News/Markets/Policy Updates: Feb. 3, 2025
— President Donald Trump announced that he plans to hold discussions with the leaders of Canada and Mexico today, following his recent declaration of imposing significant tariffs on imports from these countries and China. This development comes in the wake of Trump’s executive orders signed on Saturday, which impose a 25% tariff on goods from Canada and Mexico, with a lower 10% tariff on Canadian energy products, and a 10% tariff on imports from China. “I don’t expect anything very dramatic,” Trump said of the planned calls. “We put tariffs on. They owe us a lot of money, and I’m sure they’re going to pay.” Despite acknowledging that Americans might experience “some pain” due to these tariffs, Trump maintains that the measures are necessary to protect U.S. interests. He stated, “Will there be some discomfort? Yes, perhaps (and perhaps not!). But we will Make America Great Again, and it will all be worth the price that must be paid.” Of note: The upcoming talks with Canadian and Mexican leaders today will be closely watched for any potential shifts in policy or negotiations to address the concerns of all parties involved. — Trump’s tariff salvo: Economic shockwaves and global retaliation. As new U.S. tariffs take effect at 12:01 a.m. Tuesday, economists shift from forecasting their potential impact to assessing their immediate fallout. With 25% duties on imports from Canada and Mexico and 10% on Chinese goods, the move will likely raise consumer prices, disrupt trade worth $1.3 trillion, and shake financial markets. Bloomberg Economics estimates the tariffs could trim U.S. GDP by 1.2% and add 0.7% to core inflation. Canada and Mexico face even sharper blows, with 16% and 14% of their GDPs directly exposed to U.S. exports. Markets reacted swiftly, with a stronger dollar offsetting some inflationary effects but undercutting Trump’s competitiveness goals. Retaliation has already begun. Canada and Mexico announced counter-tariffs, while China vowed “corresponding countermeasures.” Trump also renewed tariff threats against the EU, adding to global uncertainty. Of note: The Federal Reserve must figure out how to respond, including whether tariffs pose a long-term threat to inflation. The central bank has already paused reductions in interest rates, and isn’t expected to resume them for at least a few months. — Mexico’s government is considering a carousel retaliation, which would periodically rotate the U.S. products subject to retaliatory tariffs. This generates uncertainty in U.S. export sectors and has a political impact when hitting sectors such as agriculture that are likely to lobby Congress. — WSJ: China seeks trade talks with Trump amid tariff pressure. As the Trump administration implements a 10% tariff on Chinese imports, Beijing is preparing an initial proposal to restart trade negotiations and prevent further economic confrontation, the Wall Street Journal reports (link). Citing sources familiar with Beijing’s approach, the WSJ says China’s offer will center on reviving the 2020 Phase 1 trade deal, which required it to increase U.S. imports by $200 billion — a target it previously failed to meet. While Trump’s tariffs are a clear pressure tactic, China sees room for dialogue, particularly given its current economic difficulties. Besides increasing purchases of U.S. goods, China is considering investments in American sectors like electric vehicle batteries and making commitments on currency stabilization and fentanyl precursor exports. A key point of negotiation will be TikTok, which Beijing intends to treat as a “commercial matter,” potentially allowing U.S. investors a stake but maintaining control over its proprietary algorithm. Trump, who has hinted at a willingness to negotiate, faces internal administration divisions, with some advisors pushing for broader decoupling from China, including stricter tech restrictions. Upshot: With both economic and geopolitical stakes high, China is eager to gauge Trump’s demands before a potential summit between the two leaders. — India’s tariff cuts signal shift from protectionism. India’s latest budget introduces broad-based reductions in import tariffs, marking a strategic pivot toward a more open trade policy. The move appears to be a proactive response to potential trade tensions with the U.S. under President Trump. Highlights: · Broad tariff reductions: Lower duties on electronics, textiles, and high-end motorcycles, aligning with a broader customs duty rationalization effort. Bottom line: India’s tariff policy shift reflects a calculated effort to strengthen its global trade position while maintaining selective protections for key industries. — U.S./Panama tensions rise over Canal control as Rubio’s visit sparks diplomatic friction. U.S. Secretary of State Marco Rubio’s visit to Panama has intensified tensions over the Panama Canal, with the Trump administration advocating for reduced Chinese influence and hinting at possible U.S. action. Rubio met with Panamanian President José Raúl Mulino on Sunday, Feb. 2, marking his first overseas trip as Secretary of State. President Trump has suggested the U.S. should reclaim control of the canal due to concerns over China’s growing influence. The State Department stated that if “immediate changes” aren’t made, the U.S. would take “necessary measures” to protect its rights under the treaty. President Mulino reaffirmed that Panama’s control over the canal is non-negotiable. Of note: Panama promised free passage for U.S. warships through the Panama Canal. Panama said it will not renew its participation in China’s Belt and Road Initiative. The government has launched an audit of Hong Kong-based CK Hutchison Holdings, which operates key ports near the canal. Upshot: Rubio’s trip to Central America signals a broader shift in U.S. foreign policy toward the Western Hemisphere. Discussions also covered illegal immigration and drug trafficking cooperation. — Senate Finance to vote on RFK Jr.'s HHS nomination Tuesday morning. The Senate Finance panel will vote on Robert F. Kennedy Jr.'s nomination for Secretary of Health and Human Services. Kennedy faced intense scrutiny during his confirmation hearings, particularly over his past statements on vaccines. The outcome of the vote remains uncertain, with Republican Senator Bill Cassidy (R-La.) expressing doubts. A simple majority in the full Senate would be required for confirmation, making this committee vote a critical step. — Panel to vote on Rollins as USDA secretary. The Senate Ag Committee will meet this evening to vote on whether to advance the nomination of Brooke Rollins to be USDA secretary to the Senate floor. Rollins is expected to be easily confirmed by a full Senate vote. Link to Rollins’ answers or comments to lawmaker questions. — Today, the Senate is expected to approve Chris Wright as energy secretary and advance Pam Bondi’s nomination to be attorney general, while Senate Majority Leader John Thune will move to tee up votes for later this week on White House budget nominee Russ Vought. — USAID HQ closed amid growing uncertainty over agency’s future. The headquarters of the US Agency for International Development (USAID) in Washington, D.C., was abruptly closed Monday, with employees instructed to work remotely, except for essential personnel. The closure follows escalating tensions as President Donald Trump and Elon Musk push for a federal government overhaul, targeting USAID as allegedly partisan. Over the weekend, security officials at the agency were placed on leave after resisting access requests from the Department of Government Efficiency (DOGE). Meanwhile, USAID’s branding has been removed from its offices, and senior leadership has been dismissed amid a 90-day freeze on foreign aid. The agency’s website and social media presence were also taken offline. The president is eyeing an executive order that would fold USAID into the State Department, according to the Wall Street Journal. |
| FINANCIAL MARKETS |
— Equities today: Stock futures are sliding, the dollar is surging, crypto is tumbling, and oil is on the rise, after President Trump imposed his long-promised tariffs on Mexico, Canada and China. In Asia, Japan -2.7%. Hong Kong flat. China closed. India -0.4%. In Europe, at midday, London -1.2%. Paris -1.7%. Frankfurt -1.6%.
Equities Friday and for the week: Stocks fell lower on Friday as the threat of tariffs on Mexican, Canadian, and Chinese goods pressured values. But for the month, the Dow still gained 4.7%, the Nasdaq rose 1.6%, and the S&P 500 rose 2.7%. For the week, the Dow managed a gain of 0.27% while the Nasdaq lost 1.6% and the S&P 500 declined 1%. On Friday, the Dow was down 337.47 points, 0.75%, at 44,544.66. The Nasdaq fell 54.31 points, 0.28%, at 19,627.44. The S&P 500 fell 30.64 points, 0.50%, at 6,040.53.
— ADM to cut jobs amid cost-cutting effort. Archer-Daniels-Midland (ADM) will begin laying off employees globally to reduce costs as low crop prices impact profits, sources told Reuters on Friday. The U.S. will be among the most affected regions, with job cuts targeting plants, ports, and warehouses. Layoffs will span all regions and departments. ADM is set to report earnings on Tuesday, when the job reductions are expected to be addressed.
| AG MARKETS |
— Ag markets today:
Grains lower to open the week. Corn, soybeans and wheat faced pressure overnight as markets reacted to tariffs levied against the leading U.S. trading partners. As of 7:30 a.m. ET, corn futures were trading mostly 6 to 7 cents lower, soybeans were a nickel lower, winter wheat markets were 3 to 5 cents lower and spring wheat was narrowly mixed. The U.S. dollar index was nearly 800 points higher, and front-month crude oil futures were around $1.90 higher.
Slightly smaller cattle herd, no signs of expansion. USDA estimated there were 86.662 million head of cattle in the U.S. as of Jan. 1, down 495,000 head (06%) from last year and the lowest since 1951. The beef cow herd declined 149,000 head (0.4%) to 27.864 million head. The 2024 calf crop was estimated at 33.530 million head, down 33,000 head (0.1%) from the previous year. The number of beef heifers expected to calve in 2025 dropped 50,000 head (1.7%) and total beef replacement heifers declined 46,000 head (1.0%). Compared to pre-report expectations, the data was mostly neutral, though the lack of expansion plans was a modest surprise.
Cash hog index continues to climb. The CME lean hog index is up another 42 cents to $83.48 as of Jan. 30, extending the rise from the seasonal low in early January. February lean hog futures finished Friday 69.5 cents above today’s cash quote.
— Ag trade: Iran tendered to buy up to 120,000 MT of corn from Brazil, Europe or Black Sea region, 120,000 MT of feed barley from the EU or Black Sea region and 60,000 MT of soymeal from Brazil or Argentina.
— Japan considers tapping rice reserves amid rising prices. Japan may dip into its strategic rice reserve to counter inflation and fears of a shortage. For the first time, the government is easing its policy on releasing stockpiled rice, allowing sales to major distributors. The country’s 1-million-ton emergency reserve was last used after the 2011 Fukushima disaster. Rice prices recently saw their steepest-ever increase, fueling concerns. Japan follows a global trend, as China stockpiles pork and South Korea maintains an emergency cabbage supply for kimchi.
— Australia’s wheat production bigger than expected. Australia has produced around 2 MMT more wheat in 2024-25 than was estimated during the harvest, according to four analysts polled by Reuters. Their estimates now range from 32 MMT to 35.5 MMT, up from 29 MMT to 34.5 MMT they predicted in November. Their estimates are all above the Australian government’s forecast of 31.9 MMT. Yields in Western Australia, one of the country’s biggest cropping regions, greatly exceeded expectations, the analysts said.
— Philippines declares ‘food security emergency’ to tame retail rice prices. The Philippines declared a food security emergency, which will allow the government to release buffer rice stocks to help bring down retail prices of the national staple. Half of the 300,000 MT buffer rice stocks the National Food Authority currently holds could be released over the next six months to ensure supply for emergencies and disaster response. Last year, the Philippines lowered tariffs on rice and extended existing tariff cuts on some other commodities to combat inflation and ensure ample supply.
— Agriculture markets Friday and for the week:
• Corn: March corn futures plunged 8 1/4 cents to $4.82, marking a 4 1/2 cent loss on the week.
• Soy complex: March soybeans fell 2 cents to $10.42, finishing the week down 13 3/4 cents, while March soymeal fell $3.60 to $301.10, marking a $3.80 weekly loss. March soyoil rallied 113 points to 46.11 cents and rose 89 points on the week
• Wheat: March SRW futures closed 7 cents lower to $5.59 1/2, though still gained 15 1/2 cents on the week. March HRW futures fell 9 cents to $5.79 1/4, but still rose 19 3/4 cents on the week. March HRS futures closed down 4 3/4 cents.
• Cotton: March cotton slipped 39 points to 65.88 cents, marking a 171-point weekly loss.
• Cattle: Nearby February live cattle gained 12.5 cents to $204.60, while most-active April rose 80 cents to $202.30. That latter marked a weekly decline of 72.5 cents. Nearby March feeder futures surged $2.525 to $275.725, which marked a weekly slide of 85 cents.
• Hogs: Expiring February futures slid 20 cents to $84.175, while most-active April futures fell $1.575 to $90.35. The latter marked a weekly rise of $2.15
| ENERGY MARKETS & POLICY |
— Oil prices dip amid tariff uncertainty. Oil prices eased on Friday, marking a second week of losses as investors awaited U.S. tariff implementations on Canadian and Mexican imports set for Saturday. March Brent crude settled at $76.76 per barrel, down slightly by $0.11, while April Brent fell $0.31 to $75.58. U.S. West Texas Intermediate (WTI) closed at $72.53, down $0.20 (0.3%). For the week, Brent lost 2.1% and WTI dropped 2.9% for the week, reflecting growing concerns over potential trade disruptions. Investors are cautious, as Canada and Mexico are major crude suppliers to the U.S. The tariffs could affect refinery operations and fuel prices if oil imports are included, though Trump has not yet confirmed a duty on crude. Attention is also turning to the upcoming OPEC+ meeting, where gradual output increases are expected to continue despite Trump’s push for lower oil prices. Overall, market sentiment remains mixed as the oil industry braces for potential disruptions amidst ongoing trade policy uncertainty.
— OPEC+ reportedly plans to reject pressure to sharply increase crude production. The group of oil-producing countries is likely to stick with planned gradual increases in output, despite calls by Trump to move fast to lower prices, according to Reuters. Analysts said the group would probably embark on diplomatic efforts to avoid its members facing retaliation from Washington.
| TRADE POLICY |
— Trump moves to close e-commerce loophole benefiting Temu, Shein. President Donald Trump is set to eliminate a long-standing tariff exemption that has allowed international e-commerce giants like Temu and Shein to avoid duties on packages under $800. The move, part of broader trade levies on China, Canada, and Mexico, aims to close a loophole that has helped Chinese retailers gain a competitive edge over Amazon and other U.S. firms.
Temu and Shein have relied on the “de minimis” rule to ship low-cost goods directly to American consumers without incurring tariffs. While these companies have begun adjusting their logistics, the crackdown is expected to impact their business models significantly. The decision also raises concerns about the future of Shein’s planned IPO and its broader implications for U.S. shoppers, particularly lower-income consumers who benefit from these low-cost imports.
| CHINA |
— China’s manufacturing slump signals regional challenges. China’s manufacturing sector contracted unexpectedly for the second straight month in January 2025, highlighting economic concerns across Asia’s export-driven economies. The official PMI dropped to 49.1 from December’s 50.1, marking a contraction. The Caixin/S&P Global PMI also fell slightly to 50.1. Production was impacted by the Lunar New Year holiday, weak external demand, and declining employment.
Regional effects: Japan’s factory activity shrank at its fastest rate in 10 months, while South Korea’s manufacturing sector continued to contract.
Contributing issues: Trade tensions, weak global demand, and supply chain shifts are reshaping Asia’s manufacturing landscape. The slowdown raises economic concerns and may push policymakers to introduce stimulus measures while businesses rethink supply chains to maintain competitiveness.
— Sinograin to expand domestic corn stockpiling in northeast China. China’s state stockpiler Sinograin said it plans to add new stockpiling sites in northeast China to expand purchases of domestic corn harvested in 2024. Sinograin will publicize further details of the new stockpiling program later that cover the provinces of Heilongjiang, Jilin and Liaoning.
| WEATHER |
— NWS outlook: Unsettled weather to persist across the Northwest U.S. into early next week with much colder temperatures and heavy snowfall across the Cascades, northern Great Basin, northern Rockies and northern High Plains... ...Strong atmospheric river will continue over the next couple of days across northern and central California with heavy rains and areas of flooding likely... ...Storm system crossing the Great Lakes region to bring accumulating snowfall to parts of the Northeast... ...Record high temperatures are expected across portions of the Southwest out through the Southern Plains through the middle of the week.
| KEY DATES IN FEBRUARY |
3: USDA Industrial reports on grain crushings, oilseed crushings, cotton use
4: JOLTS report
6: USDA Farm Income forecast
7: January Employment | USDA Ag Trade Data Update
9: Super Bowl
11: USDA Crop Production, WASDE, world market circulars
12: Consumer Price Index report
13: Producer Price Index-FD | USDA outlook reports for several commodities
14: Retail Sales | Valentine’s Day
16: Daytona 500
17: Presidents Day; U.S. gov’t and market holiday
21: Univ. of Michigan Consumer Sentiment | Existing Home Sales | USDA Cattle on Feed
25: Consumer Confidence | USDA Food Price Outlook
27: Durable Goods Orders | GDP | USDA Outlook Forum | Outlook for U.S. Agricultural Trade report
28: Personal Income and Outlays (PCE Price Index) | International Trade in Goods | USDA Outlook Forum concludes
| LINKS |
Economic aid for farmers | Disaster aid for farmers | Farm Bureau summary of aid/disaster/farm bill extension | 45Z tax incentive program | Poultry and swine line speeds | U.S./China Phase 1 agreement | WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | RFS | IRA: Biofuels | IRA: Ag | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum | Eggs/HPAI | Trump tariffs |