Farmers likely to feel effects in upcoming harvest
By Madeline Combs, Storm Lake Times Pilot
Iowa-President Donald Trump formally instituted the 25% tariffs on all imports from Canada and Mexico Tuesday morning, a realized threat the president delayed for a month after the neighboring countries agreed to attempt to address the migration and fentanyl “crisis” Trump claims is coming across both borders into the U.S.
Some exceptions will be for energy products like crude oil and natural gas, which will only face a 10% tariff.
Imported products from China will also face an additional 10% tariff on top of the 10% duty President Trump placed on Chinese goods last month.
Canada’s Prime Minister Justin Trudeau announced Monday that the country plans to issue retaliatory tariffs that would impact nearly $100 billion of imported U.S. goods. China is likely to instate countermeasures to protect their interests on top of the retaliatory tariffs they placed on the U.S. last month.
Iowa State University agriculture economist and professor, Chad Hart, told the Times Pilot Tuesday that many markets were already starting to react to Trump’s tariffs before they were instated.
“Well, arguably, even before the tariffs came into effect, they were having some impacts on our markets. Markets were reacting to the potential. We saw, for example, corn and soybean prices react fairly negatively yesterday (Monday) to the announcement that the tariffs would be put on today,” Hart said. “So you already saw some negative economic reaction to the tariffs before they went in. But that said, you continue to see that sort of developing over time.”
On Tuesday, the Wall Street Journal reported that the stock market saw a dip in prices as the economy reacted to the President’s announcement. The Nasdaq Composite fell 2.6%, the Dow Jones Industrial Average fell around 1.5% and the S&P 500 dropped around 1.8%.
Hart said that because the change is so new, it is challenging to determine what sectors of the economy will be most affected.
“It’s hard to get a definitive answer to anything because so many details are still missing from what we would need to truly lay out what the impact is going to be,” he said.
Hart also explained that the reigning question among economists surrounds the permanence and flexibility of these new tariffs.
“You know these tariffs have been targeted at certain countries. But, could they be taken off again if some changes are made in other policy areas that would cause President Trump to maybe reverse these tariffs sometime in the future?” he asked. “We’re constantly looking to see, are these temporary or permanent?”
Hart explained that previous tariffs enacted by President Trump during his first term that are still in place today, despite the intervening term of President Biden between his second term, are an example of the permanence economists are looking for to get a better understanding of these new tariffs.
According to Hart, these details provide valuable insight into future trade operations and patterns.
“It would be good to know more details about if and when these tariffs could be taken off again. That type of legislation tells us whether we should be looking at, are these permanent changes to doing trade? And if so, we’re going to see in the long run, trade patterns having to shift to reflect this increased cost of doing business with the U.S.,” Hart said. “Or, whether this is more of a temporary thing where maybe we have to reroute some trade this year, but next year, these could be gone and therefore things should go back to a more traditional pattern of trade.”
Possible impacts on Iowa farmers, ag
During his address to congress Tuesday night, President Trump said that the tariffs will impact American farmers and may require “an adjustment period.”
”The tariffs will go on agricultural products coming into America, and our farmers, starting on April 2. It may be a little bit of an adjustment period,” Trump said. “We had that before when I made the deal with China — $50 billion of purchases. And I said, ‘Just bear with me,’ and they did. They did. Probably have to bear with me again. And this will be even better,”
Reporting from the Associated Press suggests that the new tariffs could hurt the bottom lines of farmers and meat producers by “billions of dollars” if they are kept in place long term. As a result, consumers would likely see increased prices of fridge staples like ground beef and produce.
These impacts are expected to become known during the upcoming harvest season. Consumers could see some products become cheaper in the short-run if exports end up declining, according to AP.
Following the initial announcement of Trump’s tariffs a few weeks ago, prices of corn and soybeans for the upcoming harvest season have already fallen around 10%, the AP reports.
Hart noted that while Trump’s new tariffs will likely impact more consumers, possible retaliatory tariffs from other countries will brandish producers and farmers.
“The retaliatory tariffs really hurt us on the farming side. That’s hurting our potential revenues, that’s limiting our potential sales,” Hart said.
He presented the example of China, a large buyer of U.S. soybeans.
“If they bring on a retaliatory tariff, soybeans could be, what I believe is on the list of things that they would put a retaliatory tariff on,” he said. “That means our soybeans will cost more to get into China, which is likely going to cause them to buy less U.S. soybeans, or look to replace U.S. soybeans with soybeans from some other country where there isn’t a tariff in place.”
Hart also told the Times Pilot that farmers should prepare for a cost increase of potash, a common fertilizer that is imported from Canada.
That fertilizer is now going to cost more to bring in that it’s sort of a needed input to grow the crops that we do,” Hart said. “So farmers will possibly get hit by the tariffs as a consumer on the potash and turn around and get hit by the retaliatory tariffs on corn or soybeans or wheat, in this case, that Canada may put on in response…”
According to the New York Times, farmers may receive compensation payments similar to the $20 billion issued after the trade war during Trump’s first term that resulted in a stark decline in U.S. agricultural exports and large losses for producers.
The AP also wrote that the anxiety from both American consumers and farmers alike could cause a ripple effect in the economy.
“If the tariffs make farmers uneasy investing in expensive tractors and consumers worry so much about groceries that they cut their spending, that would hurt the economy overall and could even lead to a recession,” according to the AP.
Hart said that the new tariffs present “a very fluid situation.” He noted that Trump’s initial delay of the tariffs indicates that there may be some flexibility to them, or they could be negotiated.
“Until that, I’m interested to see how the countries respond and then whether we see more sort of trade and tariff talks with these countries building over the next couple of weeks that could provide some more clarity on how long they will last,” he said.
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