President-elect Donald Trump’s plans for new tariffs on imports from Mexico, Canada and China, if implemented, could raise input costs for U.S. farmers and spark trade escalation that dents U.S. agricultural exports. However, analysts suggest that the affected trading partners could negotiate a resolution that prevents some of the tariffs from materializing.
In a Truth Social post Monday night, Trump said on the first day of his new administration he would “sign all necessary documents” to impose 25% tariffs on all imports from Canada and Mexico, insisting the new tariffs would remain in place until both countries take steps to stem the flow of illegal drugs and migrants across the U.S. border.
A second post moments later announced “an additional” tariff of 10% on Chinese goods – a response, Trump said, to China’s inability to curb fentanyl shipments to the United States.
If the tariffs are implemented as announced, U.S. farmers could face higher costs for critical inputs on products like fertilizer. The U.S. is Canada’s largest fertilizer market, worth more than $2 billion and accounting for over half of the country’s annual exports, according to Fertilizer Canada, an industry association representing producers, manufacturers and distributors.
“American farmers will pay a little bit more, but Canadian manufacturers will have to pay a little bit of the tariffs themselves,” Josh Linville, vice president of fertilizer at StoneX, a financial services company, told Agri-Pulse. Potash could be particularly affected, Linville said, given the U.S. imports around 87% of its potash from Canada.
For urea fertilizer, however, U.S. importers may be able to pivot to alternate sources of supply and avoid any tariff increases, Linville said. The U.S. imports around 400,000 tons of urea-based fertilizer from Canada, a volume that could be replaced by other suppliers.
“The U.S. can go without Canada. We can just bump up our imports a little bit from the rest of the world, like the Middle East and stuff, and circumvent what we usually get from the North,” Linville said.
Josh Linville, vice president of fertilizer at StoneX.Elsewhere in the agricultural sector, however, the picture is more complicated. While Canada and Mexico are large export markets for U.S. products like corn, they are also competitors in the U.S. livestock and biofuel feedstock markets.
“It's a very complicated mix,” Scott Irwin, agricultural economist at the University of Illinois, told Agri-Pulse.
“Canada has become a significant exporter to the U.S. of feedstocks for biofuel production, principally canola and tallow. And so U.S. ag would benefit from tariffs that would slow down those imports into the U.S.,” Irwin added.
Bill Bullard, CEO at R-CALF USA, which represents U.S. cattle and sheep producers, also welcomed the tariffs, arguing that they would contribute to the industry’s competitiveness.
“We presently suffer under a tremendous trade deficit in the trade of cattle and beef with Canada and Mexico,” Bullard told Agri-Pulse. “We appreciate that announcement and look forward to putting tariffs on these live animal imports, as well as the beef imports that come into this country.”
Tit-for-tat escalation?
Several Democratic lawmakers greeted the announcements on Monday with warnings that the tariffs would stoke inflation and could spark tit-for-tat tariff escalations that would imperil U.S. companies. Rep. Greg Stanton, D-Ariz., for example, warned in a post to X that instigating “a trade war with our biggest economic partners will only serve to devastate Arizona businesses and raise prices for consumers.”
Mexican President Claudia Sheinbaum on Tuesday hinted that retaliatory measures would be pursued should the threats lead to new tariffs on Mexican exports.
“For every tariff, there will be a response in kind,” Sheinbaum said in a letter to President-elect Trump. She pointed to U.S. companies that had established operations in Mexico and export to the U.S., including General Motors, Stellantis and Ford.
“Why impose a tariff that would jeopardize them? Such a measure would be unacceptable and would lead to inflation and job losses in both the United States and Mexico,” the letter reads.
Similarly, Liu Pengyu, spokesperson at the Chinese embassy in Washington, D.C., told Agri-Pulse on Monday night in an email via an aide that “no one will win a trade war or a tariff war.”
The U.S. soybean and corn industries have previously warned that tit-for-tat tariff escalations with China could depress U.S. prices and trigger substantial export losses. While the 10% tariff on Chinese imports is substantially below the 60% rate Trump floated during the campaign, the industries still see tougher economic conditions if Trump goes ahead with the announcement.
China is the largest export market for U.S. soybean producers, buying around $15 billion worth of whole beans, Virginia Houston, director of government affairs at the American Soybean Association told Agri-Pulse. Mexico is the second largest market.
“We have been very consistent that we don't support the use of tariffs that would take away important markets and raise input costs for farmers,” Houston said, adding that in a “tit-for-tat tariff war” U.S. agriculture would be “the ultimate loser.”
National Corn Growers Association President Kenneth Hartman Jr. told Agri-Pulse in an email via a spokesperson that tariffs could add to economic headwinds faced by U.S. corn exporters.
“Mexico is the number one export destination for corn and Canada is the top global importer of U.S.-made ethanol. Tariffs like the ones proposed could complicate an already tough farm economy for corn growers,” Hartman said. “Rural America depends on a strong economy, which President-elect Trump also values, and we’d welcome the chance to work with his administration to position American-made products like U.S. corn to be competitive and successful globally."
The U.S. distilled spirits sector is also wary of retaliation from North American neighbors.
“Imposing a tariff on tequila and Canadian whisky from two of our largest trading partners could kick off more retaliatory tariffs on American spirits to Canada and Mexico,” said Chris Swonger, President and CEO of the Distilled Spirits Council, a trade association representing producers and marketers. Further, he added, they are unlikely to lead to significant employment benefits to the industry.
“Tequila and Canadian whisky are designated as distinctive products, similar to bourbon, where they can only be made in their country of origin. Slapping a tariff on tequila and Canadian whisky will not boost American jobs simply because they cannot be produced in the United States,” Swonger said.
Trump the dealmaker?
Trump’s picks for senior economic positions in his administration have touted using the threat of tariffs as leverage to secure concessions from trading partners. Scott Bessent, his nominee for treasury secretary, has previously suggested that the tariff threats on China made during the campaign could serve as the opening of a “maximalist negotiating position” Howard Lutnick, his pick to head the Commerce Department, has referred to tariffs as a “bargaining chip.”
Accordingly, several analysts told Agri-Pulse that they anticipated that even if Trump signed executive orders shortly after entering office, he would provide some time for dealmaking before the tariffs take effect.
If Mexico or Canada could demonstrate progress on tackling migration and drug smuggling, for example by moving troops to the border or imposing stricter penalties for drug offenses, they may be able to stave off the tariffs, said Gary Hufbauer, former deputy assistant secretary for international trade and investment policy at the Treasury Department.
Hufbauer, now a nonresident senior fellow at the Peterson Institute for International Economics, warned, however, that Mexico may struggle to demonstrate progress on tackling fentanyl.
“The off ramp for Canada is probably more feasible,” Irwin agreed. Irwin added that the reaction in grain markets on Tuesday was fairly muted, suggesting a recognition that while there are risks, “there's time for negotiations to occur.”
Scott Irwin, an agricultural economist at the University of Illinois. The number of Customs and Border Patrol apprehensions, expulsions and encounters with inadmissible migrants on the southern U.S. border was more than 10 times greater than the northern border in the 2024 fiscal year, according to CBP statistics. Canada also does not have the same issues with organized crime and drug smuggling as Mexico.
“It would seem to me that the Canadians probably could negotiate some kind of responses that would satisfy Trump,” Irwin said. “It seems more likely that the Mexican government would dig their heels in and threaten retaliatory tariffs because I think it's not as easy for them to respond to the underlying concerns.”
In her letter to Trump Tuesday, Sheinbaum criticized his use of tariff threats as a tool to address immigration and drug concerns.
“President Trump, migration and drug consumption in the United States cannot be addressed through threats or tariffs,” she wrote. “What is needed is cooperation and mutual understanding to tackle these significant challenges.”
Canadian Deputy Prime Minister Chrystia Freeland and Public Safety Minister Dominic LeBlanc issued their own statement Monday night. The pair said that Canada “places the highest priority on border security” and highlighted its border services agency’s capabilities to detect illicit drugs.
“We will of course continue to discuss these issues with the incoming administration,” they concluded. Prime Minister Justin Trudeau reportedly spoke to Trump about the threat Monday.
