U.S. Agricultural Trade Background Given Potential Tariffs

January 22, 2025

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by Joana Colussi, Gary Schnitkey, Nick Paulson and Carl Zulauf (farmdoc daily) Agricultural trade is again coming under more focus as President Trump comes into office. The Trump administration has suggested the use of tariffs on goods coming into the United States which could prompt retaliatory efforts by other countries. An overview of total agriculture trade is presented.

As agricultural imports are large, tariffs could raise the cost of food products. Corn and soybeans are important Illinois agricultural products. Both rely on export markets, and retaliatory tariffs could reduce U.S. export demand and benefit other major exporters such as Brazil.

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China is the largest destination for soybeans exported by Brazil and the U.S. In 2024, China is expected to account for 73% of Brazil’s soybean exports and 52% of U.S. soybean exports. Over time, the share of total soybean exports destined for China has been higher for Brazil than for the United States (see Figure 4). China’s share of US soybean exports has varied more over time than has China’s share of Brazil’s soybean exports. China’s share of US soybean exports has been as low as 18% in 2018 during the beginning of the trade war with China. China’s share of US soybean exports has recovered to around 50%, but has not returned to the 60% share that existed before 2018.

Corn Trade

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The U.S. is by far the largest corn-producing country in the world. However, Brazil has become an important exporter of corn, with corn exports exceeding those of the U.S. in 2023 (see Figure 6). Brazil has established itself as an alternative source for corn in global trade (see farmdoc daily, February 20, 2024, November 11, 2024).

Summary

Prospects of U.S. tariffs on imports from trading partners are again on the agenda. Trade is important to agriculture, and tariffs can increase the costs of imported to agricultural products to U.S. consumers, with the potential for retaliatory tariffs to reduce export demand for U.S. agricultural products and prices received by U.S. farmers. Soybeans and corn produced in the U.S. are traded extensively. Tariffs will make U.S.-produced soybeans and corn less competitive with those from other countries. As it also is a large global exporter, Brazil is an example of a country that could gain if retaliatory tariffs were implements on U.S. grains and oilseeds.

We also note that, as of this writing, tariffs on U.S. imports have only been discussed by the Trump administration during the campaign and first days in office. No specific actions have yet been implemented. This article simply highlights the importance of agricultural trade to both U.S. consumers and producers and that the impact of any trade actions which become confrontational with major trade partners could be large.

Data Source and References

Colussi, J., G. Schnitkey, J. Janzen and N. Paulson. “The United States, Brazil, and China Soybean Triangle: A 20-Year Analysis.” farmdoc daily (14):35, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, February 20, 2024.

Colussi, J., N. Paulson, J. Janzen and C. Zulauf. “U.S. Dominance in Corn Exports on the Wane Due to Brazilian Competition.” farmdoc daily (14):50, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 12, 2024.

Janzen, J. “Corn Exports: Rocket Ship to Where?” farmdoc daily (14):205, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, November 11, 2024.

Russell, D and B. Kenner. “Horticultural Imports Drove U.S. Agricultural Imports to New High in Fiscal Year 2021.” Charts of Note, Economic Research Service, U.S. Department of Agriculture, November 12, 2021. https://www.ers.usda.gov/data-products/charts-of-note/chart-detail?chartId=102472

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Excerpt from DTN Progressive Farmer: The first big trade dispute of the second Trump presidency ended Monday after five days of salvos and market whiplash, but no tariffs imposed.

After pressing on Saturday to put 25% tariffs in place, President Donald Trump came to terms with Canadian Prime Minister Justin Trudeau on Monday afternoon after reaching a deal with Mexican President Claudia Sheinbaum earlier in the day. All three leaders agreed they would pause tariffs for one month.

However, there is still no resolution with China, which is facing a 10% increase in tariffs on Tuesday.

BORDER SECURITY INCREASED

Mexico agreed to add 10,000 Mexican National Guard troops to its northern border.

Canada was already implementing a $1.3 billion border security plan that Trudeau and Trump highlighted. Canada also will appoint a fentanyl czar, invest $200 million more to deal with organized crime and fentanyl and add Mexican cartels to Canada's terrorist watch list.

"The proposed tariffs will be put on hold for at least 30 days while we work on this," Trudeau posted on social platform X after his call with Trump.

Trump posted on social media that talks about economic issues over the next month will determine if tariffs eventually go into effect.

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CANADIAN TARIFFS ON AG PRODUCTS

Meanwhile, Canada on Sunday had posted a list of U.S. products that would have been subject to tariffs as early as Tuesday.

The Canadian list included a range of agriculture products including poultry, pork, dairy, wheat, barley, rye, oats, rice, sunflowers, canola, sugar products, chocolates, pasta, fruits, vegetables, pasta, soups, wine, beer, distilled liquors, tobacco and wood products. Also included were animal feed supplements and harvesting equipment.

The list did not include beef, which is an $824 million market. Also not on the list were corn or soybeans, but the U.S. exports only small volumes of those commodities to Canada. Ethanol also was not listed.

Leaders of Canadian provinces also issued orders to pull American alcohol products from their stores. Doug Ford, the premier of Ontario, announced Sunday that the Liquor Control Board of Ontario (LCBO) would pull all American products from its shelves starting Tuesday. Ford said on X the LCBO sells nearly $1 billion in American alcohol products. "Not anymore."

Also see "Canada, Mexico, Look to Target Red States With Retaliatory Tariffs" here: https://www.dtnpf.com/….

See the full Canadian tariff notice here: https://www.canada.ca/…. READ MORE

Excerpt from Ag Funder News: The US agtech sector is likely to experience “significant impacts” from tariffs instituted by the Trump administration says a new report from Pitchbook, while Canadian agrifood startups are bracing for impact should blanket tariffs come into effect next month, says the Canadian Food Innovation Network.

Right now, the situation remains fluid, with some commentators arguing that Trump is using the threat of tariffs purely as a negotiating tool and will not impose across-the-board tariffs on its biggest trading partners. However, a 10% tariff on all goods coming in from China is already in effect (prompting retaliatory tariffs on US goods from agricultural machinery to crude oil) and a 25% tariff on imports of steel and aluminum is set to come into effect on March 12, suggesting that the trade war is anything but phony.

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In some cases, there could be opportunities. For example, firms that provide real-time data, AI-driven risk modeling, and scenario planning could pick up new business as food & ag companies seek to optimize supply chains in the event of a new tariff regime. Some US players in ag drones could also become a bit more competitive as Chinese imports become more expensive, although firms that rely on Chinese components could take a hit.

But stepping back, says Pitchbook, the concern is that tariffs will exacerbate already high input costs for farmers, straining margins and reducing investments in new technologies.

“Increased tariffs on essential agtech imports will likely lead to higher operational costs for businesses due to more expensive machinery, inputs, and technology. This could result in reduced profit margins and may necessitate price adjustments. Companies might also face supply chain disruptions, leading to delays and potential shortages of critical components.”

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Given the uncertainty—will there be tariffs on March 4 or just another round of negotiations?—firms are currently having to game out the “worst, best and most likely case scenario” in the short, medium, and long-term, she (Canadian Food Innovation Network CEO Dana McCauley) said.

“Some [Canadian] startups I’ve spoken to say, maybe we’ll just move to the US? But it’s not that easy, so I’ll say maybe you can find a US toll manufacturer who could take on your production for six or eight months while we see how things shake out?

“I don’t think we’d be able to sustain a trade war for very long without both countries’ economies being really, really badly damaged. So I am really cautioning folks to have backup plans for their backup plans.”

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From an investment perspective, meanwhile, tariffs could make investors wary of funding Canadian startups that are targeting the US as their primary growth market, she predicted.

“So it’s absolutely time for those companies to think about where else they can do business, whether it’s Europe or Asia. hose markets are obviously logistically more difficult, but we have MOUs with Japan, Australia, the Netherlands, the UK, and Israel. So I think that Canadian startups, especially the food tech ones that are working in global white spaces, absolutely should be getting more market intelligence about those places and revising their pitch decks.”

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