It is often said that markets like stability and certainty. That is true of all markets – stock markets, foreign trade markets and even supermarkets.
Stability and certainty allow individuals, businesses and governments to budget, forecast and plan for the future. However, the instability brought on by the Trump Administration makes all those things impossible.
“In short, there’s now an incredible amount of uncertainty about U.S. policies, policies that have a huge impact on both individual Americans and U.S. business,” writes Nobel Prize winning economist Paul Krugman. “And this isn’t uncertainty about what will happen over the next few years, it’s acute uncertainty about what will happen in the next few weeks and months.”
We could look at a wide range of actions this administration has taken to foment instability and uncertainty in markets, but, in the interest of brevity, let’s look at one – tariffs.
In addition, we could examine the impact of that uncertainty on many segments of the American economy from automobile manufacturers to the stock market. However, again in the interest of brevity, let’s look at one that directly affects us all – agriculture and food prices.
Tariff Turmoil
There is a scene in the movie Chinatown in which Jack Nicholson is abusively questioning Faye Dunaway. Each time he slaps her, she changes her answer. In the world of tariffs, President Donald Trump is playing the role of Faye Dunaway and reality is b*tch-slapping him resulting in repeated flip flops on tariff policy.
Trump hit Canada and Mexico with 25% tariffs last week. However, the day those tariffs went into effect, Commerce Secretary Howard Lutnick suggested they might be lifted.
For those of you trying to keep track – here is a brief run-down of Trump’s Tariff implementations and reversals.
Tariff Twists and Turns Timeline
- January 20, first day in office: Trump announces Tariffs on Canada and Mexico will begin February 1
- February 1: Trump issues an executive order launching the Tariffs on February 4.
- February 3: Trump pushes implementation of those tariffs to March 4.
- February 4: Tariffs on China are increased 10%. The postal service bans packages from China.
- February 5: The post office lifts the ban on packages from China after push back from online retailers.
- February 10: Trump proposes a 25% tariff on steel imports worldwide and raises aluminum tariffs from 10% to 25%.
- February 26: Trump says in a cabinet meeting that he may push tariffs back to April 2.
- February 27: Trump flips back to implementing the tariffs on March 4.
- March 2: Lutnick says tariffs on Canada and Mexico could be less than 25%. He calls the specifics of the tariffs a “fluid situation”.
- March 4: The tariffs go into effect. Lutnick says some tariffs could be reversed.
- March 5: Trump rolls back tariffs related to automobile production until April 2.
- March 6: Another reversal. Trump delays tariffs until April 2 on all goods imported from Canada and Mexico under the United States-Mexico-Canada Agreement (USMCA).
If you are dazed and confused, don’t be too hard on yourself. Trying to track the ping ponging, twisting and turning tariff policies of the Trump administration will make your head spin faster than if you were a possessed person at an exorcism.
The McKinley Effect
Trump has often referred to President William McKinley’s advocacy of tariffs. However, McKinley’s tariff support weakened over time.
As a member of Congress, he was responsible for the McKinley Tariff of 1890. That measure resulted in an increase in the price of consumer goods. Consequently, McKinley and many other Republicans were voted out of office in that year’s election.
Shortly before his death in 1901, McKinley announced his support for reciprocal trade treaties – signifying a major shift in his thinking.
More Tariff Uncertainty To Come
Trump is not satisfied to put tariffs on America’s closest neighbors and largest trading partners. He has threatened to put levies on goods from practically all the nation’s trading partners..
Administration officials say we should stay tuned for those plans on April 2. They also say we should expect reciprocal actions from those countries.
Uncertainty For Farmers And Consumers
In his address to Congress last week, Trump asked farmers to “bear with me again”.
A prolonged and expanded trade war could cost farmers billions of dollars and raise consumer prices.
Corn prices have already fallen – wiping out any profit margin. Part of the reduction in grain prices comes from increased foreign production. That is especially true in Brazil, where China began making a large investment following the uncertainty of tariffs in the first Trump administration.
Trump’s assertion that farmers could overcome the effects of new tariffs by increasing sales at home flies in the face of simple supply and demand economics.
“There is no domestic market for the amount of corn, soybeans, wheat, and other agricultural products that we now export in significant quantities,” Joe Janzen, an agricultural economist with the University of Illinois told the Associated Press.
Vital Canadian Import
The formula for growing fresh produce could be expressed as: seed + soil + water + fertilizer = crops. Eliminating any one of those elements results in economic disaster for farmers. Meanwhile, prices at the supermarket would rise.
Unfortunately, one element in that equation is potash, a component of fertilizer. American farmers get 85% of their potash from Canada. However, potash will not be subject to a tariff until April 2.
“An open, fair, predictable and transparent trade environment between the U.S. and Canada is vital,” said The Fertilizer Institute President and CEO Corey Rosenbusch.
Uncertainty Hangs Over Meat Prices
Tariffs will likely have varying effects on meat prices.
You might think that beef prices would be stable or even drop with tariffs. After all, the domestic market would suddenly have an excess. You would be wrong.
The United States is not only the largest producer of beef, but the second largest importer. In 2023, we imported 3,390 pounds of beef.
So, why does America need to import beef? Foreign beef is leaner than U. S. beef. As a result, the imported beef is mixed with U. S. beef to make hamburger.
Where do we get this imported beef? Canada is the leading supplier and, as of 2020, Mexico has been a close second. Hence tariffs on beef from those countries will raise beef prices. Those price increases will probably show up in your grocery store in about six to eight weeks.
Other foods such as chicken and ham may see a price decline. That is because reciprocal tariffs will restrict the export market. As a result, the domestic supply will increase. Unfortunately, for farmers, that will reduce profits or result in a loss.
Eggs
Tariffs could indirectly add to the upward spiral of egg prices. Farmers use potash to grow grain used to feed chickens. In addition, an increase in fuel and equipment costs might have to be covered in egg prices.
However, the reason egg prices are escalating is bird flu. That disease is reducing the supply of laying hens. At the same time, the Department of Government Efficiency (DOGE) briefly hammered efforts to combat the outbreak. Elon Musk’s team fired United States Department of Agriculture (USDA) staff charged with fighting the disease. However, when it dawned on them what they had done – they rehired those USDA employees.
Farm Aid
Farmers have been down this road before with Trump. When tariffs were initially imposed on China during the first Trump administration, farmers were the first people hurt. Trump kept the tariffs, but dished out over $22 billion of aid in 2019. Similarly, almost $46 billion was paid the next year. Although the 2020 aid included funds for the pandemic.
This time, things might be different. Trump wants to reduce government spending by cutting government programs and assistance to Americans in need. Then again, he does not want to lose votes among a core support group.
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