Trade Wars 2.0: How Trumps Tariffs Are Putting Americas Farmers in the Crosshairs

Image credits: A farmer in Iowa shows support for Donald Trump in August 2024, but the president's trade policies may ultimately hurt the agricultural industry. (Photo: Scott Olson/Getty Images)

The trade wars are back, and America's farmers are once again feeling the pain. As Donald Trump imposes new tariffs on Canada and Mexico, China and other countries are retaliating with their own duties on US agricultural products. The impact on rural economies and food prices could be significant, and farmers are bracing themselves for another tough year.

According to Wendong Zhang, an assistant professor of applied economics at Cornell University, "Agriculture is often dragged into trade wars, even in smaller-scale fights, and this is true regardless of who is in the White House." Zhang notes that China's trade retaliation tactics often focus on agriculture, as it is a sector that is both economically meaningful and politically salient.

The latest round of tariffs imposed by Trump includes a 25% duty on all Mexican and Canadian imports, except for Canadian energy products, which will face a lower 10% rate. China has responded with its own tariffs on US agricultural products, including soybeans, wheat, meats, corn, and cotton. The impact on US farmers could be significant, as China is a top overseas market for American agricultural products.

The focus on fertilizer is also a key issue, as Canadian fertilizer is a crucial ingredient in US farms. Iowa Senator Chuck Grassley, a stalwart Trump ally, has pleaded with the president to exempt fertilizer from the tariffs, but to no avail.

The trade wars are not just about economics; they are also about politics. The agricultural industry is a key constituency for Trump, and the president's trade policies may ultimately hurt the very people who supported him. As Henrietta Treyz of Veda Partners notes, "Selling the public and Trump's voters on this will be paramount in the months ahead, hence other nations' focus on penalizing red states and farmers."

The impact on the economy could be significant, and farmers are not the only ones who will feel the pain. Consumers may see higher food prices, and the trade wars could also affect other industries, such as manufacturing and construction.

So what's next? Beijing has offered more limited retaliation so far, but it has suggested an openness to talks. However, if the talks break down, China may impose additional tariffs on US products, which could lead to a significant escalation of the trade wars.

As Zhang notes, "If this carries on, as we saw before, then we might see a replay of a significant need" for financial assistance to US farmers. The Trump administration may need to offer another round of billions in aid to farmers if the tariffs are left in place for an extended period.

The trade wars are a complex and multifaceted issue, and there are no easy solutions. However, one thing is clear: America's farmers are caught in the middle, and they will likely feel the pain of the trade wars for months to come. As the situation continues to unfold, it's essential to stay informed and up-to-date on the latest developments.