During the first week of April, the US introduced reciprocal tariffs on imports from around 90 countries. The new tariff schedule included a 10% tariff on all UK imports and a 20% tariff on imports from the EU, amongst other key trading partners. In addition, the total tariff rate on Chinese imports was raised from 34% to 125%. President Trump said the new tariffs aimed to reduce the US trade deficit. Previously according to the WTO the United States had among the lowest simple average MFN tariff rates in the world at 3.3%, while many of our key trading partners like Brazil (11.2%), China (7.5%), the European Union (EU) (5%), India (17%), and Vietnam (9.4%) have simple average MFN (most favoured nation) tariff rates that are significantly higher.
However, despite the subsequent market upheaval leading to a 90-day suspension of some of the higher tariffs on the new schedule, the developments will have profound implications for trade and global agricultural markets. This article explores how a trade war impacts the agricultural sector, and amid all this, are there any opportunities for agricultural investors?
How does protectionism impact the farm sector?
Tariffs raise domestic prices, reduce competition from imported agricultural goods, and increase demand for domestically produced products. President Trump’s policies could result in higher prices for American farmers and stimulate domestic farm investment and growth.
However, eventually, domestic producers will become less competitive, resulting in higher domestic food prices. Exporter countries impacted by the tariffs may also decide to retaliate by imposing increased tariffs on US exports. For example, Canada has already enacted tariffs on live poultry, poultry meat, pig meat, eggs, dairy products, wheat, rye, barley, animal feeds and feed supplements, including concentrates. Mexico is currently the largest export market for U.S. broilers and the most important market for turkey, while Canada is the second largest export market for broilers in value, the second largest for turkey and the top market for eggs and duck. China was the third largest market for broilers in terms of value.
What are the likely impacts of the tariffs?
Farmers
Most agricultural groups have cautiously opposed tariffs. U.S. agricultural export revenue was $191 billion last year, according to the USDA. Farming groups believe that the tariffs will raise prices for farmers, exporters and consumers. Large-scale American farmers depend on export markets. Retaliatory tariffs — like those that China imposed on farm products like chicken, pork and soybeans will harm their incomes.
According to American Farm Bureau Federation President Zippy Duval, more than 20% of farm income comes from exports:
“Tariffs will drive up the cost of critical supplies, and retaliatory tariffs will make American-grown products more expensive globally.”
The impacts of the tariffs are likely to vary across sectors. Analysis by OSU (Ohio State University) has forecasted that US soybeans would be especially vulnerable, followed by wheat and corn. Over half of US soybeans exported go to China. Ohio agriculture is forecast to lose $705 million in exports in 2025 in the event of a full-blown trade war, with $359 million in soybean exports lost.
Consumers
Imported food products will become more expensive for consumers. This is because grocery retailers operate on thinner margins than most industries. With little room to absorb higher tariff costs, retailers will pass them on to shoppers. For example, the US is a significant importer of Australian and New Zealand beef for manufacturing burgers. The announcements have already led to historically high beef futures going even higher.
Farm Supply Input Chains
The imposition of tariffs on inputs can impact domestic firms. For example, US farmers rely on potash fertiliser from Canada, which now faces a 10% tariff; in addition, US farmers use a lot of equipment manufactured in Canada. The US animal feed sector also relies on many imported feed additives such as amino acids and vitamins.
Agricultural Trade Patterns
The US is a major agricultural exporter and importer. Mexico and Canada are major trading partners due to their geography and membership in the NAFTA (North American Free Trade Agreement) and later the United States–Mexico–Canada Agreement (USMCA). Mexico is the largest importer of fruit and vegetables into the United States. On the other hand, Canada leads in exports of grain, livestock, meats, poultry, and more. Increased tariffs are likely to lead to significant shifts in these trade flows.
The EU has a significant trade surplus with the US regarding food and agricultural products ($24 billion in 2024). According to Rabobank, the potential imposition of 25% U.S. tariffs on EU exports threatens to significantly disrupt food and agriculture trade flows.
Are there opportunities?
After the imposition of tariffs on Canada, Mexico and China in January, Gustavo Flores-Macias, a professor of government and public policy at Cornell University, stated:
“The U.S. economy is larger and can better absorb the negative consequences of a trade war, but a simultaneous trade war with its three main trade partners, once tariffs against China are included, will affect all parties negatively.”
However, as other countries relate, US exporters may lose out, creating gaps within other markets. The upheaval could lead to significant shifts within established trade flows. US pig farmers, who export roughly 10% of their pork production to Mexico, say they will lose out to their Brazil, Chile, and Argentina rivals within the Mexican market.
According to the International Food Policy Research Institute, Brazil responded to the first Trump-era trade war by expanding its harvested areas by 35%, and the U.S. has not kept pace. A study from 2024, commissioned by the National Corn Growers Association and the American Soybean Association, found that in a new trade war, U.S. soybean exports to China could drop by 51.8%, and U.S. corn exports to China could fall by 84.3%. Meanwhile, Brazil and Argentina would increase their exports, gaining valuable market share.
Possible Scenarios going forward
Many countries are also making renewed efforts to establish new free trade agreements with the US and other countries. The UK has said it will go further and faster in lowering barriers to trade with other nations, including the US itself. India has stated that it will make renewed efforts to sign a free trade deal with the UK. There is no certainty, but in the long term, the upheaval could actually lead to increased trade liberalisation.
The full impacts of the tariff changes are yet to be understood. However, in light of this trade policy upheaval, it is essential for those within farm and farm input supply chains to understand the new trade policy environment. It’s also more important than ever for farmers and agricultural businesses to leverage technology to enhance their productivity and competitiveness. Advanced agricultural technologies can help optimise resource use, improve crop yields, and provide valuable insights for decision-making in a turbulent environment.