President Donald Trump made it clear during his campaign that the word “tariff” was one of his favorites and he intended to implement a broad array of tariffs on most of our biggest trading partners.
Now we are watching closely to see how his strategy plays out in terms of markets, input costs and relationships with our international customers.
Trump signed an executive order imposing a new 10% duty on Chinese imports on Feb. 1. He recently raised that rate to 20%, citing Beijing’s failure to make progress curbing fentanyl production and shipments to the United States.
He also signed executive orders in February noting the flow of illegal drugs arriving from Mexico and Canada constituted a national emergency. Accordingly, the orders imposed new 25% duties on both countries’ exports, with Canadian energy products subject to a lower 10%, until the crisis is addressed. Both governments negotiated a 30-day reprieve, however, which expired on March 3.
Ag exports targeted
All of these countries have had plenty of time to figure out their responses and to little surprise, many agricultural products, as well as machinery, will be part of the retaliation.
China swiftly announced new duties on a slate of American agriculture exports, while Canada implemented the first step of its two-step retaliation plan.
“What the U.S. side has done is a typical act of unilateralism and bullying in disregard of facts, international trade rules and the voices of all parties,” a spokesperson for China’s Ministry of Commerce said March 4 in a statement from China’s State Council. Accordingly, the Council announced new 15% duties on U.S. chicken, wheat, corn and cotton, set to begin March 3. Sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products, the Council said, will face a new 10% duty.
In addition to the tariff measures announced, Beijing added more than a dozen U.S. companies to its export control list, requiring Chinese exporters to seek approval before making any sales
to the firms. It also indicated it would file a lawsuit at the World Trade Organization, as it did last month when the initial 10% U.S. duties went into effect.
“If war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” Chinese Foreign Ministry Spokesperson Lin Jian said.
China is a significant market for U.S. ag, accounting for around 16% of all exports in 2023, including more than half of all soybean exports and a quarter of U.S. cotton exports, according to the U.S. Department of Agriculture.
Canada retaliates, too
Canadian retaliatory tariffs also quickly went into effect. The first wave of retaliation involves duties on some $20 billion of U.S. goods, including certain tomatoes and other fruits, out-of-quota dairy products and certain prepared foods. After 21 days, a further $86 billion of U.S. exports are set to face new duties, which Canada has said will also feature plenty of U.S. agricultural products.
“Because of the tariffs imposed by the U.S., Americans will pay more for groceries, gas and cars, and potentially lose thousands of jobs,” Prime Minister Justin Trudeau said in a statement.
Trudeau also previewed forthcoming non-tariff measures during a press conference, but declined to elaborate on those measures. He did not rule out new taxes on potash exports but reiterated a point he has previously made: that no industry or geography should carry a disproportionately large economic burden from retaliation. Saskatchewan produces all of Canada’s potash, according to Saskatchewan’s government.
“Our focus has to be on getting these tariffs lifted as quickly as possible,” Trudeau said.
Mexican President Claudia Sheinbaum said that Mexico would also retaliate with tariffs, set to be unveiled during a public address.
U.S. meat exporters are eying that announcement with some trepidation. The U.S. is the predominant supplier of red meat to Mexico, according to a statement from the U.S. Meat Export Federation.
“We are reviewing the retaliatory measures announced by Canada and China and are watching for details on the response from Mexico. These three markets accounted for $8.4 billion in U.S. red meat exports last year, including nearly $4 billion to Mexico. While the United States is the primary supplier of pork and beef to Mexico, U.S. red meat has already been facing heightened competition in this critical market,” said USMEF President and CEO Dan Halstrom.
Last year U.S. beef exports equated to more than $415 per fed steer or heifer slaughtered and pork exports equated to more than $66 per head slaughtered, according to USMEF.
“These exports, a large share of which are underutilized cuts and variety meat, help producers maximize the value of every animal produced and allow U.S. consumers to enjoy more of the cuts they prefer.”
Higher input costs ahead? U.S. farm equipment manufacturers have previously warned that increasing duties on U.S. trading partners would raise input costs that could be passed along to U.S. farmers and ranchers. Components and parts cross the U.S. border multiple times before assembly into the finished product, and will face higher added costs each time they re-enter the U.S.
“Tariffs are taxes on American companies,” said Kip Eideberg, senior vice president at the Association of Equipment Manufacturers. “Tariffs have already contributed to higher input prices, disrupted supply chains and created uncertainty for equipment manufacturers.”
While the group supports efforts to create more favorable terms for U.S. trade, Eideberg said the duties threaten U.S. market expansion and undermine its global competitiveness, given competitors from other nations are not subject to the same tariffs. Farm groups, including the American Farm Bureau Federation and the National Farmers Union, had been urging the administration to reconsider the Mexico and Canada tariffs. Canada is the main source of potash for U.S. producers, and lawmakers have warned of rising input costs, particularly fertilizer, given the U.S.’ reliance on Canadian potash.
“Farmers support the goals of ensuring security and fair trade with other nations, but additional tariffs, along with expected retaliatory tariffs, will take a toll on rural America,” said AFBF President Zippy Duvall.
“Farmers and ranchers are concerned with the decision to impose increased tariffs on imports from Canada, Mexico and China—our top trading partners. Last year, the U.S. exported more than $83 billion in agricultural products to the three countries.
“Approximately 85% of our total potash supply—a key ingredient in fertilizer—is imported from Canada. For the third straight year, farmers are losing money on almost every major crop planted. Adding even more costs and reducing markets for American agricultural goods could create an economic burden some farmers may not be able to bear.
“We ask the president to continue working with our international partners to find ways to resolve disagreements quickly, so farmers can focus on feeding families in America and abroad,” Duvall said.
Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications, Inc., www.Agri-Pulse.com.
