As current trade tensions between the United States and key global partners, especially China, continue to rise, Iowa’s farmers could be caught in the crossfire.
The country accounted for nearly $145 billion of U.S. exports in 2023, according to the U.S.-China Business Council.
There has been a significant decline in the trade of agricultural products over the past three years, according to economics professor Chad Hart. China was once a major trade partner, accounting for a significant portion of U.S. agricultural exports. However, the markets have since shrunk.
“In fact, in the years 2020 and 2021, arguably China was our biggest agricultural trade partner,” Hart said. “So they went from very small to very large, and now they are shrinking back down again.”
Hart predicts that this downward trend will likely continue into 2025, specifically due to the reaffirmation of tariffs by President Donald Trump. The tariffs are expected to further erode agricultural exports to China.
“Tariffs are just one piece of a larger puzzle,” Hart said. “The real challenge is how both the U.S. and China will respond to each other’s moves.”
The prospect of losing access to China’s consumer base has led to declining prices, even before any official trade has begun. According to David Peters, professor of sociology and criminal justice, it especially impacts farmers with soybeans and hog production.
“The biggest issue right now is uncertainty,” Peters said. “Markets are reacting to the possibility of tariffs, which is already driving up input costs and putting pressure on farmers’ bottom lines.”
The current trade between the U.S. and China has become strained, with tariffs being used as a tool for economic leverage, according to Peters. The Biden-Harris administration maintained many of the previous Trump administration tariffs on non-agricultural products, and agricultural tariffs have largely stabilized in recent years.
“Right now, trade relations with China are tense,” Peters said. “The fear is that if the trade war escalated, China could retaliate by restricting key imports like soybean and pork, which could be devastating for American farmers.”
As for Canada and Mexico, Peters said the situation is “more about negotiating trade terms rather than an all-out trade war.”
Peters suggested that the trade tensions with Canada and Mexico will not last long nor have lasting effects. However, the U.S.-China trade conflict could have more lasting repercussions.
“The administration is focused on limiting China’s economic and military expansion, and tariffs are a part of that strategy,” Peters said.
Hart expressed that the consequences of the ongoing trade tensions will create “winners and losers” in the global agricultural market.
“Tariffs protect U.S. producers by making foreign products more expensive, but they simultaneously hurt U.S. consumers by raising the prices of imports,” Hart said. “On the flip side, countries facing U.S. tariffs will suffer lower prices for their exports but benefit from cheaper prices for consumers in those nations.”
On Thursday, Trump extended a one-month 25% tariff delay on products from Mexico and Canada covered under the USMCA, as well as an exemption for automotive goods from both countries.
