US farmers could permanently lose key markets amid Trump's tariffs diplomacy: trade

The US agriculture and food sector, especially soybeans, corn and proteins, could immutably lose its key markets to emerging economies, such as Brazil, amid the resumption of tariff diplomacy under the US President Donald Trump, market sources told S&P Global Commodity Insights on Feb. 6.

The White House declared an economic emergency on Feb. 1 and imposed tariffs of 25% on imports from Mexico and Canada and 10% duty on all imports from China. In addition, a 10% tax was levied on energy imports from Canada, such as oil, natural gas and electricity, the announcement said.

More concerningly, Trump's decree included a system to raise the US tariff rates against retaliation by other countries.

The Republican leader believes imposing tariffs on its trading partners is an integral part of the 'America first' strategy.

"We may have short term some little pain, and people understand that," Trump said Feb. 2. "But long term, the United States has been ripped off by virtually every country in the world."

The following day, as Mexico and Canada imposed retaliatory duties on select US goods, Washington softened its tone and postponed the tariff plan for a month, citing ongoing dialogues with its two North American partners to resolve the outstanding issues.

However, China imposed retaliatory taxes on certain US goods on Feb. 4, a decision reminiscent of the two-year trade conflict of 2018-2020 between two of the world's biggest economies.

Effective Feb. 10, China -- world's top agricultural importer -- will impose tariffs of 15% on US coal and 10% for crude oil, farm equipment and pick-up trucks, China's finance ministry said Feb. 4.

China's retaliation is not full-fledged, and many market experts see the move as Beijing's subtle warning to the Trump administration to toe the line.

Why US farmers should be concerned

The US farming sector is one of the biggest suppliers of farm products in the world, so any trade tension is likely to fan price volatility, which is not an ideal situation for farmers, market sources said.

Platts, part of S&P Global Commodity Insights, assessed SOYBEX FOB New Orleans at $416.31/mt on Feb. 5, down 12.4% on the year, while corn FOB US Gulf Coast Panamax was assessed at $225.10/mt on the same day, up 12% year on year.

In the protein sector, Platts assessed the US Chicken Marker at $1,168/mt on Feb. 5, down 5.4% on the month.

Tariff diplomacy also tends to erode a country's market share in key destinations in the long run, sources said. For example, China, Mexico and Canada, the three targets of Trump's tariffs, account for nearly half of all US agricultural exports annually.

Out of the total forecast of $170 billion of US agricultural exports in fiscal year 2025 (October-September), exports to Mexico are expected to account for 17.6%, according to the US Department of Agriculture's Economic Research Service. Meanwhile, Canada and China are forecast to purchase 17% and 14%, respectively, of total US agricultural exports in 2025.

These three nations are the leading buyers of US corn, soybeans, pork, beef, dairy and ethanol, among other products. As as a result, any escalation of the trade strife is expected to put a sizable dent in the American farm supply to its top three markets, sources said.

US soybeans losing China to Brazil

During the US-China trade tension of 2018, the US Department of Agriculture estimated total loss to US farmers at $27 billion. The Trump administration paid $23.1 billion in farm assistance to placate its seething farming community. However, trade flows seem to have been disrupted permanently, market sources said.

This was seen in the soybean market in particular. Previously, China, the world's largest soybean buyer accounting for more than 60% of total global soybean trade, relied heavily on US supplies. However in recent years amid diplomatic skirmishes and trade conflicts, the Asian powerhouse re-routed its demand for the oilseed to Brazil and Argentina.

Once a trade flow is established, it is very hard to upend it, a Shanghai-based agricultural consultancy said.

Until 2012, China imported nearly half of its soybeans from the US, according to USDA data. However, in the last decade, Brazil emerged as the largest supplier of the product to China and the world.

In 2024, China's total soybean imports reached a record-high 105 million mt, with Brazil accounting for nearly 70% of the supplies and the US accounting for roughly 20%, the latest data from the General Administration of Customs of the People's Republic of China data showed.

Of course, the price-competitiveness of the South American oilseed is the main attractor for China-based buyers in recent years, the consultancy said. But the trade ties between China and Brazil have also been reinforced by the geopolitical uncertainty in US-China relations, the consultancy added.

Market sources said Beijing realized the importance of food security during President Trump's first term when the threat of US agricultural supply curbs was used as negotiation tactics against China. Thereafter, Chinese President Xi Jinping strategized food security as its top national priority and started looking toward South America -- especially Brazil -- for its food imports.

Since 2018 Brazil has displaced the US as the largest seller of agricultural products to China, led by soybean shipments, China's Ministry of Agricultural and Rural Affairs data showed.

US farmers are not just worried about the soybean market. China is the third-largest purchaser of US beef and pork, importing 15% and 16% of country's total exports, respectively, USDA data shows. Additionally, Mexico accounts for nearly 40% of US corn exports annually and is also the largest importer of US pork, accounting for nearly 29% of total exports.

If the US-China-Mexico-Canada trade tension escalates, the White House may compensate the American farmers with billions of US dollars, as they did during Trump's last term, market sources said, but the loss of the global markets may not be recompensed.