Tariffs and retaliatory actions by trading partners are causing “uncertainty” throughout the ag industry, and economic experts during NDSU’s Agricultural Market Situation and Outlook Webinar on April 4 discussed the impacts of the tariffs on agriculture, as well as the new proposals for shipping and vessels, especially for Chinese vessels, that would charge upwards of $1 million for entry into the U.S. ports.

Steel and aluminum

Tariffs on steel were set at 25 percent and will continue at that percentage indefinitely, according to Bryon Parman, NDSU ag finance specialist.

“The exemptions for a lot of the carve-outs for steel manufactured products like stamped bumpers and things like that are going away,” he said.

Aluminum tariffs have risen from 10 percent to 25 percent across the board, and the top country the U.S. imports aluminum from is Canada. While the U.S. imports about 24 percent of the steel it uses, it imports a larger share of aluminum.

“The biggest industry impacted as far as aluminum tariffs is going to be in the transportation sector, and we can expect that a lot of that is probably going to trickle into ag, not just on farm and work trucks and things like that, but new equipment prices,” Parman said.

For the last 18 months or so, ag equipment prices have flattened out, but there are no more carve-outs, and tariffs on aluminum are higher than ever.

“The biggest areas where we might see some price responses and cost increases are work trucks, farm vehicles, as well as farm equipment, which has already kind of soared (compared to 2021 prices), and replacement parts,” he said.

Agrochemicals

Some 58 percent of 2,4-D sourced in 2022 came from China, according to Parman.

“That is quite a huge amount coming into the country,” he said.

Atrazine is 100 percent sourced from China. While Parman realizes that not much atrazine is used by farmers in the Northern Plains, he was originally from Nebraska where atrazine is frequently used.

“Herbicide bills on things like corn and whatever else you use for weeds like waterhemp and Palmer amaranth will probably rise with the high tariffs placed on China,” he said. “You need to throw a cocktail at it, and atrazine is used quite extensively.”

Dicamba is 55 percent sourced from China, and 40 percent from India. In 2022, 98 percent of glyphosate and 55 percent of the paraquat came from China. A common insecticide is 92 percent sourced from India. In addition, active ingredients in agrochemicals like Mustang are sourced from several countries.

Parman said his take home message was that there aren’t very many active ingredients that are produced in the U.S. anymore. Most of the ingredients are imported.

“They may be blended into whatever the brand name is, whether its Mustang Max or something like that, but the active ingredients are sourced from other countries,” he said, noting that it is likely companies will still have to source these active ingredients until the U.S. can get chemical manufacturing online. “We really have not done this in mass for quite a long time.”

Interest rates

On Apr. 4, the Federal Reserve said it would not cut interest rates down the line.

“They’re basically saying our options are open and we’re in a wait-and-see situation right now,” he said.

Parman pointed out the Fed has indicated that avoiding long-term inflation is their main goal, not necessarily stabilizing markets.

During a speech from Jerome Powell, chair of the Federal Reserve, the key takeaways were that uncertainty is high, downside risks have risen a bit, and that the economy is still in a good place.

Parman explained the difference between reciprocal tariffs and retaliatory tariffs, as he saw it. Most are confused with the different types and who is affected by which kind of tariff.

“Reciprocal tariffs are calculated as a tariff necessary to balance out bilateral trade between two nations, whether it’s restrictions or just tariffs on goods being exported over to them,” he said.

Frayne Olson, NDSU Extension crops economist/marketing specialist, added that U.S. reciprocal tariffs, the ones that the U.S. has put on products coming into the U.S., will impact farmers and consumers.

“They have a direct impact on the costs that we as farmers or farm managers will pay. The amount the prices will go up can vary significantly from product to product, but the fact is some of that tariff, some of that additional cost, will be passed on to the end user or the consumer,” Olson said.

Retaliatory tariffs are taxes or duties placed on imports coming into a country in response to some action that another country took. These tariffs can be punitive in nature and “less about just actually causing harm rather than just trying to get a fair deal.” Countries put these tariffs on quickly.

Those tariffs will impact costs of herbicides, insecticides, pesticides, some fertilizers, replacement parts for farm equipment and other inputs farmers need to farm that the U.S. cannot source domestically.

Proposed port fees

Matthew Gammans, NDSU assistant professor of agricultural policy, discussed the proposed port and vessel fees. He emphasized these fees are not in place yet, and there are many proposals. The following is just a small part of what Gammans discussed regarding these fees:

The backstory began in March 2024, when five national labor unions filed a petition asking the former administration to look into potential maritime practices that were anti-competitive or problematic to American commerce. On April 17, 2024, the U.S. Trade Representative launched an investigation, which also set a deadline of April 17, 2025, and essentially agreed there were threats to U.S. commerce.

Separately, port fees and shipping vessel proposals were presented, and if these go through, the fees could significantly increase transportation costs for U.S. ag exports traveling back to Southeast Asia in Chinese vessels, which could potentially reduce profit margins for farmers.

“Proposal number one is a service fee on Chinese operators, so if you’re a Chinese-operated ship, and you’re coming into the U.S., you would be charged a $1 million,” Gammons said, adding it didn’t matter if the ship were small or had no cargo in it. “If you’re a Chinese operator, that’s what you have to pay for access to American ports (under proposal one).”

Gammans said the second proposal looks at the current composition of the fleet, while policy three is more forward-looking. They would both trigger more fees with similar costs amounting to anywhere from $500,000 to $1 million.

The purpose of the proposals, at least partially, is to shift people away from Chinese ship builders, whether that would be to Japan, a major ship builder, Korea or to the U.S.

“It would start with 1 percent of U.S. ships exporting out of the U.S. needing to be built and flagged in the U.S. and then that would be ramped up over time,” he said.

Gammans pointed out a problem in which many ag exporting vessels arrive empty, and the way that these proposed fees are constructed would be bad news for agriculture.

“There is really no one else to share these costs with unless you’re willing to incentivize these vessels to come to take the product,” he said.

How much would this increase in transportation cost be? The U.S. Farm Bureau has an analysis saying it would add 10-28 cents per bushel of soybeans. The American Soybean Association has a slightly higher estimate.

Olson commented on some of the discussion around Gammans’ point on the shipping costs.

“The challenge we’re going to face there, just to put this in context, is if those (port and shipping fees) are to be in place, if they do come to fruition and they are implemented, in many cases, the majority of that additional cost is actually going to be pushed back through the system in the form of lower basis levels,” Olson said. “It likely will not have an impact on futures market prices from the bigger setting, but it will likely have some impact on local basis levels.”

Commodities and tariffs

Olson reinforced the uncertainty of these tariffs with the grain and futures markets. With grains that the U.S. sells, the impact is an indirect one.

“Just because the U.S. puts tariffs on products we bring into the U.S., it doesn’t have a direct impact on the price or the value of soybeans, corn, wheat or any other product that we're exporting, but it does have an indirect impact,” he said. “There is an increase in uncertainty mainly from any potential retaliatory tariffs, so given the fact that we did this, what are our trading partners going to do?”

Canada did put on additional retaliatory tariffs on U.S. cars and trucks, in particular automobiles that are not covered by the U.S.-Mexico-Canada Agreement (USMCA). With two of the U.S.’s largest agricultural trading partners, Mexico and Canada, there has not been big retaliations, so far. The European Union does import U.S. ag products, and it is currently discussing retaliatory tariffs.

With direct impacts, Olson pointed out that China announced on April 4 that they were going to add an additional 34 percent tariff on all U.S. products, including agricultural products. U.S. soybeans get the brunt of the commodity impacts.

China also has a 3 percent import tariff on all soybeans coming into the country, and a while back they added a 10 percent tariff for U.S. soybeans only. Besides the 34 percent, there is also a value-added tax.

“U.S. Soybean Export Council said there would be (in total) approximately a 60 percent tariff on the value of soybeans going into China. The vast majority of that is U.S. soybeans,” Olson said.

This will put U.S. soybeans at a distinct disadvantage, especially into the Chinese market.

“Obviously, we saw an almost 40-cent drop in soybean prices this morning (April 4) futures market. There hasn’t been the same impact on corn and wheat,” he said.

Olson said part of the biggest challenge he struggles with is trying to figure out how long some of these tariffs and some of these trade pressures will continue. They could be short-lived, and U.S. and North Dakota could get back to normal trading patterns, especially for ag products.

“Cleaning bins out today would be a very smart move, but there’s risk in that because some of these tariffs could last for an extended period of time,” he said. “I am most concerned about soybeans.”

For those who have old crop soybeans in the bin that are not on contract, Olson suggests farmers might want to sell those now.  

“If you do have some old crop soybeans in the bin, I think that would be something I would be looking pretty seriously at getting rid of,” he said, noting it depends on how much risk farmers are willing to take on. “Given the outlook, and if there’s a continued strained relationship between the U.S. and China, this could be a bit of a long road for the soybean market, and we might see some additional cuts in soybean acres.”

While the U.S. does have the ability to sell to other countries, it doesn’t apply to all crops. Corn is the easiest to find a new home, but soybeans are sold whole, so they need to go to a country with crush facilities. The number one crusher in the world is China.

The number one wheat buyer for U.S. wheat is Mexico, and the Philippines is important, too, but Japan has been decreasing their sales over time.

Trade with Taiwan, a wheat customer, is going to get “tricky,” due to tensions with China, according to Olson.

As the U.S. has seen with past trade tensions, once a market goes away and a country finds a new place to buy products, they seldom come back.

“It will become more and more difficult for us to try and regain some of the market share that we may have lost over time,” he said.

Ethanol

Dave Ripplinger, NDSU Extension bioproducts and bioenergy economist, said trade is really important to the biofuels industry in the U.S., and that imports and exports at the margin can make quite a difference in terms of profitability. For ethanol specifically, Canada is biggest export market for the U.S.

“Ethanol goes up that way, including from the Northern Plains because of our rail access,” he said. “It has been stated by Canada publicly that they may retaliate against U.S. actions by introducing an import tariff on ethanol. That would be a direct impact on that industry.”

There is a new 10 percent tariff on energy product imports from Canada and Mexico. Some products are exempt under USMCA.

“A little over 12 percent of our (ethanol) production is exported,” he said, noting that there is also downward pressure on ethanol profitability because almost 2 billion gallons of ethanol requires about 650 bushels of corn to produce.

There is also a new 10 percent retaliatory tariff on Brazilian imports.

“Obviously, Brazil is a major producer of sugarcane ethanol, so that has implications globally,” Ripplinger said. “We actually exported very little to Brazil beginning in 2018. They introduced the 18 percent import tariff, which really limited the nation’s competitiveness into that market.”

If Canada retaliates against U.S. ethanol, that could affect the corn market, according to Ripplinger.

There are also a lot of new markets that have been developed where the U.S. has invested a lot of effort in building those relationships to start trading into those markets, including to the United Kingdom, the Netherlands, Columbia and Mexico.

Regarding the proposed shipping fees, Ripplinger said a Panamax vessel is 1.5-2 million gallons in terms of capacity.

“If we think about that and the magnitude of what those additional fees would be, there would be approximately an extra 50 cents a gallon, and that 50 cents would be impactful,” he said.

Gammans commented that there is good progress on getting year-round eligibility for E15.

“In neighboring states, the EPA’s new waivers have gone through, and we should probably see that this summer with Minnesota, South Dakota, and Iowa having year-round mandatory minimum of E15,” he noted.

U.S. a major meat player

Tim Petry, NDSU livestock marketing economist, answered a question on lamb imports from a listener online. About 73 percent of our lamb consumption in the U.S. comes from overseas, and the U.S. sheep industry is very concerned with the number of imports.

“The cost of production in Australia and New Zealand is less than ours. Over time, we’ve been importing more and more (lamb). The big box stores can sell it cheaper, so we have just been importing more and more lamb every year, except for 2023,” he said.

The U.S. is a major player in the world meat market – number one in beef and chicken and number two in pork only behind China.

“We’re also a major player in the export market, and it’s very important to us in terms of prices. We are the largest exporter of beef, at least high-quality beef and beef on a value basis,” Petry said.

Occasionally, Brazil or Australia will export more beef, but the U.S. still beats every country in terms of beef quality and value. A trade agreement is in place with Australia, and for many years, there is a zero tariff for the country to ship beef here free, unless they go over the quota allowed. That spurs a 21 percent tariff.

“Recently, with the 10 percent tariff in Australia, now there are 10 percent tariffs even for the under quota for Australia, Canada, and Mexico,” he said.

The U.S. shares special tariff rate quotas with many countries, and now there is 10 percent tariff added on.

“With the tariffs, the market has really reacted negatively, not knowing what’s going to happen with the shipping or retaliatory tariffs,” Petry said. “I know there’s a lot of concern and uncertainty with producers.”

There are trade agreements in place with Korea and Japan, negotiated by the current administration. However, with proposed port fees and shipping fees, the impact to beef, meat, and byproduct exports could be huge.

“This could be a very big deal for us, maybe even bigger than tariffs because our customers, just for beef, include Korea, Japan, China and all of Southeast Asia,” he said.

Beef for export is transported out of Oakland, Calif., and it is fresh, chilled or frozen, and usually shipped in containers. Petry said if they have to pay these proposed port or shipping fees of $1 million, it could make it cost-prohibitive to send exports, especially for byproducts that are low value.

“Shipping is something we are really going to have to watch,” Petry said. “Last year, our meat exports had a $10.5 billion value to us. China has been our third-best customer, but China has greatly increased beef imports in the last 10 years. China went from importing very little to being, by far, the largest importer of beef in the world.”

However, complaints by Chinese beef producers and organizations about foreign beef was investigated and Chinese officials believed they did have too much meat coming in. When approval for all the U.S. packing plants for beef, chicken, and pork that have been going into China came up for renewal, China did not renew beef, but did renew pork and chicken.

“It’s all to be seen whether we lose our third-biggest customer. There certainly could be a price impact,” Petry said.

Recordings of NDSU’s Agricultural Markets and Situation Outlook Webinars are available at www.ndsu.edu/agriculture/ag-hub/events/agricultural-market-situation-and-outlook-webinar.