By Evie Liu

American farmers are getting squeezed -- again -- by both U.S. tariffs and retaliation from major trade partners. This time, it might cost the government more to keep them afloat, and the long-term damage could be worse.

Tariffs against major U.S. trade partners took effect on Tuesday. The U.S. imposed a 25% levy on nearly all imports from Mexico and Canada -- a one-month exemption for cars was granted on Wednesday -- while it doubled to 20% a tariff it imposed on all Chinese products in February.

Retaliation has already started. On Tuesday, China's Ministry of Finance said it would add 10% tariffs on a range of U.S. agricultural products, including soybeans, sorghum, pork, beef, seafood, fruits and vegetables, and dairy products. It plans 15% tariffs on chicken, wheat, corn, and cotton, starting March 10.

Canada announced 25% countertariffs on $155 billion worth of U.S. products, beginning on Tuesday with a list of goods worth $30 billion. It includes products like orange juice, peanut butter, wine, spirits, beer, and coffee.

Mexico also said that it would impose retaliatory tariffs against the U.S., although it hasn't released specific details.

American farmers could suffer as importers in China, Canada, and Mexico -- the three largest export markets for the U.S. agricultural sector -- turn to other producers like Brazil. Even for the remaining sales, they would likely face falling prices as demand drops.

In 2024, Mexico imported roughly $30.3 billion worth of agricultural goods from the U.S., according to data from the Department of Agriculture, followed by Canada with $28.4 billion, and China with $24.7 billion. The three countries make up more than half of the total.

Chinese imports of U.S. soybeans alone were worth $12.8 billion last year. The import volume, more than 27 million metric tons, made up nearly a quarter of U.S. production.

Beijing's retaliatory tariffs could shave U.S. soybean exports to China by over 50% from expected levels, while corn exports could drop 84%, according to a 2024 report commissioned by the American Soybean Association and the National Corn Growers Association.

Farmers know how this can play out from the trade war during Trump's first term. As Beijing shifted its purchases to countries like Brazil and Argentina, U.S. agricultural exports to China were cut by half to less than $10 billion in 2018.

During the 2018 trade war with China, U.S. agriculture experienced more than $27 billion in losses, according to the American Soybean Association. Soybean farmers accounted for more than 70% of those losses, it said.

This time, the harm could last much longer beyond the tariff itself.

"Farmers are frustrated," said Caleb Ragland, president of the American Soybean Association, in a Tuesday statement. "Not only do [tariffs] hit our family businesses squarely in the wallet, but they rock a core tenet on which our trading relationships are built, and that is reliability."

Declining exports to China have led U.S. farmers to cut the acreage they plant with soybeans. And Brazil and Argentina have expanded their production area.

That farmland, and the additional beans it can produce, will remain even after the trade war under Trump ends. Ragland noted that soybean producers in Brazil and other countries are "expecting abundant crops this year" to meet demand stemming from the renewed U.S.-China trade war.

During the 2018 trade war, the Trump administration handed out billions of dollars in subsidies to the agricultural sector to compensate for its losses. It might have to do the same this time. But compared with 2018, farmers are in a worse financial situation today.

Although soybean prices are higher than they were seven years ago, costs for land, seed, pesticides, and fertilizer have been rising even faster over the past few years. That means slimmer margins and less savings to draw from when revenue declines.

U.S. tariffs on imported products could further increase costs for U.S. farmers. For example, around 85% of potash -- an important ingredient in fertilizer -- is imported from Canada.

"The U.S. farmer will feel those impacts after the spring planting season," said Ken Seitz, the CEO of Nutrien, on an earnings call last month. The Canadian fertilizer company is the largest producer of potash in the world.

"For the third straight year, farmers are losing money on almost every major crop planted," wrote Zippy Duvall, president of the American Farm Bureau Federation, on Tuesday, "Adding even more costs and reducing markets for American agricultural goods could create an economic burden some farmers may not be able to bear."

Write to Evie Liu at evie.liu@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 05, 2025 17:05 ET (22:05 GMT)

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