Trump tariffs create risks for US ag exports

: Agriculture
25/01/31

New US tariffs on Chinese and Mexican imports could lead to disruptions in US corn and soybean sales to those countries, creating substantial risks for US agriculture markets.

China and Mexico are the two largest purchasers of US produced corn and soybeans, collectively accounting for 48pc of US corn exports and 61pc of US soybean exports since 2019, according to US Department of Agriculture (USDA) data.

With US president Donald Trump's plans of a 25pc tariff placed on US imports from Mexico, and a 10pc tariff place on imports from China to be enacted on 1 February, the future of those trade flows could by threatened by retaliatory tariffs.

In 2018, during Trump's first term, similar tariffs placed on China resulted in counter-tariffs on US agricultural exports and a substantial reduction in trade. Over 2018, US exports of corn and soybeans to China dropped by 74pc from the prior year, according to USDA data.

For the recently harvested 2024 US corn and soybean crops, some of this risk has been mitigated by higher-than-normal exports ahead of Trump's presidency. US exports of corn reached 20.9mn t through 23 January of the 2024-25 marketing year, 29pc ahead of last year's export pace. Similarly, US soybean exports reached 33mn t through 23 January, 21pc ahead of year ago levels.

But there is still a substantial amount of the two crops that has yet to be shipped. As of 23 January, 2.4mn t of US soybeans purchased by China had yet to be exported to the country.

Mexican buyers had 1.3mn t of US soybeans and an additional 7.9mn t of US corn yet to be exported. These purchases could be canceled as a result of tariffs, placing this supply back into the US market.

The risks also extend to the volumes of the two crops yet to be sold for export. According to USDA projections, the US will export 62.2mn t of corn and 49.7mn t of soybeans over the 2024-25 marketing year. To reach these levels, the US will need to export an additional 22.4mn t of corn and 9.7mn t of soybeans. Historically, China and Mexico would be viewed as the primary purchasers of the volumes.

By Ryan Koory

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