As the American ag industry settles into a new year and a new political administration, every day brings surprising twists and turns. President Donald Trump’s threats of 25% tariffs on goods from Canada and Mexico, our largest trade partners, will be delayed for a month as those countries act on the concessions they’ve made regarding border control, fentanyl restriction and other demands. Meanwhile, tariffs are already being placed on certain goods from China, which has responded with retaliatory tariffs of its own, suggesting that trade wars not only could loom in the near future but have already begun.
“Once tariffs are put in place, they’re very hard to come off,” says ag economist Dan Basse on the latest episode of Unscripted. President of AgResource Company, a domestic and international agricultural research firm based in Chicago, Basse has been working in the ag commodities business for 45 years. He’s been through many of the industry’s ups and downs. “I would imagine we’re going to see more countries ensnarled in this whole thing,” he says. “My big concern with tariffs is not how they’re used to help the American economy but how long lasting they may be for the American farmer.”
The Chinese tariffs might impact American exports of ag equipment but so far haven’t included exports of our key commodities. “For China to get a reduction or even a pause on tariffs, they have to go back and adhere to the 2020 Phase I trade agreement,” Basse explains. According to that agreement, China still needs to spend roughly $85 billion on American goods. “But I don’t think the Chinese are going to be buying anything from the United States. They spent the past four years diversifying their suppliers and, at least at the moment, they’re in good shape on that.”
The discussion on the podcast ranges across a number of topics, including biofuels and the currently booming cattle market. Basse predicts that the boom in cattle prices will continue, good news for American ranchers. “I don’t think this cycle is over for another two-and-a-half or three years,” he says. “This is going to keep going on. I don’t think cattle have hit their all-time highs yet.” While he notes that the market could see some short-term price volatility, he believes “cash cattle will make higher highs as we look toward the fourth quarter of this year than we’re sitting right now.”
