Could Trumps Tariff Policy Cost US Farmers Billions? Are Brazilian Farmers the Biggest Winners?

As the U.S. presidential election approaches, former President Donald Trumps chances of winning have continued to rise in the final month, raising serious concerns among some U.S. agricultural trade associations. If Trump imposes new high tariffs on China and triggers a trade war as promised in his campaign, U.S. farmers could face billions in losses. Meanwhile, Brazilian farmers, as major competitors of U.S. agricultural products, are poised to seize this windfall and benefit significantly.

Trump has repeatedly reiterated at rallies that if elected, he will impose tariffs of 10% to 20% on imports from all countries, with tariffs as high as 60% on certain Chinese imports. This aggressive trade policy aims to protect domestic industries and reduce reliance on foreign-made goods. However, economists warn that Trumps tariff threats could severely disrupt global supply chains, potentially triggering retaliatory tariffs, further raising global costs, and having profound impacts on international trade relations.

Industry insiders have expressed concerns, arguing that the new tariff policy will force China to more actively seek alternative suppliers to meet its agricultural needs, thereby weakening the competitiveness of U.S. agricultural products in the global market. Ana Luiza Lodi, an analyst at StoneX Group, noted, If a trade war breaks out between the U.S. and China, U.S. agricultural products will be less competitive than Brazilian ones. This will lead China to source as much as possible from Brazil, driving up demand for Brazilian agricultural products and raising their export premiums compared to Chicago.

Economists from the National Corn Growers Association and the American Soybean Association pointed out in a research report released this month that if the hypothetical trade war causes economic losses similar to those during Trumps first trade war in 2018, U.S. farmers could lose tens or even hundreds of billions of dollars. The report stated, From the summer of 2018 to the end of 2019, retaliatory tariffs caused U.S. agricultural exports to lose over $27 billion, with Chinas sharp decline in demand accounting for about 95% of these losses. This highlights the critical importance of the Chinese market to U.S. agricultural products.

Specifically, U.S. soybean and corn exports will face significant challenges. The National Corn Growers Association and the American Soybean Association stated that if China cancels existing tariff exemptions for U.S. agricultural products, U.S. soybean exports to China could decrease by as much as 16 million metric tons, a drop of over 50%. Corn exports to China are also expected to decline by more than 84%, or 2.2 million metric tons. If China imposes new retaliatory tariffs in a renewed trade war, losses in these U.S. agricultural sectors could further expand.

Meanwhile, Tanner Ehmke, chief economist at agricultural lender CoBank, said, We may need to look to other major export markets like Mexico to replace China, but Mexico also faces the risk of renewed trade disruptions under a Trump administration—Mexico will increasingly rely on South American crops to replace lost trade with the U.S. This analysis further suggests that the U.S. agricultural sectors position in the global market will be severely impacted by a trade war, making it difficult to find sufficient new business channels to offset losses.

Against this backdrop, Brazilian farmers are poised to be the biggest beneficiaries. Krista Swanson, an economist at the National Corn Growers Association, noted that Brazils agricultural sector stands to gain the most as the trade war escalates. According to U.S. Department of Agriculture data, Brazils agricultural sector has grown steadily since surpassing the U.S. in soybean production in 2012, and by 2032, Brazil is expected to account for nearly 61% of global soybean export market share. If U.S. agricultural exports to China are restricted, Brazil will quickly fill this gap, driving up demand and export prices for its agricultural products.

Scott Gerlt, chief economist at the Brazilian Soybean Association, pointed out, Once Brazilian land is dedicated to crop production, it will remain in production even after the trade war ends. Additionally, Arlan Suderman, chief commodities economist at StoneX Group, cautioned that if Trump wins, a renewed trade war would quickly impact Chinas demand for U.S. grains, but regardless of who wins the November 5 election, Chinas demand for U.S. agricultural products is likely to decline. Tariffs are certainly part of the price equation, but fundamentally, China has been moving away from reliance on U.S. grain purchases due to geopolitical tensions and pricing, Suderman said.

This series of trade policy adjustments not only affects U.S. farmers but also has profound implications for the global agricultural market. As the largest trading partner of the U.S. agricultural sector, Chinas high dependence on U.S. agricultural products means that an escalating trade war will force China to seek more alternative suppliers, undoubtedly weakening the U.S. position in the global agricultural market and further boosting agricultural exports from South American countries like Brazil.

Meanwhile, Mexico, as a major buyer of U.S. corn, has also been increasing its purchases of U.S. soybeans. Scott Gerlt, chief economist at the American Soybean Association, noted, Once Brazilian land is dedicated to crop production, it will remain in production even after the trade war ends. This means Brazil will not only benefit from the current trade war but also continue to expand its agricultural capacity and market share in the future, further solidifying its leading position in the global agricultural market.

However, the potential risks of a trade war extend beyond changes in trade volume to include disruptions to global supply chains and market instability. The U.S. agricultural sectors losses will not only manifest in reduced exports but could also lead to domestic overproduction, further depressing agricultural prices and affecting farmers incomes and livelihoods. Additionally, the complexity of the global trade environment and geopolitical tensions make countries more cautious in formulating trade policies, further increasing market uncertainty.

Facing these challenges, the U.S. government and businesses need to adopt more flexible and diversified strategies to adapt to market changes. By strengthening trade cooperation with other countries, exploring new export markets, and enhancing the added value and competitiveness of agricultural products, the U.S. agricultural sector can mitigate some of the impacts of the trade war. At the same time, the government should increase support for agricultural technology and innovation to improve production efficiency and product quality, thereby enhancing competitiveness in the international market.