Would another Trump Presidency Lead to a Return of Trade Wars?

Jul 23, 2024

Trump's policies could lead to increased tariffs

By Devin Lashley
Farms.com Risk Management Intern
Photo Credit: Pexels - Polina Zimmerman

Domestically, Trump has strong support in farm states and has previously provided substantial trade compensation payments to farmers affected by trade disputes. But, would another Trump Presidency lead to a return of trade wars?

Following the attempted Assassination of Donald Trump and the dropping out of the race by Joe Biden, the race to the Whitehouse is more uncertain than ever but Trump leads the poles at 62 percent vs. Harris at 36 percent.

When it comes to biofuels, Donald Trump 2.0 would not be good for renewal biofuels as he prefers to drill for oil, and we could revisit the trade war from 2016 – 2019 with China and other countries around the world.

Trump's policies could lead to increased tariffs (60-100% with China) and 10 percent with Europe because Trump does not like the fact that they do not but enough U.S. ag or U.S. cars it could reduce demand for U.S. ag products and drive prices lower as these counties retaliate.

During his previous term, Trump imposed steep tariffs on Chinese goods, leading to a trade war that negatively affected U.S. agricultural exports. The USDA reported that these tariffs resulted in about $27 billion in lost exports between 2018 and 2019, with the majority of these losses stemming from reduced trade with China.

China is a major player in the global agricultural market and a top importer of U.S. agricultural goods. A reduction in Chinese purchases would likely lead to an oversupply of these commodities in the U.S., causing prices to drop. This would put significant financial pressure on American farmers, who already operate on thin margins. The reduced demand from China could benefit other exporting countries like Brazil, which might see increased demand for their agricultural products.

Trump's protectionist policies could also lead to further renegotiations of trade agreements, including the United States-Mexico-Canada Agreement (USMCA). These negotiations could be challenging, especially with the recent election of Mexico's President Claudia Sheinbaum, who may not align with Trump's trade policies. This uncertainty could create instability in the agricultural markets, affecting prices and trade flows.

As noted above, domestically, Trump has strong support in farm states and has previously provided substantial trade compensation payments to farmers affected by trade disputes. However, increased tariffs and trade wars could lead to long-term harm to the U.S. agricultural sector, making it difficult for farmers to plan and invest for the future. Trump could revisit the Phase 1 trade deal and introduce a Phase 2 but that could take time. We definitely need a new trade strategy for China.

The biofuel policy under a Trump administration is also uncertain. Changes in biofuel mandates could significantly impact the demand for crops like corn and soybeans, which are used in ethanol and biodiesel production. Trump prefers fossil fuels and wants to drill more for oil and eliminate the EV mandate.

Additionally, Trump's "America First" approach might strain relationships with key trade partners such as Canada. While Canadian politics may shift to more conservative leadership that aligns better with a Trump administration, it remains uncertain how this would affect trade relations and agricultural exports between the two countries.

In summary, a Trump 2024 presidency could lead to increased tariffs and protectionist trade policies, potentially resulting in reduced demand for U.S. agricultural goods, lower crop prices, and financial challenges for American farmers. While Trump’s policies might provide short-term compensation to farmers, the long-term effects on agricultural markets could be more detrimental, creating an unstable and uncertain environment for U.S. agriculture.

The Trump-Vance ticket could make America first again, and it could also increase tariffs and negatively impact players in the agriculture industry.

For daily information and updates on agriculture commodity marketing and price risk management for North American farmers, producers, and agribusiness visit the Farms.com Risk Management Website to subscribe to the program.

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