Mexico and Canada Both Take Additional Actions to Ward Off U.S. Tariffs

— Global stock selloff deepens on tariff concerns. A global stock selloff extended from Asia into Europe as investors worried that President Donald Trump’s planned tariffs on Canada, Mexico, and China could hurt economic growth. Asian shares fell as much as 2.5%, while the dollar strengthened. Trump announced 25% tariffs on Canada and Mexico starting March 4, with Chinese imports facing an additional 10% levy. Economists warn the move could slow U.S. growth, fuel inflation, and trigger recessions in Mexico and Canada. China vowed “all necessary measures” in response, while Hong Kong saw some of the biggest losses, particularly in Chinese tech stocks. The euro is at risk of further falls as markets are not fully priced for the prospect of a global trade war, ING analyst Chris Turner says in a note.

Of note: The U.S. economy is showing early signs of strain as President Trump’s aggressive tariffs and federal spending cuts disrupt businesses, weaken consumer confidence, and spark concerns over inflation. Job cuts across government agencies and funding freezes are forcing local officials to explore tax hikes and bond issuances to stabilize budgets. Economists warn that escalating trade tensions and regulatory uncertainty could further dampen growth, with projections of higher inflation and slower economic expansion. While the administration insists its policies will strengthen the private sector, financial markets and businesses remain uneasy about the near-term outlook.

— Trump confirms tariffs on Canada, Mexico, and additional hike on China. President Trump announced that tariffs on imports from Canada and Mexico will take effect on March 4 as planned, citing inadequate efforts to curb drug trafficking. Additionally, he declared a new 10% tariff on Chinese goods, doubling the previous levy imposed earlier this month. The move has drawn criticism from businesses and trade groups, warning of economic strain and higher consumer costs. While Canada and Mexico have taken measures to address U.S. concerns, China’s response remains muted, potentially setting the stage for further trade tensions.

— Mexico extradites top cartel figures to U.S. in major drug war move in bid to ward off U.S. tariffs. In a historic crackdown on cartel operations, Mexico has transferred 29 high-profile cartel operatives to U.S. custody, including Rafael Caro Quintero, the infamous Sinaloa cartel leader wanted for decades. The move, seen as a major victory for the Trump administration, signals increased co-operation between Mexican President Claudia Sheinbaum and U.S. authorities. Among those extradited is Miguel Ángel Treviño Morales, the notorious ex-leader of the Zetas cartel. The mass transfer underscores ongoing diplomatic efforts to combat cartel violence and the drug trade across the U.S./Mexico border.

Of note: Will this and perhaps other measures that may be announced in the coming days be enough to impact the Trump threatened 25% tariffs on Mexico currently slated to take place March 4? Mexico authorities have arrested more than 700 people since early February, when President Claudia Sheinbaum agreed to deploy 10,000 National Guard troops along the U.S.-Mexico border. Sheinbaum said she was planning to have a telephone conversation with Trump in the coming days to follow up on the agreements reached by both leaders early this month. “We hope that we can make this call to close the agreement,” she said this week.

As for Canada, it sent the country’s new “fentanyl czar” and cabinet ministers to meet with Trump’s border czar, Tom Homan, this week. Canada named the czar as part of an agreement earlier this month with Trump to increase its efforts to curb the amount of fentanyl crossing over from Canada to the U.S. Canada has argued that the amount of fentanyl seized at the Canadian border is a fraction of what is found at the southern border.

— Even more U.S. tariff hikes ahead. There are several actions set for April 2, from the completion of trade policy reviews ordered on Inauguration Day to the unveiling of 25% tariffs on automobiles, pharmaceuticals and semiconductors. That is also the planned date for the announcement of Trump’s levies on reciprocal trade, which will seek to equalize U.S. tariffs with the duties and nontariff barriers imposed by other nations.

A White House official said a report will be released on April 2 that will “outline the equivalent tariff rate” for other nations and the “mechanics for how they would be implemented.” Details for some countries might be released before others, the official added. The official also declined to comment on the timeline for reciprocal tariffs, but said any talk of a bottleneck in implementing the trade agenda is “premature.”

Trump trade strategy unfolding. Trump administration officials believe that a trade policy combining reciprocal trade action with sector-specific tariffs would be legally stronger and cause less disruption than a broad tariff approach. This strategy would still allow the U.S. to impose tariffs on significant parts of the economy while minimizing harm to consumers and markets. The sectoral tariffs, particularly on steel, aluminum, and copper, could be announced on April 2. However, their implementation would likely fall under Section 232 of the Trade Expansion Act, which permits tariffs on national security grounds. This process generally requires a 30-day notice and comment period, except for steel and aluminum tariffs, which are based on an existing investigation and may be enacted more quickly.

— Any details about the $21 billion in ag disaster relief payments? Farmers are asking that question after reports here and from USDA Secretary Brooke Rollins that the $10 billion is economic aid to farmers is coming soon, before the March 21 statutory deadline. But news has been scant about the $21 billion ag disaster aid. The only thing we can report is that the program is still being put together, which means not much new information is available.

— USDA revised its outlook for the U.S. ag trade deficit in fiscal year (FY) 2025, projecting a record-breaking deficit of $49 billion. This represents a significant increase from the previous forecast of $45.5 billion and a sharp rise from the $31.8 billion deficit in FY 2024.

Export outlook. U.S. agricultural exports for FY 2025 are now forecast at $170.5 billion, a $500 million increase from the November projection. This upward revision is primarily driven by:
· Higher grain and feed exports, projected at $37.7 billion (up $1.2 billion)
· Increased corn exports (up $1.4 billion) due to higher volumes and unit values
· Livestock, poultry, and dairy exports forecast up $400 million to $39.7 billion

U.S. ethanol trade continues to be a positive with the outlook maintained at $4.2 billion which would match the FY 2024 record. Export volumes are to be a record 1.85 billion gallons, but slightly lower values are offsetting the increase. “Brazil’s 18% import duty on ethanol continues to weigh on U.S. export opportunity to that market,” USDA noted.

However, the oilseed sector faces challenges, with exports forecast at $32.4 billion, down $1.1 billion from the previous quarter due to lower soybean unit values and strong competition from South American producers.

Import projections. Agricultural imports for FY 2025 are now forecast at $219.5 billion, a $4.0 billion increase from the November projection. This rise is largely attributed to:
· Higher import values of horticultural products
· Increased sugar and tropical product imports

Key trading partners
· Mexico: Forecast to remain the top market for U.S. agricultural exports at a record $30.2 billion, up $300 million from the previous estimate.
· Canada: Exports projected to decrease by $800 million to $28.4 billion due to weaker-than-expected shipments.
· China: Exports cut by $1.3 billion to $22.0 billion, largely due to reduced prospects for U.S. soybeans, grains, and cotton.

Bottom line: The widening trade deficit underscores the ongoing challenges faced by the U.S. ag sector, including global competition, changing consumer preferences, and economic uncertainties. As the fiscal year progresses, industry stakeholders and policymakers will likely focus on strategies to enhance the global competitiveness of U.S. agricultural products and mitigate trade risks.

— USDA Forum: Key trade challenges and opportunities for U.S. agriculture. At the USDA Agricultural Outlook Forum, Gregg Doud, president and CEO of the National Milk Producers Federation, outlined key issues affecting U.S. agricultural trade and exports.

Agricultural Exports and Farm Income: Doud highlighted the cyclical nature of commodity markets, noting that farm income peaked in 2022 alongside record exports of $195 billion but declined as exports dropped to $176 billion in 2024.

Challenges with Key Markets: He criticized EU trade policies for restricting U.S. agricultural innovation, expressed concerns over China’s slowing demand, and identified obstacles in accessing India’s market. He also flagged Mexico’s regulatory issues as a major risk to North American livestock.

Protein Demand and U.S. Growth: With global protein demand set to rise, Doud emphasized the U.S.’s strong position, citing $8 billion in dairy processing investments.

Tariffs as a Trade Strategy: He suggested tariffs could be a useful tool to level the playing field and expand U.S. exports.

Future Trade Policy: Despite challenges in negotiations, Doud stressed the importance of expanding global market opportunities for U.S. agriculture.

— Trump backs full-year stopgap spending bill amid GOP infighting. Signs are pointing toward a full-year government funding patch as Congress approaches the March 14 shutdown deadline without a deal. President Donald Trump endorsed a temporary funding bill through September, following a White House meeting with House Speaker Mike Johnson (R-La.) and Senate Majority Leader John Thune (R-S.D.). GOP leaders have tasked Senate Appropriations Chair Susan Collins (R-Maine) with drafting a stopgap measure, though its fate remains uncertain.

Of note: Collins and Sen. Patty Murray (D-Wash.) both oppose a year-long continuing resolution (CR), arguing it would be harmful, particularly for the Defense Department. While Republican appropriators are drafting a long-term CR, negotiations with Democrats are ongoing. The White House has submitted its requested exceptions (anomalies) for inclusion. Despite concerns, both Collins and Murray recognize the need for a short-term CR to extend funding past the March 14 deadline as talks continue.

— Slotkin to deliver Democrats’ response to Trump’s State of the Union address. Democrats announced that first-term Sen. Elissa Slotkin (D-Mich.) will deliver their response to Trump’s joint address to Congress next week, with Rep. Adriano Espaillat presenting the Spanish version. Slotkin, one of the few Democratic senators elected in 2024 from Trump-won states, hinted she may focus on Michigan’s auto industry and electric vehicle manufacturing. “I’m from a state that feels a lot of these economic issues pretty powerfully,” she told reporters.

— UK prioritizes tech and AI in U.S. trade talks over full FTA. The UK is focusing on a limited trade deal with the U.S. centered on technology and artificial intelligence, avoiding past disputes over agriculture and drug pricing. While Donald Trump spoke of a “great trade deal” with Prime Minister Keir Starmer, Britain is emphasizing emerging sectors like AI and quantum computing. Trump’s willingness to negotiate marks progress after years of stalled discussions. UK officials hope this targeted approach will strengthen economic ties, with future sectoral agreements possible. “We’re going to have a great trade agreement one way or the other,” Trump told reporters at a joint briefing with Starmer on Thursday. “We’re going to end up with a very good trade agreement for both countries, and we’re working on that as we speak… I think we’ll have something maybe even in terms of possibilities agreed to very shortly,” Trump said.

— EPA moves to dismiss biofuels blending lawsuit. The Environmental Protection Agency (EPA) asked a federal court to dismiss a lawsuit filed by Clean Fuels Alliance America, which seeks to compel the agency to set 2026 biofuel-blending volume targets under the Renewable Fuel Standard (RFS). The lawsuit argues that the EPA missed a November 2024 deadline, but the agency contends the suit is premature, as plaintiffs provided notice of intent to sue before the deadline had passed. Clean Fuels representatives stress the importance of increased biofuel targets to support the industry and meet energy demands.

— USDA’s Rollins goes virtual for USDA Outlook. Newly installed USDA Secretary Brooke Rollins was set to address the annual confab today instead of delivering remarks at the opening session on Thursday as is usually the case at the gathering. But late Thursday night, USDA advised that due to “travel challenges” Rollins would be addressing the meeting virtually and not in person. That also meant a fireside chat with her and USDA Chief Economist Seth Meyer was cancelled as was her press briefing after delivering remarks.

— USDA Outlook Forum stays focused on agriculture amid Trump-Era Disruptions. Despite ongoing disruptions from the Trump administration, attendees at the USDA’s 101st Agricultural Outlook Forum remained focused on industry developments.

Stable USDA Forecasts: Commodity outlooks released ahead of the event showed expected shifts in corn and soybean acreage, though no major surprises arose.

Protests Resurface: Animal activists disrupted the plenary session for a second consecutive year, though most attendees dismissed the interruption.

Biofuels and Trade Discussions: Beyond trade, biofuels and carbon emissions were key topics, sparking significant interest among participants.

Changing Demographics: The event saw a younger crowd, signaling a generational shift in the agriculture sector.

Trump Administration’s Impact: While speakers stuck to their topics, hallway discussions centered on the potential effects of Trump’s policies on USDA operations and data transparency. Despite uncertainty, attendees agreed on the critical role of USDA reports in maintaining industry stability.

— APHIS adjusts strategy to combat New World Screwworm. USDA’s Animal and Plant Health Inspection Service (APHIS) is modifying its sterile fly dispersal strategy to push the New World screwworm (NWS) away from the U.S. and back toward the biological barrier in Panama. APHIS will now focus dispersal efforts in Mexico — the northernmost point of the outbreak — using its proven eradication model.

— NWS outlook: Heavy snow expected near the U.S. Canadian border from the Northern Great Plains to Maine... ...Temperatures will be 10 to 20 degrees below average behind a strong cold front across the Midwest and Ohio Valley on Saturday... ...An Elevated Risk of fire weather conditions over parts of the Plains on Friday.

(NWS)