The past few years have seen significant events disrupt global agricultural economies. These have included the COVID-19 pandemic, recession, rapid inflation, and Russia’s war in Ukraine, all of which triggered price increases for the inputs farmers buy (like fertilizer and equipment) and the commodities they sell (most importantly food). In 2024, the economic impact of these shocks had lessened, with overall inflation now near the Federal Reserve’s target level of 2 percent and the US Department of Agriculture (USDA) predicting just a 2.4 percent increase in food prices for 2025. President-elect Trump’s proposed tariffs and other ill-considered policies, alongside geopolitical tensions, are likely to disrupt agriculture, harm farmers, and drive up food prices.
Trump 2.0 tariffs explained
Trump has floated imposing tariffs ranging between 10 and 25 percent on all imported goods. What could this mean for US agricultural producers? On one hand, this could increase local food purchases by making imported food more expensive and might encourage local farmers to increase output. On the other hand, farmers growing export-dependent crops such as soybeans, corn, and wheat could see a decrease in demand from the international market.
When one country imposes tariffs on another, the affected nation often responds by implementing its own tariffs in retaliation or, in some cases, finds an alternative market to source from, in turn increasing domestic supply for the exporting country and lowering domestic prices. This results in export losses for the farmer and could mean an increase in consumer prices for other imported goods.
What are tariffs and who pays for them?
A tariff is a tax that is imposed on goods imported from another country with the aim of giving a price advantage to domestically produced goods over similar imported goods. On paper this seems great. In the past few years, the United States has allocated more resources towards promoting local food through various programs and policies such as the Local Food Promotion Program (LFPP), Farmers Market Promotion Program (FMPP), Know Your Farmer, Know Your Food (KYF2), Farm to School, and Community Supported Agriculture (CSA). In reality, increasing tariffs often leads to retaliatory measures, which can negatively impact farmers’ incomes and burden consumers with higher prices.
The United States imports 15 percent of its overall food supply. In 2023, US food imports were valued at $189 billion. A 10 percent import tariff would increase the cost of imported food by $18.9 billion; a 25 percent tariff would increase it by $47.25 billion. The purpose of a tariff is to make foreign goods more expensive, incentivizing US consumers to buy more US products, which are not subject to any tax. However, it’s not as simple as that.
The import share of fresh fruits and vegetables is currently 55 percent and 32 percent, respectively, mainly because the United States does not offer policy support for fruit and vegetable farmers, so there is no competitive advantage in producing them. For example, most imported fruit comes from Mexico, which has a competitive advantage in fruit production over the United States because its warm tropical and subtropical regions allow it to produce enough fruits such as mangoes, avocadoes, berries, and pineapples all through the year to meet both domestic and international demand regardless of the season. Although the United States has fruit-growing regions like California and Florida, production is seasonal and often riddled with limitations such as frost, droughts, and higher costs of labor. So, there’s a reason why our fruit and vegetable import bills are high. Because of the limitations on US growing conditions, it costs more to produce fruits and vegetables than it does in other countries, so foreign-grown food tends to be less expensive than US-grown.
Will tariffs be inflationary? The simple answer is yes. It is the local retailer who pays the tax. If Retailer A, for example, buys a $100 produce item and sells it for $150, they make $50 in profit. With a 10 percent tariff, they buy the produce item for $100 and pay a $10 tax to the government. One of two things will happen: either Retailer A takes a profit cut of $10 or increases the price from $150 to $160 to offset the extra cost.
One may argue that this would be great for US farmers, as they would be competing on a level playing field with imported produce. However, US fruit and vegetable production does not currently meet domestic demand and must be supplemented by imports. According to the Peterson Institute for International Economics, tariffs are projected to increase household expenses by approximately $2,600 annually.
The impact on US farmers
During the first Trump presidency, his administration’s trade policies (particularly the US–China trade war of 2018–2020) left a lasting mark on agricultural goods. What started as the United States’ attempt to address trade imbalances ended in retaliatory tariffs on key US agricultural exports to some of our significant trading partners.
The prime example is China, which is the largest market for US agricultural goods, particularly soybeans, corn, pork, and dairy. In 2016, US soybean exports to China totaled $14 billion—representing 62 percent of all US exports. Trade tensions escalated following the enactment of tariffs by the Trump administration in 2017, and by 2018 US soybean exports had slumped to $3 billion—a 78 percent decrease in market value. Farmers faced plummeting prices and mounting financial stress as China began importing its soybeans from Brazil.
To rectify this, Trump signed a trade deal with China in 2020 in which China committed to making significant additional purchases of US goods and services in subsequent years. But by the time the deal was signed it was a little too late, as China had turned to other countries such as Argentina and Brazil to meet its soybean demand. US soybean-planted acreage decreased from 90.2 million acres in 2017 to 76.1 million acres in 2019.
A USDA report indicates that tariffs resulted in approximately $27 billion in lost exports for US agricultural producers between 2018 and 2019, with soy and pork producers suffering the most significant economic damage. Many farmers relied on government subsidies to stay afloat, and the USDA had to come up with a short-term relief strategy to support these vulnerable producers by authorizing $12 billion in programs such as the Farm Service Agency (FSA), Agricultural Marketing Service (AMS), and Foreign Agricultural Services (FAS), and another $600 million through the Agricultural Trade Promotion Program (ATP). Although taxpayer-funded bailouts were intended to support US farmers, some of the benefits inadvertently flowed to foreign Big Ag companies like Brazil’s JBS.
So, if new Trump tariffs increase food prices and result in farmer bailouts, consumers will end up paying twice for this misguided policy. Additionally, despite China’s commitment to increase its purchases of US products, little progress has been made. China instead focused on policies that increased its domestic production and limited its reliance on US soybeans.
There are better ways to boost domestic production
Until 2018, the United States was a net exporter, with agricultural exports totaling $148.6 billion and imports amounting to $136.5 billion. For the 2025 season, exports are projected to reach $170 billion, while imports are expected to total $215.5 billion. Mexico’s economy minister signaled the country’s willingness to establish retaliatory tariffs by saying, “If you put 25 percent tariffs on me, I have to react with tariffs.” The last thing the United States needs as its trade deficit continues to grow is another trade war.
Congress should not only prioritize bilateral trade agreements and policies that will open new markets for US exports, but also shift the focus of agricultural policy to growing more food for people instead of feed for animals. For example, increasing investments in more domestic fruit and vegetable production by shifting as little as 0.5 percent of current farm acreage from livestock to produce could have helped balance the 2024 trade deficit.