New Study Warns Tariffs Are A Threat To U.S. Farmers

President Trump has increased U.S. tariff rates to levels unseen since before World War II. While the precise economic impacts of these new tariffs remain to be seen, a new report warns they are likely to harm U.S. farmers.

Trump’s new tariffs on steel, aluminum, autos, and other goods from countries across the globe are projected to raise the average effective U.S. tariff rate from under 3% to over 14%. Prices will rise as the direct impact of the tariffs works its way through the economy, but higher consumer prices will not be the only impact. Workers and businesses will also be affected, both directly due to higher prices for imports and indirectly through possible retaliation from other countries.

In a new report published by the American Enterprise Institute, Joseph W. Glauber lays out the potential impacts of Trump’s tariffs on U.S. farmers. Farms are scattered across America, but some state economies depend more on agriculture than others. In South Dakota, farmers make up nearly 6% of the population and 87% of the state’s land is used for farming. Major crops include corn, soybeans, and wheat, and the state also produces beef and dairy products. Its neighbor North Dakota is also an agricultural powerhouse that produces significant amounts of grain and other crops. Iowa, Nebraska, and Montana round out the top five states with the highest proportion of farmers. These are the states most likely to feel the pain from tariffs that impact farmers.

According to Glauber, 58% of agricultural imports will face tariffs of 10% or more under Trump’s current tariff plan. Around 14% of imports will face tariffs of 20% or more. More than 80% of agrochemical imports and 70% of farm machinery imports come from countries facing tariffs of 10% or more. It will be hard for farmers to find other suppliers to avoid the tariffs given the high concentration of imports from high-tariff countries. Other agricultural imports, such as spices, nuts, and oilseeds, also come primarily from countries facing high tariffs, as shown in the table below.

The direct impacts of these tariffs will be higher prices for U.S. farmers and consumers, but there is another threat—retaliatory tariffs levied by other countries. American farmers are major exporters and if other countries implement tariffs to counter U.S. tariffs it will hurt farmers’ sales. Glauber notes that markets especially exposed to retaliatory tariffs include oilseeds; animals and animal products; and grains and feeds.

Tariffs may also reshape markets. Glauber points to the example of soybeans, America’s second-largest crop after corn. In his first term, President Trump imposed tariffs on China and China retaliated with tariffs on U.S. soybeans. Prior to the tariffs, Brazil and the United States each provided about 40% to 45% of Chinese soybean imports. After the tariffs, Chinese importers shifted their business away from the United States to Brazil. U.S. soybean exporters have yet to regain their market share in China and today Brazil supplies roughly 70% of Chinese soybean imports while America provides 20%. Trump’s current reciprocal tariffs could have a similar effect on other markets, such as beef or corn, if they are implemented and strictly enforced. Such shifts would hurt U.S. farmers even if the tariffs are eventually rescinded.

These tariffs may seem like they are mostly a problem for farmers, but the effects of policies tend to spread beyond those most directly impacted. During Trump’s first trade fight with China from 2018 to 2020, the U.S. government raised over $65 billion in revenue from the tariffs on China, which was largely paid by U.S. importers and consumers. At the same time, Trump authorized $61 billion in relief payments to U.S. farmers hurt by China’s retaliatory tariffs. In other words, the Trump administration basically transferred money from the U.S. consumers and importers who paid higher prices for Chinese goods to farmers. Using taxpayer dollars to appease farmers may be good politics, but it also shows that folks who think they are unaffected by a particular policy may be impacted upon closer inspection.

There is still substantial uncertainty surrounding Trump’s trade policy goals. He has temporarily suspended the highest tariffs on most countries to provide time to negotiate trade deals. His administration has had discussions with India, Japan, and Italy, but no deals have been announced. Meanwhile, several countries have suggested unilaterally reducing their tariffs on U.S. imports to try to placate Trump. If the highest and broadest tariffs are avoided, U.S. farmers will likely be able to handle the impacts with only modest discomfort. But if tariffs of 20%, 30% or more remain in place for several years and are accompanied by retaliatory tariffs of similar magnitude, farmers—and the rest of America—will experience significant economic hardship.