By: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University and Chris Zoller, Interim Assistant Director Agriculture & Natural Resources (ANR) Professor and Extension Educator, ANR Ohio State University Extension – Tuscarawas County
First Trade Policy Announcement(s) by the New Administration
Both before and after the 2024 presidential election, the trade policy community has been speculating about and discussing the likely economic impact of tariffs an incoming administration might implement once in office. With the inauguration of President Trump on January 20, we now have the first view of what could be in store for US trade policy. Specifically, while new tariffs have not been imposed immediately, the President indicated the possibility that 25 percent tariffs would be applied to imports from Canada and Mexico as of February 1 (Reuters, January 20, 2025). Surprisingly, the much talked of hike in tariffs to 60 percent on all imports from China, and a 10 percent tariff on imports from the rest-of-the-world, have yet to be announced, the President instead ordering the Office of the US Trade Representative (USTR) to investigate unfair trading practices globally, and whether China complied with the US-China Phase 1 Trade Agreement signed in 2020 (Bloomberg, January 20, 2025).
Potential Impact of Tariffs on US Agricultural Sector
With the integrated agricultural market that has evolved under the North American Free Trade Agreement (NAFTA), and its renegotiated successor the US-Mexico-Canada-Agreement (USMCA), it should come as no surprise that Mexico and Canada are the top-two US agricultural export markets at $29.9 and $29.2 billion respectively (USDA/FAS, Outlook for US Agricultural Trade, November 2024). Given the importance of these two markets to US farmers, and also in light of the declining US share of China’s imports of feed grains and soybeans (Glauber, IFPRI, December 2024), a trade war between USMCA members has the potential to have a serious impact on future US farm incomes. However, any analysis of the impact of such tariffs is an exercise in economic forecasting, and will also depend on the extent to which Mexico and Canada choose to retaliate, although Canada has already indicated it will respond in kind (Associated Press, January 20, 2026).
Agricultural economists at North Dakota State University have recently analyzed various US tariff scenarios (Steinbach et al., farmdoc, and Food Policy, 2024), which they have updated to include the impact of 25 percent tariffs against Canada and Mexico (Steinbach et al., CAPTS, 2024). Their analysis focuses on the potential export market losses in 2025 for 11 agricultural commodities, using baseline export projections for 2025 from the World Agricultural Board’s (WAOB) demand and supply estimates (WAOB, 2024). The sensitivity of US agricultural exports to the imposition of foreign tariffs is based on published estimates from the 2018/19 trade wear (Grant et al., Applied Economic Perspectives and Policy, 2021).
In the following table, three scenarios are reported for five commodities: soybeans, corn, dairy products, beef and beef products, and pork and pork products, along with total projected losses for the US agricultural sector. Scenario 1 assumes 25 percent US tariffs on Canadian imports are met with 25 percent Canadian tariffs on US imports; Scenario 2 assumes 25 percent US tariffs on Mexican imports are met with 25 percent Mexican tariffs on US imports; and Scenario 3 combines Scenarios 1 and 3 with tit-for-tat additional US/Chinese tariffs of 10 percent. The latter scenario is included here given President Trump has also signaled he will introduce an additional 10 percent tariff on imports from China as of February 1 (Guardian, January 22, 2025).
| Forecast Export Losses in 2025 by Commodity (US $ billions) |
| Commodity |
Scenario 1: US/Canada levy tariffs of 25% |
Scenario 2: US/Mexico levy tariffs of 25% |
Scenario 3: US/Canada/Mexico levy tariffs of 25% US/China levy tariffs of 10% |
| Soybeans |
-0.12 |
-1.68 |
-5.60 |
| Corn |
-0.31 |
-2.04 |
-2.90 |
| Dairy Products |
-0.42 |
-0.99 |
-1.54 |
| Beef & Beef Products |
-0.27 |
-0.29 |
-0.73 |
|
Pork & Pork Products
|
-0.29 |
-0.59 |
-1.09 |
| Wheat |
-0.03 |
-0.91 |
-1.11 |
|
Total Losses |
-15.7 |
-14.1 |
-36.9
|
Source: Steinbach et al., 2024
While the total forecast losses to the agricultural sector are quite similar for Canada and Mexico, there is clear variation across key commodities, and forecast losses for the listed commodities are also higher for US/Mexican tariffs as compared to US/Canadian tariffs. Importantly, these forecast losses increase if additional 10 percent tariffs are levied on Chinese imports, and subsequently matched by China.
While not reported in the table, if the United States were also to levy 60 percent tariffs on all Chinese imports, and 10 percent tariffs on all imports from the rest of the world, with tit-for-tat retaliation, the total value of US agricultural exports for 2025 are forecast to decline 34.4 percent, i.e., a loss of $60.6 billion. In this scenario, US soybeans would be the most vulnerable, followed by wheat and corn. At the state level, Ohio agriculture is forecast to lose -$705 million in export value in 2025 if the most extreme scenario plays out, with a loss of -$359 million for soybean exports.
Although these expected losses are obviously subject to forecast error, at a time when commodity prices have been falling, additional uncertainty about export markets due to changing US trade policy will likely exacerbate any financial stress faced by US farmers. It will also place additional pressure on the federal government to consider ways of reducing sectoral stress through further ad hoc payments to farmers similar to the Market Facilitation Program (MFP) applied during the 2018/19 trade war.
Financial planning is always a critical component of operating a farm business, and the potential negative impacts of tariffs reinforce the need to analyze costs, evaluate alternatives, and develop plans. For assistance, please contact your Extension Educator and enroll in the OSU Extension Farm Business Analysis and Benchmarking Program (https://farmprofitability.osu.edu/). Enrolling in this program will provide you an in-depth analysis of your farm business and allow you to plan for future success.
