U.S. commodity markets were down to start the week in Sunday night trade as the markets digested the latest tariff announcement by President Donald Trump. On Saturday, President Trump threatened to impose 30% tariffs on Mexico and the European Union starting on August 1. The announcement came after a string of new tariff threats last week, as the Trump administration’s deadline for trade deals came due.
On Monday, President Trump continued with tariff talk, saying he would implement “severe tariffs” on Russia unless a peace deal is reached with Ukraine within 50 days.
He provided few details on how they would be implemented but described them as 100% secondary tariffs, meaning they would target Russia’s trading partners in an effort to isolate Moscow in the global economy.
The latest tariff threats weren’t good news for farmers looking to price fertilizer for fall, as StoneX Group says Russia is the United States’ top destination for both urea and UAN imports. StoneX points out Russia’s market chair has “grown substantially in recent years.”
Monday’s news follows a week where many anticipated trade deals. Instead, President Trump made a series of announcements with new tariffs. The new tariffs on Mexico and the European Union, which Trump announced Saturday, capped off a week of sweeping tariff threats.
Earlier in the week, Trump warned of a possible:
- 50% tariff on all copper imports
- 50% tariff on all goods from Brazil
- 35% tariff on Canadian goods
- 25% tariff on goods from Japan
- 25% tariff on imports from South Korea
- 200% tariff on imported pharmaceuticals
The positive side of the announcements is the Trump administration says any products covered under the U.S. Mexico Canada Agreement (UMCA) won’t face the new tariffs.
President Trump also sent letters to both Japan and South Korea last week, saying their goods will be taxed at 25% starting August 1st.
The President posted the two letters he sent to those countries’ leaders on his Truth Social site. In the letter to South Korea, he stated when it comes to Korea’s tariff and non-tariff polices and trade barriers, the relationship between the two countries has been far from reciprocal. He added the 25% tariff was far less than what he says is needed to eliminate a trade deficit disparity.
The letter to Japan added if Japanese companies decide to build or manufacture a product within the U.S., there will be no tariffs. Japanese and U.S. negotiators have been working for several weeks to try and reach a deal.
Lack of Progress Impacts Commodity Prices
The lack of trade announcements last week was just one factor that caused corn prices to tank, according to AgMarket.net’s Matt Bennett. While rain in the upper Corn Belt was also bearish for the markets, little to no movement on trade is also pressuring prices.
“We had no trade announcements, and then we continued to talk about tariffs. The unfortunate reality right now is it appears the administration is playing the long game, trying to get people to come to the table with better trade deals than what we currently have seen. But it certainly isn’t doing any favors for the corn market,” Bennett said on U.S. Farm Report this weekend. “I think something like a big trade agreement certainly could tilt the tide more in the favor of the corn market moving higher. Until you get that, with weather being as good as what it is, there’s nothing there.”
It’s not all bearish, though. Arlan Suderman of StoneX Group says the 50% tariff on Brazil is actually bullish for beef.
“We already have a shortage of protein in America with the cattle herd being shrinking over recent years because of lingering drought in the western half of the country, and supplies are tight. We’re just getting to the point of trying to rebuild those supplies, which holding back heifers, tightens up the supply of meat even more. We’re feeding to record-high carcass weights to try to fill the void. We’re increasing imports to record levels. Brazil is the primary supplier of those imports: 27% of our imports come from Brazil in the first five months of the year, according to the latest data we have available, that’s 666 million pounds. That’s 4% of consumption,” Suderman says.
If you think 4% doesn’t sound like a big deal, Suderman says it is - especially considering meat demand in the U.S. has turned out to be inelastic.
“We’ve been shifting from a starch-based diet more heavily toward protein-based. And as the prices go up, we’re actually increasing demand for beef and the other proteins - but we don’t have the supply of it. I think that could be a real problem going forward for the meat industry and the meat supply. We will have to find somewhere else to get that meat,” Suderman says.
Are Trade Deals Close?
While President Trump initially stated he had reached trade agreements with 200 countries, only a few have been officially announced. These include deals with China, the United Kingdom, and Vietnam, however. Negotiations with other countries are ongoing, with the administration extending the deadline for tariff-related negotiations to August 1.
The European Union says it was working on sealing a trade deal with the U.S. by the end of this month, and the European Commission president says the EU was working closely with the Trump administration to reach a deal.
