In mid-November, Jamie Dimon, head of JPMorgan Chase & Co. offered the Asia-Pacific Economic Cooperation (APEC) attendees a tip for how to think about how President-elect Trump might make good on his promise to impose widespread tariffs on American imports. Dimon said, “Read his book: create options,” Dimon said, presumably referring to a strategy Trump espoused in The Art of the Deal. “I just hope it’s done wisely.”
Then, on November 25, President-elect Donald Trump said that on his first day in office he would impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China, citing concerns over border security, illegal immigration and illegal drugs.
Since then, we’ve seen a flurry of political and diplomatic activity. The President of Mexico, Claudia Sheinbaum, posted on social media implying that she would retaliate with counter-tariffs and then held a call with President-elect Trump where she talked about what Mexico is already doing to protect the border.
For his part, Justin Trudeau, Prime Minister of Canada, flew to Florida and went to Mar-a-Lago to meet with President-elect Trump. The meeting which after the fact was said to be “productive” included Trump’s comments to Trudeau that Canada was not doing enough to stop illegal immigration into the U.S. as well as the fact that the trade deficit between the two countries is too high. Trudeau responded with concerns that tariffs would damage the Canadian economy. Trump said he expected progress before January 20, 2025.
When asked at a Meet the Press interview on Sunday, Dec. 8, Trump insisted that the tariffs he is contemplating on trading partners would cost Americans “nothing.” But he added that he couldn’t guarantee that outcome. He underlined that he wants “a level, fast and fair playing field.”
How Much Are We Importing Now?
Relative to Canada and Mexico, let’s take a look at what the numbers currently show:
In 2023, the U.S. imported $45.4 billion worth of agricultural products from Mexico and $40.1 billion from Canada. These are the top two countries in terms of agricultural imports. From Canada the U.S. imported $3 billion in beef, $1.1 billion in pork, $2 billion live animals, as well as nearly half of all lumber, forest products and vegetable oil imports. Critical for the fertilizer industry, the U.S. also imported 13 million tons of potash in 2023, 85% of which was from Canada.
Two thirds of all vegetable imports and half of fruit and nut imports come from Mexico--90% of avocados, 35% of orange juice and 20% of strawberries also come from Mexico. In addition, Mexican tequila and mezcal imports totaled $4.66 billion in 2023. Mexico exported more than 1 million cows, as well as over half a million tons of sugar to the U.S that year as well.
Key Dates:
While Trump has said he wants to act on many items, including tariffs on Day 1 of his new Administration, realistic implementation of these could take many months, if not longer.
One of the key trade agreements that was renegotiated in Trump’s first term was the North American Free Trade Agreement (NAFTA) which became the U.S. Mexican and Canada Agreement (USMCA).
Key dates looking ahead for USMCA are:
- In October 2025: A notice for public comment and public hearing dates must be set to consider whether the U.S. should extend the USMCA.
- Early January 2026: United States Trade Representatives will issue a report to Congress on issues the U.S. wants to address in the Joint Review.
- July 1, 2026: Joint Review of USMCA will begin. At the end of this process if the three countries do not agree to extend USMCA in their 2026 review, the agreement will terminate in 2036.
Potential Risks from Tariffs:
Using a tariff-first approach has the potential to undermine the USMCA and the role it plays to facilitate trade across North America. Additionally, if the U.S. ignores USMCA commitments, it may erode trust that Canada and Mexico have with the U.S. and may make it more difficult to renegotiate or negotiate on other issues in the future. As the U.S. attempts to counter China on several issues, if there is backlash from the tariffs either domestically or internationally, it could hinder other strategic initiatives vis-à-vis China or other international players.
What will the impact be on Agriculture?
While it’s hard to make long term predictions, it can be useful to look at what has happened in the past. Brownfield Markets said on December 6th that during Trump’s first term, it was “the second half when he really started ratcheting up the trade pressure with the Chinese. The bean market really took it on the chin, drove down to $8 beans, and the market did struggle.” In addition to soybeans, as mentioned earlier, there are a number of agricultural commodities that could be impacted in the U.S. if either Canada or Mexico retaliate either through government action or through the actions of farmers, distributors or other private sector players who decide to purchase these goods through other means. This could damage demand for U.S. exports from these sectors, while also raising prices on commodities that are imported. Conversely, if the tariffs are used more as a tool to “create options” and are either not implemented in some areas or at lower levels, they may have the intended outcome by forcing changes in Canada or Mexico with respect to border security or in other Trump Administration priority areas.
Finally, some trade experts in DC expect that some Trump approaches to tariffs may be imposed and then immediately suspended, as a negotiating tactic. They note that Mr. Trump's overarching objectives are to return traditional American manufacturing of substantial material industries like steel, autos, etc. to the US and employ American workers again. Agriculture has not been in that top trade agenda priority but he's likely to be open to ag trade interests if posed in positive/action-oriented ways. The experts are also predicting that Trump will stick to a bilateral trade approach only, do not expect a return to any multilateral approaches.
We will be watching this all closely and look for opportunities to engage over the coming months as this important topic evolves.
