Volatility created by the tariffs escalation rekindles impacts from the trade war during President Trump’s first administration. The trade war in Trump’s first term led to a drawdown of about 75¢ in corn over the course of just over a month, while soybeans fell around $2.00 over the same timeframe. Prices did not fully recover until the spring runup in 2019 amidst late corn plantings and until the late 2020 rally for soybeans — a long and dreary process for both. Wheat fell in tandem with corn and soybeans early but pushed to new highs late in 2018.
There are several key distinctions between 2018 and the current situation – this year showcases tighter balance sheets and is expanded to Mexico, Canada and others rather than China alone. Mexico, Canada and China are the three largest export markets for U.S. agriculture, accounting for $91 billion in sales last year — 48% of ag exports. Amid escalating trade tensions, traders fear potential export contract cancellations that could jeopardize exports.
What’s at risk for ag exports?
As of Feb. 27, 2024-25 outstanding export sales stood at:
- Corn: 7.620 million metric tons (300.2 million bu.) to Mexico; another 1.199 MMT (47.3 million bu.) for 2025-26, 26,444 MT (1.042 million bu.) to Canada and nothing for China. Mexico is the largest buyer of U.S. corn.
- Soybeans: 1.439 MMT (52.9 million bu.) to China, 1.096 MMT to Mexico and 4,656 MT to Canada. China is the largest U.S. soybean buyer; Mexico is No. 3.
- Wheat: 1.237 MMT (45.5 million bu.) to Mexico, 5,203 MT (191,158 bu.) to Canada and nothing for China. Mexico is a top buyer of U.S. wheat.
- Cotton: 311,132 running bales to Mexico and 273,773 bales to China. Both are key buyers of U.S. cotton.
- Beef: 19,507 MT to China, 12,542 MT to Mexico and 4,500 MT to Canada. These are three of the top five U.S. export markets. Exports account for just over 10% of total U.S. beef use.
- Pork: 63,386 MT to Mexico, 25,066 MT to China and 15,917 MT to Canada. These are three of the top five U.S. export markets. Exports account for nearly one-third of total U.S. pork use.
Initially, many thought tariffs were just a negotiation tactic, so when they actually went into place it spurred the 76¢ knee-jerk selloff in just 10 trading sessions in corn. While soybeans saw sustained selling as well, it was not nearly as steep as the initial 2018 reaction. Considering Mexico is a large importer of wheat, it saw sharp selling as well. The relative restraint in soybeans can be attributed to the diversified export portfolio brought on by the initial trade war with China — as China sought to purchase the majority of its soybeans from Brazil, the U.S. found other destinations.
Markets priced in tariffs far quicker than they did a decade ago. But they’ve also shown an ability to rebound as some tariffs have been pushed back and exemptions for some ag products are being discussed. USDA Secretary Brooke Rollins stated, “everything is on the table.”
Bottom line: We don’t know exactly how markets will react, but the previous trade war showed us the shift in market sentiment is lasting and prices take much longer to recover than fall.