Sweeping tariffs spark fears of a global trade war, shake markets, and place American agriculture exports—especially soybeans and corn—at risk.
By Aleah Harle, Farms.com Risk Management Intern
On April 2nd, President Donald Trump announced aggressive elevated tariff rates on nearly all U.S. trading partners, including an introduction of a 10% baseline tax on imports from all countries. Affecting over 180 nations, the new measures represent one of the most aggressive trade policy shifts in decades.
The most notable tariffs hikes include a 20% levy on goods from the EU, 46% on Vietnam, 32% on Taiwan, and an increase on Chinese imports to a total of 54%. Set to take effect on April 9th, these tariffs will raise U.S. trade barriers to levels not seen since the 1930’s. China has responded with a 34% tariff in retaliation on all U.S. imported goods commencing on April 10th and is the largest U.S. soybean buyer at over 20% of the total. The 2nd largest buyer is Europe and they are getting ready to announce countermeasures as well.
With the goal of revitalizing U.S. manufacturing, stimulating the domestic economy, and offsetting income tax from taxpayers through increased tariff revenue, the announcement has triggered widespread market uncertainty. Concerns over a potential recession – now estimated at a 60% probability – along with rising inflation and the threat of a global trade war have sent markets tumbling, wiping trillions of dollars off some of the world’s largest companies. Ultimately, consumers are left to bear the cost. Additionally, as part of the broader strategy is refinancing at lower rates The U.S. national debt comes due, amounting to just over $36 trillion.
Japan also factors risk, ranking the second-largest buyer of U.S. corn this year with 16.7% of total export sales with 108 million bushels still awaiting shipment, showing the fundamental risk at hand. With China having just announced a 34% retaliatory tariff on U.S. goods, soybeans are now directly in the crosshairs – and if the EU follows suit, the consequences for American agriculture could escalate rapidly.
Regardless of the tariffs if a global recession does happen ag commodities perform poor as it destroys demand. However, rising inflation could offset it as funds like to buy ag commodities as a hedge against that rising inflation like from 2020 to 2022.
Big hedge funds and investors got it wrong underestimating the impact of these tariffs that were much worse than expected. This is another global “Black Swan” event is like COVID of 2020, and the falling knife may not stop until next week when DOW hits bear market territory down over 20%. In March of 202 we fell over 38.8% in just 5 trading days!
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