Vincent Smith and Joseph Glauber of the American Enterprise Institute project one potential impact of the president’s tariff policy.

American farmers overwhelmingly voted for Donald Trump last November. But now the Trump administration’s leap into levying high tariffs on imports from major trade partners bodes ill for U.S. producers of soybeans, corn, wheat, hogs and many other agricultural commodities.

Those tariff-targeted export markets are crucial revenue sources and drivers of higher market prices for U.S. farmers. Many of those markets will be lost as Canada, Mexico, China and other countries threatened by the Trump administration’s trade policies respond by imposing countervailing tariffs and other measures on imported U.S. products, especially agricultural commodities. 

China and Canada have already levied substantial retaliatory tariffs on U.S. exports in response to Trump’s tariffs. These reactions should not be a surprise. In 2018, China responded to the first Trump administration’s efforts to use tariffs as a form of economic warfare with prohibitive tariffs on imports of U.S. soybeans and other commodities. Other countries subjected to increased tariffs followed suit.

As a direct result, prices for U.S. farmers’ soybeans declined by at least 30% percent, hog prices fell substantially, and prices received by U.S. farmers for other commodities were also estimated to decline, though more modestly. To placate a frustrated and politically noisy farm sector, then-Agriculture Secretary Sonny Perdue used more than $23 billion of unspent Commodity Credit Corporation (CCC) funds to compensate farmers for losses caused by the trade actions. 

This time around, we are seeing what could be a repeat of 2018. China has already explicitly targeted soybean, feed grain, chicken and other U.S. agricultural exports. The European Union has also threatened to take countervailing actions against U.S. exports if Trump levies new tariffs on imports from the EU. The EU imposed duties on orange juice, peanut butter and bourbon imports in 2018, following the imposition of U.S. duties on steel and aluminum. This time, retaliatory actions could be broader and hit other important imports, including California wines and soybeans.