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President Donald Trump’s plans to impose tariffs on some of the US’s largest agricultural trade partners next month threaten to upend markets and unleash food-price inflation.
Mexico, Canada and China account for about half of all American agriculture exports, and the US has become increasingly reliant on its two neighbors for fruit and vegetables. Tariffs along with any retaliatory measures will curb overseas sales and increase energy and fertilizer costs for farmers. All of that will likely mean higher prices for consumers at grocery stores.
Trump has set general levies of 25% on Canada and Mexico, though agreements were reached on Monday to delay those by a month, while a tariff of 10% is set for Chinese goods. Whether or not the tariffs end up being implemented, and exactly how the other countries might retaliate, will be key to what happens to commodity prices.
“These tariffs will only make it harder for American families to put food on the table and for American farmers and ranchers to sell their products,” said Minnesota Senator Amy Klobuchar, a Democrat and member of the Senate Agriculture Committee. “Farmers and ranchers want an even playing field, not handouts necessitated by another Trump trade war.”
We break down the markets that are vulnerable to disruption.
Fruit and Vegetables
Mexico and Canada accounted for nearly 90% of US fresh vegetable imports by value in 2023, and more than half of fresh fruit shipments, according to the US Department of Agriculture.
Mexico is now the biggest source of US farm imports, shipping tomatoes, fresh berries and other vegetables. The country is a particularly big source of avocados, supplying more than 90% of what Americans eat. Canada, meanwhile, ships apples, mushrooms and potatoes.
Corn and Pork
Mexico ranks as the biggest buyer of US corn and pork and any counter measures could hurt America’s biggest crop as well as meat companies such as Tyson Foods Inc. and Smithfield Foods Inc.
“We’ve been preparing for this,” Tyson’s Chief Executive Officer Donnie King said during a conference call on Monday. “We’ll leverage our global expertise to identify the best markets for our products.”
Still, Mexico may find it hard to replace American corn. The Latin American nation imported almost 19 million metric tons last year. Both Mexico and Canada are also key importers of US dairy products.
Soybeans and Canola Oil
Soybeans were the poster child for the last trade war with China, with the world’s biggest buyer shrinking US purchases by 79% in the first two years of the first Trump administration. A repeat of those actions could hurt farmers.
Tariffs also mean American biofuels, food and consumer-product makers may need to pay more for oilseed crop products used in everything from shampoo and salad dressing to renewable diesel and sustainable aviation fuel. The US accounted for more than 90% of Canada’s canola oil exports in 2023, according to the USDA.
Fertilizers
The US is highly dependent on potash from Canada, importing roughly 85% of what it needs. The Fertilizer Institute and US Senator Chuck Grassley, an Iowa Republican, have already urged Trump to exempt Canadian product from tariffs.
An exemption is especially important ahead of spring planting of grains that are relied on for global food supply chains, Fertilizer Institute Chief Executive Officer Corey Rosenbusch said in a statement.
“Tariff costs are passed on to the end-user,” said Alexis Maxwell, a Bloomberg Intelligence analyst. US farmers will likely pay $60 to $80 more per short ton for potash and ammonia fertilizers this year, she added.
Lumber
More than 70% of US imports of softwood lumber and gypsum, used in drywall, come from Canada and Mexico respectively, and “consumers end up paying for the tariffs in the form of higher home prices,” Carl Harris, chairman of the Washington-based National Association of Homebuilders, said in a statement.
Canada is the biggest foreign supplier of lumber to its southern neighbor, accounting for as much as 30% of supplies. The new US tariffs will likely be in addition to existing duties, which were hiked to 14.5% last summer, according to Dustin Jalbert, senior economist at commodity pricing agency Fastmarkets.
--With assistance from Gerson Freitas Jr. and Isis Almeida.
