The most overused word in the English language since November has to be the word “tariff” as speculation runs rampant on how much a Trump 2.0 presidency will use this controversial trade negotiation tool.
Here’s a sampling, so you get the idea: “Think About Making These Purchases Before the Trump Tariffs are Enacted”, U.S. News; “U.S. Carmakers Face Rough Ride Under Trump Tariffs”, Bloomberg.com; and “Bourbon Industry Concerned About Looming Tariffs”, LEX18. You know it’s bad when tariffs threaten to make it harder to drink your troubles away!
Tariffs can disrupt almost any industry, but U.S. agriculture has already seen this movie.
During Trump’s first term, according to the USDA’s Economic Research Service, retaliatory tariffs reduced U.S. agricultural exports by $27 billion from mid-2018 when the tariffs were imposed to the end of 2019. Soybeans accounted for the majority of the decline at 71%, followed by sorghum and pork at 7% and 5%, respectively. The losses were primarily concentrated in states, such as Iowa, Illinois and Kansas, exporting these products.
As a result of ag being caught in the cross fire of a new trade war, the USDA allocated $23 billion in trade-aid payments to U.S. producers. However, the rest of the story is that the Trump administration’s tough-line trade tactics ultimately led to the China Phase I deal and record exports to China and record farm income in 2021 and 2022.
That turned out to be short-lived. Even with the Phase I deal still in place, 2024 saw a serious erosion of U.S. agricultural exports to the Chinese mainland. After reaching a high of $36.38 billion in goods in 2022, USDA ERS projected 2024’s final export tally to China was expected to come in at only $23.3 billion.
So What Exactly Went Wrong This Time Around?
One could still blame such an export freefall on some of the tariffs that are still in place. But the truth is that the U.S. is now navigating the most troubled geopolitical waters since the Cold War days of JFK and Ronald Reagan. Simply put, China and Russia—aka the old Soviet Union—are not our friends.
What should be concerning, to those in U.S. agriculture and beyond, is the influence these two countries now have over a multi-country trading alliance referred to as BRICS. That acronym is short for the Brazil, Russia, India, China and South Africa alliance.
The original members of BRICS held their first summit in Russia in 2009 and sought to establish themselves as a geopolitical club to counter the influence of the G7 nations: the U.S., Canada, United Kingdom, Germany, France, Italy and Japan. Their agenda at that first meeting was firmly shaped by the global recession and, therefore, mostly focused on redistributing voting rights in the International Monetary Fund and World Bank in favor of the developing world. One of the most controversial statements to come out of that 2009 meeting was the calling for a new global reserve currency. From that point on, it was clear that the dominance of the U.S. dollar was being put on notice by the members of BRICS.
Today, the trading bloc is the world’s largest by population and accounts for about 37% of the world’s grain. China has been particularly aggressive in strategic moves with countries within BRICS. In 2023, Brazil was China’s largest source of agricultural imports. This movement of agricultural products accounted for more than 50% of Brazil’s total trade with China and 24.85% of China’s overall agricultural imports. No longer are U.S. farmers China’s primary source of imported soybeans or corn.
Real-Life Monopoly
Right now, China is buying up railroads in Brazil plus upgrading and expanding port facilities. Between 2007 and 2022, China invested $71.6 billion in 235 projects carried out in Brazil. The country’s investment and buying spree have been more impressive within the continent of Africa. At present, 53 out of 54 nations in Africa are part of China’s Belt and Road Initiative (BRI), which supports building key infrastructure projects throughout Africa, Asia and Europe. The projects intend to provide improved shipping corridors for precious raw materials and commodities. As of 2023, the two-way investment between China and its BRI partners had reached $380 billion.
If U.S. agricultural exports to China continue their decline, then it won’t be because of the “T” word. It will be because China holds a majority of railroads, utilities and low-cost properties on the world’s Monopoly board. Why buy U.S. soybeans when you can ship them from Brazil on your own railroad to your own port to your own container ship? Same goes for precious metals in Africa or oil in Russia or Iran. If you already own everything but Boardwalk and Park Place, then you don’t need the economies of the West to be involved as you plot your future livelihood.
Time To Take Control
A lot of unknowns exist as the second iteration of the Trump presidency begins. But this is clear. In 2023, the U.S. trade deficit with China was a whopping $279.4 billion. Those are the very dollars subsidizing a railroad somewhere in Brazil or a superhighway in South Africa—all to our own detriment. For the sake of our own future, we must start negotiating trade deals from a position of strength instead of begging for mercy. “Speak softly, and carry a big stick” was Teddy Roosevelt’s mantra during his time as president. When it comes to U.S. agricultural trade, we need Trump to start channeling his inner Teddy beginning Jan. 20, 2025.
