President Donald Trump is a big fan of tariffs and said so repeatedly throughout his presidential campaign. So, it comes as little surprise that, shortly after his inauguration, he pledged to impose new tariffs on Mexico, Canada and China.
What followed is anything but predictable and left many farmers and agribusinesses filled with uncertainty.
On Feb. 1, he said new 25% duties will apply to all imports from Mexico and Canada, with Canadian energy exports facing a reduced 10% duty rate, according to a White House fact sheet. A separate 10% duty, on top of any pre-existing tariffs, will apply to Chinese products. The tariffs were scheduled to kick in on Feb. 4.
“The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency,” the fact sheet reads. The document goes on to accuse China and Mexico of failing to take sufficient action against drug cartels and cites a “growing presence” in Canada.
The tariffs will remain in place “until the crisis is alleviated,” the fact sheet says.
The executive order also includes a clause allowing the president to increase the tariff rate and scope if the countries retaliate.
The tariffs mark the first time a president has used powers granted under the International Emergency Economic Powers Act of 1977 to impose tariffs—although former president Richard Nixon used a precursor to adopt a broad tariff on U.S. imports. It is also among the first occasions a president has used tariffs to advance policy goals unrelated to trade or economic policy, said Dan Mullaney, who served as an assistant U.S. trade representative through Trump’s first term.
The president also told reporters that he was no longer seeking concessions and that there was nothing either country could do to avoid new tariffs.
What happened next?
Any time another country is threatened with tariffs, one would expect for them to fight back with tariffs of their own—aimed at many of the people who supported Trump.
Canada swiftly slapped back, unveiling new duties set to phase in over the coming weeks. Among the U.S. exports hit with new 25% duties are orange juice, peanut butter, fruits, vegetables, pork, beef and dairy products.
Mexican President Claudia Sheinbaum said in a post to X that she was instructing her Secretariat of the Economy to implement a retaliatory plan the government has been working on.
The plan, she said, “includes tariff and non-tariff measures in defense of Mexico’s interests,” according to an informal translation. Reuters reported last week that such a plan could include new duties on U.S. pork, cheese, apples, grapes, potatoes, cranberries and whiskey.
People who were going to be harmed by the potential tariffs, including farmers and agribusinesses, started to get nervous. He’s widely viewed as a shrewd negotiator, but some of his trade actions during his first term created market disruption. Many Trump voters hail from rural America, and they wanted to make sure he fully understood how they might be negatively impacted.
Senior vice president at the Association of Equipment Manufacturers Kip Eideberg said the conflict presents a “double whammy” of costs for U.S. farmers. The retaliatory tariffs will likely dent exports, while farm inputs like fertilizer and agriculture equipment become more expensive.
“It’s real bad news for farmers and ranchers,” Eideberg said. He pointed out that it’s common for tractor and combine parts to cross the U.S., Mexico and Canadian borders multiple times in the manufacturing process. New duties would impose added costs at each stage of that process.
Trump seemingly acknowledged the measures would lead to higher costs, posting in all caps on Truth Social.
“WILL THERE BE SOME PAIN? YES, MAYBE,” he wrote, but added it “WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”
Another twist and turn
By Feb. 4, the tariff spat with two of our largest trading partners was on hold—at least for the next 30 days. Both Mexico and Canada agreed to Trump’s demands for additional efforts to secure borders and stop the flow of fentanyl. But, facing an additional 10% tariff on all of their exports, China did not follow suit.
The Chinese Ministry of Finance unveiled its response to new U.S. duties that went into effect Feb. 4, announcing new tariffs beginning next week on agriculture machinery but sparing soybeans and other agricultural commodities. On Feb. 10, Beijing will adopt 15% tariffs on U.S. coal and liquefied natural gas as well as a 10% tariff on crude oil, agricultural machinery and certain cars and pickup trucks, according to a Ministry of Finance statement.
Plows, seeders, planters, tractors and combines are among the machinery targeted. China is a major market for U.S. soybean exports, which make up more than half of the $29 billion in U.S. ag exports to the country. Commodity exporters had been concerned that a return to tit-for-tat tariff escalations could mean a return to rising Chinese tariffs on U.S. commodities and reduced U.S. sales to the country.
China is a large producer of agricultural machinery, which serves its own market. It does, however, import high-end machines, including precise harvest equipment, irrigation systems and grain drying technologies, according to the International Trade Administration.
Whether or not any of these tariffs stay in place over the longer term remains anyone’s guess. Trump told reporters on Monday that he planned to speak with Chinese President Xi Jinping “probably over the next 24 hours.” He’s also hinted that tariffs on the European Union may be coming next. Stay tuned.
Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications, Inc., www.Agri-Pulse.com.
