Increasing tariffs could impact the ag industry

Americans are consuming larger amounts of imported fruits, vegetables, wine, alcohol, coffee and beef, which will drive the food and ag trade deficit to a record $45.5 billion this fiscal year, according to estimates published by the U.S. Department of Agriculture (USDA) on Nov. 26. 

It is reported imports would be $9.3 billion larger than in Fiscal Year 2024, while food and ag exports declined for the third year in a row due to lower commodity prices.

The largest U.S. food trade partners are Mexico and Canada which account for four out of every $10 in American ag exports and imports totaling $385.5 billion, according to the USDA quarterly forecast. 

Roughly one-fifth of U.S. agricultural production is exported, so trade is an important part of farmer revenue.

However, President-Elect Donald Trump states he would impose a 25 percent tariff on goods coming from Mexico and Canada when he takes office, unless they stop illegal immigration and “crime and drugs” crossing the border into the U.S. 

Mexico President Claudia Sheinbaum reports mutual cooperation would be more fruitful than tariffs, while Canada Prime Minister Pierre Trudeau states he would meet provincial leaders to discuss how to approach the U.S.-Canada relationship.

Future actions

“On Jan. 20, as one of my many first executive orders, I will sign all necessary documents to charge Mexico and Canada a 25 percent tariff on all products coming into the U.S. and it’s ridiculous open borders,” reads a post by Trump on his Truth Social platform. “This tariff will remain in effect until such time as drugs – fentanyl in particular – and all illegal aliens stop this invasion of our country.”

According to Trump, China will face tariffs on goods 10 percent higher than any existing tariffs until the country prevents the flow of illegal drugs into the U.S.

“I have had many talks with China about the massive amounts of drugs, especially fentanyl, being sent into the U.S. – but to no avail,” Trump posts on Truth Social.

In a Nov. 26 CNN report, Chinese Embassy Spokesperson Liu Pengyu states, “China believes the China-U.S. economic and trade cooperation is mutually beneficial in nature. No one will win a trade war or a tariff war.”

Impact of policy change

If enacted, the tariffs could have a negative impact on America’s supply chains and industries reliant on goods from the country’s closest trading partners.

Although Trump reports each country will pay tariffs, the fact remains they will be paid by companies who purchase imported goods, and those costs are typically passed on to the consumer. 

During Trump’s first administration, he invoked Section 301 of the Trade Act of 1974 to impose tariffs on China. 

His imposed tariffs ranged from 7.5 percent to 25 percent across four lists of imports totaling $550 billion in value and were maintained by the Biden administration.

But for agricultural producers, the concern lies not with how tariffs will be imposed, but rather how they will impact their operations.

According to USDA data, tariffs cost U.S. producers $27 billion in exports between 2018-19 while the Trump administration soothed the impact of these losses by distributing emergency funding to affected producers.

Ag industry could face challenges

“U.S. agriculture producers are bracing for the prospect of a fresh trade war. While they said any new tariffs would hurt, they felt better prepared,” reads a Nov. 12 Farm Policy News article by Ryan Hanrahan.

“China is the largest market for U.S soybeans, but it has been trimming purchases, as U.S. agricultural exports to China fell 24 percent last year to $29.1 billion, according to the USDA. This is expected to fall further this year, but China will remain a key market,” Hanrahan adds.

USDA Acting Deputy Under Secretary for Trade and Foreign Agricultural Services Jason Hafemeister comments, “It’s a concern, but even in the last couple of years, we’ve recognized the potential for disruption in U.S.-China trade, and we have spent our efforts diversifying our markets.”

He adds, “They need food, and we produce a lot of food. We hope things don’t spin out of control and they stay proportionate.”

Recently, the U.S. farm industry has sought to expand into Southeast Asia, Africa, India and beyond to expand value-added products, but China’s size and appetite are hard to replace.

However, new tariffs could further shrink export markets at a time farmers are already experiencing lower demand for their commodities and raise prices for consumers as the U.S. becomes a net importer of food.

Melissa Anderson is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.