input costs for farmers, as a negotiation tactic.

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Soybeans by far make up the largest volume of ag products exported to China.

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“Soybean producers face huge, disproportionate impacts from trade flow disruptions, particularly to China,” Ragland says. “And we know foreign soybean producers in Brazil and other countries are expecting abundant crops this year and are primed to meet any demand stemming from a renewed U.S.-China trade war.”

Impact on Corn and Ethanol Demand
Market analysis shows tariffs won’t solve the U.S. trade deficit and instead will just shift business to other countries, says Neil Caskey, CEO, National Corn Growers Association (NCGA).

“We issued a study back in the fall that documented the implications of tariffs and specifically retaliation in a trade war — it’s not good for corn farmers, farmers in general,” he says. “We did that in conjunction with the American Soybean Association, and it concluded a trade war is really only good for Brazil, and we hope to avoid that.”

The top two destinations for corn and ethanol are Mexico and Canada. According to Krista Swanson, chief economist, NCGA, 40% of U.S. corn exports go to Mexico and more than 40% of U.S. ethanol exports are shipped to Canada.

“[Corn] is a commodity [those countries] consume way more than what they produce, so they’re going to have to get it from somewhere,” she says. “There’s definitely some concern about losing corn [exports], but how much is lost is left to be seen because it depends on what happens with shifting trade flows.”

Impact on Beef and Pork Sectors
U.S. meat export could be impacted by the tariff war as well, with China singling out pork and beef for a 10% counter tariff. READ MORE