US farmers brace for impact as potential trade war looms

In its recent article, Financial Times highlights that farmers in Iowa are bracing for the potential fallout of a trade conflict that could send shockwaves through the US agricultural sector. 

In the heartland of Iowa, Aaron Lehman’s soybean farm stands as a quiet refuge amidst the political storm surrounding President Donald Trump’s second term. However, Lehman is preparing for the possibility that a new trade conflict originating from Washington could soon disrupt the tranquillity of America’s agricultural sector.

"Farmers understand that trading relationships go up on a stairway, where you work hard to build them up, but go down on an elevator — very, very fast," said Lehman from his farmhouse near Des Moines. "The long-term effect is that countries around the world will no longer see us as a reliable partner."

The recent developments in US trade policy have left farmers on edge. Trump announced 25 per cent tariffs on Mexico and Canada, citing their insufficient efforts to curb migrant flows and the trafficking of fentanyl into the US. Although these tariffs were suspended after talks with the two countries’ leaders, many in Iowa believe it’s only a matter of time before the tariffs are reinstated. The potential fallout of these sanctions has cast a shadow over the Midwest, where Canada, Mexico, and China together account for half of all American agricultural exports.

"Suddenly, farmers were facing the specter of retaliatory tariffs and the prospect of a full-scale conflict that some fear could decimate America’s rural heartland," said Mark Mueller, a farmer from northeast Iowa. "We’ve gone from being a seller of choice to a seller of last resort."

Iowa, a state where agriculture is the backbone of the economy, has always been a pillar of American farming. It’s the largest producer of corn, hogs, eggs, and ethanol, and one of the top three growers of soybeans. With more than 20 per cent of its economy tied to agriculture, it is particularly vulnerable to disruptions in trade.

"Free trade is the backbone of the economy in the Midwest," said Ernie Goss, an economist at Creighton University in Omaha, Nebraska. "What we have here is some of the most productive agriculture on the face of the Earth, and the domestic market is not even close to being big enough to absorb all the commodities produced here. You have to have international markets."

The threat of new tariffs brings back painful memories of the previous trade war Trump launched in his first term. In 2018, Trump imposed tariffs on $300 billion worth of Chinese goods, which resulted in China slapping a 25 percent tariff on US soybeans, beef, pork, wheat, and corn. While the trade war ended in 2020 with a deal that saw China pledge to increase its purchases of US goods, the damage was done. Many of America’s traditional buyers began sourcing from other countries, including Argentina and Brazil, who have since become China’s leading suppliers of corn.

"We haven’t got it back," said Lehman, who is also president of the Iowa Farmers Union. "A lot of our Asian buyers started developing relationships with soybean producers in South America, and they’ve taken more and more of our market."

While some Iowa farmers still support Trump’s use of tariffs to curb illegal immigration, others are concerned about the potential long-term effects. “It was a strategy he needed to use to… get those countries to the negotiating table,” said Steve Kuiper, a fourth-generation Iowa farmer. However, Kuiper remains doubtful that Mexico and Canada will deliver on their border security promises in the 30-day window granted by Trump.

The timing of the trade conflict couldn’t be worse for Iowa’s farmers, who are already struggling with low crop prices and rising costs. According to the US Department of Agriculture, net farm income is expected to fall 23 percent in 2024, a significant drop from $181.9 billion in 2022.

By Naila Huseynova