Trade wars won’t make American farming great again

The US lost its crown as the world’s largest exporter of wheat and soybeans, two of the world’s staples, during the last 10 years to Russia and Brazil, respectively. It remains the king of corn exports, but only for now. Argentina is a major threat to American corn farmers, and the policies of President Javier Milei could unleash monster crops that will erode US dominance.

For decades, the US counted on its bountiful harvests as a source of soft power, with American diplomats talking up their “agripower” – whether as food aid or a commercial commodity, crops were available to supply hungry nations from Japan to Egypt and, even during the Cold War, the Soviet Union.

The decline of the American farming sector is part of a long economic trend. President George W. Bush tried to reverse it, introducing mandates to boost the use of corn to produce biofuel. Bush assembled a rare alliance of national security hawks determined to reduce America’s dependence on foreign oil, environmentalists keen to boost green energy and farming lobbyists always happy to use federal money for their benefit. It was the last effective effort to revive American farming.

Thereafter, the White House has done little to help rural America. Presidents Barack Obama and Joseph Biden at least didn’t hurt the sector. In between, President Trump not only neglected it, but hurt it via his original trade war with China. Beijing responded to Trump’s tariffs by targeting its imports of American foodstuffs — suggesting the Communist Party, previously nervous about stoking inflation, is confident it can feed its nation from elsewehere.

Now, Trump is causing more harm. Not only he is fighting a trade war against China, currently the third-largest buyer of US agricultural commodities, but also against Mexico and Canada, respectively the first- and second-largest importers. Together, the three nations purchased nearly half of all US food exports last year.

Unless bad weather reduces supply elsewhere, American farmers will see less demand and lower prices. From its high point in 2022, the Bloomberg Commodity grains sub-index, which tracks the spot price of what, corn and soybean, is down more than 50%.

It gets worse — because Trump’s tariffs on Canada will the cost of fertilizers. The US imports more than 80% of its potash, a key crop nutrient, from Canada. Acknowledging the damage, Trump recently lowered the tariff on Canadian potash to 10% from 25%. Still, the cost increase of a must-have input will further damage the farming economy.

Even before the impact of all the tariffs and counter-tariffs hits the US Midwest, corn and soybean farmers were facing a difficult 2025 and likely to suffer a third consecutive year of losses, according to forecasts from the University of Illinois in Urbana. The previous trade war cost American farmers about $27 billion, according to a USDA study. The number will be larger this time, with Beijing already targeting food for retaliation. The American Farm Bureau Federation, the most powerful institution representing the country’s rural areas, has broken with its traditional support for Republican presidents, warning Trump he’s making a mistake. “For the third straight year, farmers are losing money on almost every major crop planted,” it said earlier this month. “Adding even more costs and reducing markets for American agricultural goods could create an economic burden some farmers may not be able to bear.”

The Trump administration should read a 1983 government report analysing the impact of American food embargoes and trade spats in the 1970s and 1980s, under Presidents Richard Nixon and Jimmy Carter. The three lessons are crystal clear – and as applicable in 2025 as they were half a century ago. The US became viewed as an “unreliable” world supplier of agricultural commodities; the report found that “major countries that compete with the United States in the world grain and soybean markets expanded their production and exports of these commodities so as to capture a growing share of the world trade”; and the US government “incurred costs to cushion the adverse effects” of the trade policies. Rinse, wash, repeat.

The US’s agricultural rivals, notably Russia and Argentina, have room to expand — even more so if Chinese capital helps. Argentina is the must-watch nation. It’s never previously threatened the US because local politics, via large export taxes on grains and oilseeds, curbed the full development of its agricultural sector. Ironically, Milei, a free-market-supporting politician who’s close to Trump, could be poised to unleash Argentina’s potential.

American farmers face many enemies — foreign and domestic. But, ultimately, the US rural electorate is getting what it voted for.

Credit: Bloomberg