U.S. Tariff Whiplash as Trump Delays Some Canada, Mexico Auto Tariffs; Ag Exemptions Under Review

— Asian and European stock markets were mostly higher overnight. Hong Kong’s Hang Seng rose 3.3%, boosted from an unexpected policy shift as China announced plans to raise its deficit to around 4% of GDP. In Asia, Japan +0.8%. Hong Kong +3.3%. China +1.2%. India +0.8%. In Europe, at midday, London -0.9%. Paris -0.5%. Frankfurt +0.3%.U.S. stock indexes are pointed to solidly lower openings.

— The R word returns re: U.S. economy. David Morrison of Trade Nation in an email dispatch today: “President Trump has called everyone’s bluff and has said he’s prepared to take some pain to get what he wants. Tariffs may have been the trigger for the latest downturn, but they aren’t the only story. Speculation is growing over the possibility that a U.S. recession could start this year. GDP growth forecasts have been downgraded sharply, while inflation remains well above the Fed’s 2% target. Recent economic data releases have disappointed, most notably consumer confidence, retail sales and weekly jobless claims.”

— U.S. job growth slows sharply. Private companies added only 77,000 jobs in February, falling well short of the 148,000 expected, according to ADP. This marks the smallest increase since July and raises concerns over potential economic slowdown amid President Trump’s tariff policies. Trade, transportation, and utility sectors shed 33,000 jobs. Investors now await Friday’s nonfarm payrolls report for further insights.

— ECB cuts rates amid tariff uncertainty. The European Central Bank (ECB) reduced its key interest rate by 25 basis points to 2.5% on Thursday, marking the sixth cut in nine months. The move comes as Europe faces sluggish economic growth and potential tariffs from President Donald Trump. With inflation easing to 2.4% in February and GDP growth barely positive, analysts warn of possible policy divisions within the ECB as geopolitical pressures mount.

— Oil prices tumble on trade and growth concerns. Brent crude fell below $70 a barrel for the second consecutive day, marking its lowest level since 2021. Market uncertainty stems from fears of a potential tariffs trade war and concerns about overproduction by OPEC+ nations. While energy stocks have been hit hard, lower oil prices could help ease persistent inflation.

Of note: China is pushing oil refiners to reduce fuel output, raising new questions about demand in the largest crude importer just as the world’s drillers need buyers for the extra barrels they’re adding to the market.

— Followthrough buying in grains overnight. Corn, soybeans and wheat built on Wednesday’s corrective gains during overnight trade. As of 7:30 a.m. ET, corn futures were trading mostly 1 to 2 cents higher, soybeans were 5 to 8 cents higher, and wheat was 1 to 3 cents higher. The U.S. dollar index was down around 225 points, and front-month crude oil futures were about 50 cents higher.

— Cattle signaling short-term lows. Cattle futures have bounced back from the recent long liquidation plunge driven by trade war concerns with strong gains the past two days. Yesterday’s close in April live cattle was the highest since Feb. 10. While the lead contract still holds a roughly $1.00 discount to last week’s average cash cattle price, price action the past two days suggests the panic selling has subsided for now.

— Wholesale pork prices continue to chop. The pork cutout fell $1.29 to $96.48 on Wednesday, continuing the recent choppy price trend. Since mid-February, cutout has chopped broadly within a range from $94.03 to $102.47, with big swings in primal bellies largely driving the volatility.

— Ag trade: South Korea purchased 98,200 MT of milling wheat, including 50,000 MT U.S. and 48,200 MT Canadian, and tendered to buy up to 140,000 MT of corn to be sourced from the U.S., South America or South Africa. Thailand purchased 67,000 MT of optional origin feed wheat, likely to be sourced from the Black Sea region.

— U.S. ag export sales activity to China remains on soybeans, cotton. U.S. Export Sales for the week ended Feb. 27 included activity for 2024-25 of net sales of 2,000 metric tons of sorghum, 205,724 metric tons of soybeans, and 46,776 running bales of upland cotton. Activity for 2025 included net sales of 2,494 metric tons of beef and 11,281 metric tons of pork.

As for unshipped quantities of U.S. agricultural products to China, the data showed no outstanding sales of wheat and corn, 2,500 metric tons of sorghum, 1,438,976 metric tons of soybeans, 273,773 running bales of upland cotton, 19,507 metric tons of beef and 25,066 metric tons of pork.

— Indonesia aims for B50 biodiesel push, needs capacity boost. Indonesia must expand its biodiesel production capacity by around 4 million kiloliters to meet the government’s B50 target for 2025, according to the producer group APROBI. The country’s current capacity of 19.6 million kiloliters would need to increase to accommodate the shift from the current B40 policy, considering maintenance limitations that cap operational capacity at 85%. Biodiesel demand under the B40 policy is projected to reach 15.6 million kiloliters this year.

— Thai business group urges U.S. trade policy ‘war room’ but also more ag imports. The Thai Chamber of Commerce said it is concerned about U.S. trade policy and asked the government to establish a special working group and a “war room” to address related issues. But the chamber also said Thailand needs to import more American ag goods to reduce its trade surplus with the United States.

— COFCO: China expecting another bumper wheat crop, reduced imports. China is expecting to produce another bumper wheat crop this year due to favorable weather, a COFCO International executive said, with rising domestic supplies likely to reduce the need for imports. Duan Chen, associate hedging manager with COFCO International, said China’s winter wheat crop is stable and strong production is expected under normal weather, without providing a specific estimate. Besides higher output, stagnant consumption has led to excess wheat supplies, which COFCO International expects to grow in 2025-26.

— Mexico’s Congress approves ban of cultivation of GM corn. Mexico’s Senate approved the constitutional reform banning cultivation of genetically modified (GM) corn on Wednesday, a week after the lower House approved the measure. The reform must now be approved by the local legislature of at least 17 of the country’s 32 states. The addition to Article 4 of the constitution specifies that the cultivation of corn “in the national territory must be free of genetic modifications produced with techniques that overcome the natural barriers of reproduction or recombination, such as transgenics. Any other use of genetically modified corn must be evaluated under the terms of the legal provisions to be free of threats to biosafety, health and biocultural heritage of Mexico and its population.” The constitutional amendment made no reference to corn imports.

— Walmart pressures Chinese suppliers to cut prices amid tariffs. Walmart has asked Chinese suppliers to reduce prices on products like kitchenware and clothing by up to 10% per round of tariffs imposed by the Trump administration, Bloomberg reports. While some suppliers are resisting, Walmart aims to shift the tariff burden to manufacturers rather than absorbing the costs itself.

— Tariffs put millions of tons of unshipped U.S. crops at risk. Amid escalating trade tensions, agriculture traders are bracing for potential contract cancellations that could jeopardize roughly 12 million tons of American crop sales, Bloomberg reports. With China, Canada, and potentially Mexico responding to President Donald Trump’s tariffs, concerns are mounting over the future of US agricultural exports. “The risk is that Mexico cancels U.S. corn,” said Pat Boova, director of International Agribusiness Group LLC, as cited by Bloomberg. Mexico is the largest buyer of American corn, with purchases last year valued at $5.6 billion. However, retaliatory tariffs could diminish the U.S.’ freight advantage, altering trade dynamics. Matt Campbell, a risk management consultant at StoneX, warned that continued trade tensions could harm new crop demand. “Mexico is a bit of a wild card,” he noted, emphasizing the uncertainty surrounding the fall harvest season.

Besides corn, over 4 million tons of soybeans, wheat, and sorghum sales to China, Canada, and Mexico remain unshipped. Chinese soybean contracts “could be on the chopping block,” Campbell added, though he downplayed the immediate impact due to relatively low unshipped sales.

Arlan Suderman, chief commodities economist at StoneX, suggested China might cancel some shipments “to get some headline impact” but could also roll contracts forward, hoping for a trade agreement in the future.

With more than half a million cotton bales also in limbo, Louis Barbera of VLM Commodities pointed out that despite potential cancellations, U.S. cotton remains competitive. “U.S. cotton is now the cheapest in the world,” he said, as cotton futures in New York hit their lowest price since August 2020.

Of note: The agriculture sector now watches closely as Mexico prepares to make an announcement on Sunday, potentially adding another chapter to the evolving trade saga.

(USDA, Bloomberg)

— Tariff exemptions for some ag products including potash? USDA Secretary Brooke Rollins indicated to Bloomberg News that exemptions for certain agricultural products, including potash, from tariffs imposed on Canada and Mexico are being considered by the Trump administration. While specific exemptions have not been determined yet, Rollins stated that “everything is on the table” regarding potential relief for the agricultural sector.

Rollins specifically mentioned potash and fertilizer as examples of products that could potentially receive exemptions, saying “As far as specific exemptions and carveouts for the agriculture industry, perhaps for potash and fertilizer, et cetera — to be determined.” This consideration is particularly significant given that the U.S. heavily relies on Canada for potash imports, with government data showing that at least 90% of potash consumption volume in the U.S. is fed by imports, and 80% of all potash coming from Canada.

The potential exemptions are part of a broader discussion on tariffs recently imposed by the Trump administration on Canada and Mexico, with the administration already granting a one-month exemption for automakers to comply with the new trade duties.

Of note: A farmer emailed: “The big automakers get a pass on the tariffs for a month… A great deal of fertilizer comes from Canada, sounds like potash being the greatest. My fertilizer last week was $321/ ton. Now it is $390/t
Doesn’t matter now where it is coming from, every dealer is covering their basis for an up charge.And last night he said that he loved his American farmers and to bear with him. I am gonna guess that most farmers have burned through enough equity, that they can’t BEAR anything for much longer.”

Some additional agricultural products that might be considered for exemption include:

· Nitrogen: Mentioned by House Ag Chair GT Thompson (R-Pa.) as a product he’s pushing for exemption.
· Peat moss: Also mentioned by Thompson as important for horticulture and mushroom growers.
· Other agricultural inputs: Thompson has broadly asked the White House for exemptions on agricultural inputs, which could potentially include various types of fertilizers, seeds, or farming equipment.

While these products are being discussed, no final decisions have been made regarding specific exemptions. The Trump administration is still in the process of deliberating which agricultural products might receive relief from the tariffs. The consideration of these exemptions is part of a broader effort to mitigate the potential negative impacts of the tariffs on the U.S. agricultural sector.

— Trump grants automakers one-month tariff exemption amid trade tensions. President Donald Trump announced a one-month tariff exemption for automakers importing vehicles from Mexico and Canada, following the imposition of 25% tariffs on all Mexican exports and most Canadian exports. This applies to automakers that comply with the U.S. Mexico Canada Agreement (USMCA). The exemption, aimed at Stellantis, Ford, and General Motors, offers a temporary reprieve amid escalating trade tensions. While automakers benefit, everyday U.S. goods, including fruits and other imports from Mexico, face price hikes. Mexico and Canada have announced retaliatory measures, with Mexican President Claudia Sheinbaum pledging to unveil new trade actions this Sunday.

According to the White House statement, the exemption will apply to cars imported from Mexico and Canada. That means manufacturers could still get whacked with tariffs on parts and materials that cross the border, which could add thousands of dollars to the cost of each vehicle. Manufacturers that assemble cars in North America would still be at a competitive disadvantage. Trump said in his speech to Congress Tuesday that his policies would allow “our auto industry to absolutely boom.”

Of note: At least two carmakers are already weighing plans to move some production to the U.S. to mitigate the increased tariffs. Volvo CEO Jim Rowan told Reuters it may shift some output into the country, but will maintain plans to export a new SUV from Europe. And Honda will make the next-generation Civic hybrid in Indiana instead of Mexico, Reuters reported.

Moody’s estimated that the 25% tariff would lead to an average increase of $3,400 per vehicle sold in the U.S., Automotive News reported. Motor vehicles made up less than 10% of all U.S. imports from Canada and Mexico last year. U.S. consumers and businesses still face a 25% tax on more than $800 billion of goods.

Bottom line: All the other across-the-board 25% tariffs on Mexico and Canada remain in effect. But White House Press Secretary Karoline Leavitt said Trump would remain open to other tariff exemptions, days after saying there would be none. The stock market rallied on the news Wednesday after it took a beating at the start of the week.

— Trump plan on tariffs. The release yesterday of the Fed Beige Book survey of regional activity showed that companies were growing worried that the levies would push up prices. One possibility: Tariffs could level the field before negotiations. Trump himself sees them as a tool to bolster the U.S. economy.

Details. The Beige Book report shows a mixed economic picture across its districts: six saw no change, four experienced modest or moderate growth, and two reported slight contraction. While inflation remains the primary focus for Fed officials, the report notably mentioned tariffs nearly 50 times across its 54 pages. All districts discussed the “potential tariffs” and their likelihood of prompting businesses to raise prices, adding to inflation concerns. With the tariffs now in effect, they are expected to play a significant role in the upcoming FOMC meeting on March 19 and in Fed Chair Jerome Powell’s remarks on Friday.

Of note: Wall Street and corporate leaders are beginning to realize that former President Trump was genuinely committed to using tariffs as a tool for foreign policy and to boost domestic manufacturing. However, while they may now understand his determination, predicting when and how these policies will significantly impact the global economy remains uncertain, say some analysts.

— U.S. trade tariff focus on Mexico and Canada. The United States’ main stated reason for imposing the tariffs on Mexican and Canadian goods is that a large quantity of fentanyl is coming into the U.S. via its southern and northern borders. At White House Press Secretary Karoline Leavitt’s press briefing, one reporter pointed out that less than 1% of the fentanyl seized by the United States last year was detected at the northern border with Canada. “The president did just put out a statement on his call with the Governor Justin Trudeau, as he calls him, of Canada,” Leavitt said, referring to a post to Trump’s Truth Social account. “He said that he was not pleased [with Canada’s action against fentanyl]. … He said it’s not good enough. He told Prime Minister Justin Trudeau that directly,” she said. “… When it comes to fentanyl, for the last four years, unfortunately, our neighbors to the north and the south, Canada and Mexico respectively, have allowed America to be a dumping ground, not just for illegal aliens but for illegal, poisonous deadly fentanyl, which is now the number one killer of young people in this country aged 18 to 34,” Leavitt said.

Mexico President Claudia Sheinbaum said Tuesday that she will announce retaliatory “tariff and non-tariff measures” during a rally in Mexico City’s central square, the Zócalo, on Sunday. She told reporters “there will be no submission” on Mexico’s part, and declared that Mexico will seek other trade partners “if necessary.” Sheinbaum has indicated that she will speak to Trump about tariffs on Thursday.

The Canadian government announced Tuesday that it was moving forward with 25% tariffs on $155 billion worth of imported goods, beginning immediately with a list of goods worth $30 billion. Trump wrote that the call ended in a “’somewhat’ friendly manner,” while also accusing Trudeau of using the tariff issue to hold onto power in his final days in office. “He was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power,” Trump said. Trudeau said he doubts fentanyl is the issue, and instead suggested Trump is using them to cause the collapse of the Canadian economy to facilitate “annexation.”

“They’ve chosen to launch a trade war that will, first and foremost, harm American families,” Trudeau said on March 4. “They’ve chosen to sabotage their own agenda that was supposed to usher in a new golden age for the United States and they’ve chosen to undermine the incredible work we’ve done together to tackle the scourge that is fentanyl, a drug that must be wiped from the face of the earth.” Commerce Secretary Howard Lutnick was asked by reporters to respond to Trudeau’s comments about annexation made earlier that day. He noted in his response that the prime minister is in his last days in office. “Justin Trudeau is running the end of his term, and I don’t really want to think about the ridiculous things he said the last couple of days,” he said. “It’s sad, it’s time for him to go and let’s move on, have a new government in Canada.”

Of note: Trudeau of Canada in his talk with Trump, VP JD Vance and Commerce Secretary Lutnick had requested a broader set of exemptions. Trump declined, citing what he said was the flow of fentanyl over the border.

Solutions on tariffs are moving forward, Energy Secretary Chris Wright said on Fox Business News in response to a question about threats from Canada to cut off electricity supply to some states. “I think there are solutions moving forward that make sense, but guns-blazing and threatening to cut off energy to the United States, that’s just never a good idea,” Wright said.

— Trump to meet next week with tech leaders amid tariff and export concerns. President Trump is scheduled to meet with top executives from major tech companies next week, including HP Inc., Intel Corp., IBM, and Qualcomm Inc. The meeting will address concerns over potential import tariffs and stricter export rules that could disrupt their operations. The tech industry is seeking clarity on trade policies and export restrictions, particularly regarding advanced technology for AI data centers. Trump has also called for the repeal of the 2022 Chips Act, a move that has faced opposition from key lawmakers.

— Beef and pork exports bolster corn and soybean markets. In 2024, U.S. pork and beef exports reached $19.1 billion, bolstering the corn and soybean industries despite a challenging year for producers. An independent study by the Juday Group, released by the U.S. Meat Export Federation (USMEF), highlighted that beef and pork exports contributed $2.24 billion to corn, $525 million to distiller’s dried grains with solubles (DDGS), and $1.12 billion to soybeans. The study emphasizes how red meat exports drive value back to producers, with beef and pork exports accounting for 525.1 million bushels of corn and 100.7 million bushels of soybeans used in 2024.
· Exporting Corn through U.S. Beef and Pork
· Exporting Soybeans through U.S. Pork

— Brazilian beef’s potential reentry poses challenge to U.S. in Japanese market. Brazil is negotiating with Japan to reintroduce beef exports after a ban in 2012 due to Bovine Spongiform Encephalopathy (BSE). According to Southern Ag Today (link), despite Brazil’s previous negligible market share, its return could disrupt U.S. beef exports to Japan, a vital market where U.S. beef currently leads with 43% of total imports. Brazil’s robust export capacity, demonstrated by its dominance in the Chinese market, may enable it to compete in Japan, particularly if it can match the quality of U.S. beef.

— Appeals board reinstates thousands of fired USDA Workers. The U.S. Merit Systems Protection Board Chair, Cathy Harris, issued an order to reinstate over 5,000 workers at the USDA who were fired under the Trump administration’s effort targeting probationary workers. The order mandates that the workers be given their jobs back for at least 90 days. Harris acted after the Office of Special Counsel found that the USDA had “engaged in prohibited personnel actions” during the firings. Special Counsel Hampton Dellinger’s office indicated that evidence suggested the terminations were not performance-related, despite emails to the workers stating otherwise. The Trump administration has attempted to remove both Harris and Dellinger, but a federal judge ruled this week that Harris cannot be removed, with a similar ruling on March 1 regarding Dellinger. However, a federal appeals court overturned that decision Wednesday, resulting in Dellinger’s removal while the case is litigated. The Office of Personnel Management (OPM) order that led to the USDA firings was rescinded this week following a federal judge’s ruling in California that OPM did not have the authority to fire workers at other agencies.

— Supreme Court orders U.S. to disburse USAID funds. The U.S. Supreme Court Wednesday ruled that the Trump administration should disburse around $2 billion owed to contractors for work completed on foreign aid efforts through the U.S. Agency for International Development (USAID). The court, in a 5-4 ruling, rejected the request from the Trump administration to throw out the trial court ruling on the halt of the aid. The Supreme Court directed U.S. District Judge Amir Ali to reset the deadlines for paying out the money as the original deadline has now passed. The Supreme Court indicated the case was still in preliminary stages and that the government was not contesting the order by Ali to pay the contractors, only the timeline he set.

— Trump warns Hamas over hostages. President Donald Trump warned Hamas there will be “hell to pay” if the militant group doesn’t immediately release its hostages in Gaza. The caution came via a social media post following a rare direct meeting between a U.S. official and Hamas, which is designated as a terrorist organization by the U.S. and other nations. Hamas said that the threats amounted to support for Israel, encouraging the country to back out of the fragile Gaza truce.

— France steps up intelligence support for Ukraine amid U.S. suspension. France offered to share intelligence with Ukraine a day after the U.S. suspended its military aid. French Defense Minister Sébastien Lecornu emphasized France’s “resources” to support Ukraine against Russia’s invasion. He noted Britain’s more complex situation due to its intelligence ties with the U.S. The American suspension aims to pressure Ukraine into negotiations with Russia.

— Top-line spending deal imminent, but stopgap debate continues. Lawmakers are close to a bipartisan top-line funding agreement, with House Appropriations Chair Tom Cole (R-Okla.), House Appropriations ranking member Rosa DeLauro (D-Conn.), and Senate Appropriations Vice Chair Patty Murray (D-Wash.) signaling an announcement is near. However, debate continues over a stopgap measure to extend funding beyond March 14, with House Republicans planning to propose a stopgap through Sept. 30. Democrats prefer a shorter extension to complete appropriations work. A potential House vote on a full-year stopgap could shift leverage to Republicans, as hard-line conservatives weigh support in line with former President Trump’s agenda.

Of note: Congress’ top appropriators are close to a deal that would avert a government shutdown scheduled to begin March 15 if there is no accord.

— Musk, GOP lawmakers push for concrete cuts in DOGE project. Elon Musk met with congressional Republicans to discuss turning his DOGE project’s spending cuts into formal legislation. Lawmakers, led by Sen. Rand Paul (R-Ky.), urged Musk to collaborate with Congress on a rescission proposal to save potentially hundreds of billions of dollars. The move aims to strengthen congressional control over federal spending while addressing concerns about the national debt. However, the Supreme Court recently dealt a setback to the DOGE project by denying a Trump administration request related to foreign aid spending. House Republicans also explored long-term cuts, with Musk sharing insights on how his team, aided by AI, identifies budget reductions. Musk admitted to some mistakes, including the cancellation of a USAID contract for a Georgia plant, which he has since reinstated.

— CBO confirms Medicaid cuts needed in GOP budget plan. The Congressional Budget Office (CBO) supported Democrats’ claims that House Republicans must cut Medicaid spending to meet their broader budget goals, according to a memo sent Wednesday. The GOP’s budget resolution calls for $880 billion in savings over a decade, but non-Medicaid programs only offer $581 billion in potential cuts, leaving $299 billion to come from Medicaid. While Republicans deny plans to cut benefits, Democrats argue the budget framework inevitably leads to Medicaid reductions.

— Lindberg gears up for USDA confirmation; Vaden papers still needed. Luke Lindberg, Trump’s nominee for undersecretary of trade and foreign agricultural affairs at USDA, met with key GOP lawmakers, including Senate Ag Chair John Boozman (R-Ark.), as he prepares for his confirmation process. The committee is still awaiting final paperwork for Lindberg and deputy USDA secretary nominee Stephen Vaden. If confirmed, Lindberg would play a major role in promoting U.S. agriculture abroad and helping to manage Trump’s trade policy. Lindberg is the CEO of South Dakota Trade, a senior fellow at the America First Policy Institute, and the son-in-law of Senate Majority Leader John Thune (R-S.D.).

— Novo Nordisk cuts Wegovy price amid weight-loss drug competition. Novo Nordisk has reduced the monthly cost of its weight-loss injection, Wegovy, from over $1,300 to $499 for American patients without health insurance coverage. The discounted injections will be available through the company’s online pharmacy. The move follows increased competition in the weight-loss drug market, with Eli Lilly recently lowering prices on some of its Zepbound injections.

— NWS outlook: Unsettled weather will continue to impact the Intermountain West, the Rockies, and the Central Plains through the end of the week... ...Critical fire weather conditions exist across the southern High Plains... ...Colder and drier air to arrive across the East along with some areas of snowfall downwind of the Great Lakes and into the central and northern Appalachians.

(NWS)