Return of Trump May Shake Global Agricultural Markets in 2025, New Trade Order Likely

In 2024, the international agricultural market witnessed a notable decline in the prices of major grains, oilseeds, and sugar, while tropical crops like cocoa, coffee, and palm oil experienced price surges. Against this backdrop, farmers across the globe are entering the new year amid mounting risks from climate change and geopolitical uncertainties. After three to four decades of globalisation, the world is now transitioning toward a phase of economic and political de-globalisation. This shift accelerated in 2024 and is anticipated to intensify in the coming years. Some experts speculate that a potential Trump victory in the U.S. could mark a definitive turning point, signaling the end of globalisation.

Impact of Trump on Global Agricultural Trade  
On January 20, Donald Trump of the Republican Party, will be sworn in as President of the United States for the second time. His persistent warnings of imposing tariffs on various countries may provoke retaliatory tariffs from other nations. This could reduce farmers' margins as they strive to remain competitive in the international market. 

In 2023, the U.S. imported agricultural products worth $195 billion, including fruits and vegetables, sugar, cheese, vegetable oils, coffee, and cocoa. Experts predict that Trump may impose a 5-10% tariff on all imported goods within his first 100 days, with tariffs on Chinese imports potentially reaching 60%. This is likely to invite retaliatory tariffs against the U.S., affecting agricultural exports. 

China, a major buyer of U.S. agricultural products, purchased 19% of U.S. agricultural exports in 2023. That year the US had an agri export of $34 billion. Experts warn that a tariff war with China could reduce U.S. agricultural exports by half by 2025. Over the past two years, Chinese retaliatory tariffs have caused a 37% drop in U.S. agricultural income, as China has increasingly sourced imports from other nations.

China's retaliatory tariffs are expected to impact U.S. soybean exports, as soybeans are its largest agricultural export to China. Over the past year, soybean prices have dropped by 25% in international markets. Any further action by China would exacerbate losses for U.S. soybean farmers. However, if a trade agreement is reached between the U.S. and the European Union (EU), the EU could shift soybean and soymeal imports from South America to the U.S.

The US-China trade war stands to benefit Brazil the most. For geopolitical reasons, Brazil has started exporting more corn to various countries, surpassing the U.S. in some instances. In the global wheat market, Russia has emerged as a major supplier, exerting significant control over prices. Previously, China was the largest buyer of U.S. agricultural products, but during Trump's first term, tariff policies led China to source large quantities of grains and soybeans from South America and Russia. Experts note that China prioritises securing supply over price considerations. Agricultural trade will continue to be influenced by geopolitics, reducing U.S. exports.

What Happened During Trump’s First Term?  
In 2018, when Trump imposed tariffs on China, China retaliated, reducing the U.S. share of its soybean imports from 40% to 18%. During this period, Brazil's share increased from 46% to 76%. China also ramped up purchases from Argentina, Ukraine, and Australia. A similar scenario could unfold this time, with China likely targeting agricultural products again.  

Jeff Van Pevenage, CEO of Columbia Grain International (CGI), told World Grain magazine that everyone involved in the wheat, corn, and soybean trade is concerned about tariffs. In 2019, when China imposed retaliatory tariffs on the U.S., American exports were significantly impacted. While Biden maintained the tariffs imposed during Trump's presidency, China did not escalate its measures. Some believe that both nations may engage in negotiations for six months, maintaining the status quo in the meantime. Notably, China holds record soybean reserves, which it may leverage during these negotiations.  

G7 vs. BRICS  
A new global order is forming with two political and economic poles: the G7 nations and BRICS countries. The G7, led by the U.S., Canada, France, Germany, Italy, Japan, and the UK, represents 30% of global GDP. Meanwhile, BRICS- comprising Brazil, Russia, India, China, and South Africa- accounts for 32% of global GDP, a share expected to grow as the group expands.  

At the recent BRICS summit in Kazan, Russia proposed establishing a new international grain futures exchange. While this may take time, these nations aim to reduce reliance on Western markets. Despite their substantial role in global agricultural trade- producing and consuming 44% of the world’s grains and accounting for 25% of global grain exports- there is no international exchange in BRICS countries. They dominate rice (39%), wheat (33%), and corn (23%) exports.  

In polar geopolitical circumstances, the U.S. and EU could face input challenges. BRICS countries produce most of the nitrogen, phosphorus, and potash used in fertilizers. G7 nations, in particular, have limited access to phosphorus.  

Potential Changes in Trade Relations  
Rabobank, in its report ‘Trump 2.0: Impact on Global Food and Agriculture’, states that Trump’s policy changes could create a complex scenario for global food and agricultural trade. These policies may alter existing trade relationships, increase costs for businesses and consumers, and drive inflation. Changes in consumer behavior and the international trade system are also possible, depending on the extent of Trump’s tariffs and the retaliatory measures they provoke.  

Rabobank Executive Vice President Stephen Nicholson noted in an interview that Trump has learned from his first term and understands how to implement his agenda. He is likely to appoint non-mainstream Republicans loyal to his policies to key positions in his administration. During his first term, Trump offset farmers' losses from the trade war with China, but he may not do so this time, as he no longer faces reelection.

Trump has nominated his former aide, Brooke Rollins, to head the U.S. Department of Agriculture (USDA). Rollins, currently President and CEO of the America First Policy Institute, previously served in Trump’s administration and has a background in agricultural development from Texas A&M University.

Challenges for the International Agricultural Industry  
The U.S.-Mexico-Canada Agreement (USMCA) is another area of concern for the global agricultural sector, as it is due for renegotiation in two years. Mexico and Canada are the U.S.’s largest trading partners. 

Regarding exports from Europe to the U.S., the impact of tariffs will vary across commodities. While European exporters may absorb some increased costs, higher tariffs such as a 20% or non-tariff barriers could significantly disrupt trade.  

Other Challenges in Agriculture  
Rising prices of equipment, fuel, fertilizers, and chemicals are increasing production costs for farmers. The volume of global grain trade is also expected to decline. The International Grains Council (IGC) estimates grain trade for 2024-25 at 419 million tons, down from 455 million tons in 2023-24. Climate change is another source of uncertainty, with extreme weather events affecting major production areas. Europe experienced heavy rainfall, while the Black Sea region faced drought. El Niño has further exacerbated the situation.  

Weak La Niña conditions are predicted for 2025, though no official announcement has been made. Delayed rainfall in Brazil and dry conditions in Argentina and southern U.S. regions are potential impacts. Clearer insights into La Niña’s effects are expected by March-April.  

India’s Role in wheat market
India’s growing population and high domestic wheat prices may lead to wheat imports this year or the next. Currently, wheat prices in Chicago are $5.8 per bushel, compared to $9 in India. India’s increasing food demand could add pressure on imports, making it a significant player in the international wheat market.  

Rising Global Demand for Biofuels  
Global demand for biofuels is expected to rise sharply. The aviation industry, in particular, is driving new demand. Sustainable aviation fuels (SAF) made from vegetable oils, ethanol, plant biomass, and waste products are gaining traction, including soybean-based biodiesel and corn-based ethanol. SAF is blended with conventional fuel at ratios between 10% and 50%. According to the International Civil Aviation Organization (ICAO), SAF has been used in over 360,000 flights at 46 airports in the U.S. and Europe.  

In 2024, global SAF production is expected to exceed 600 million gallons. However, this represents a small fraction of the 100 billion gallons of aviation fuel used annually. The Biden administration set targets of producing 3 billion gallons of SAF by 2030 and 35 billion gallons by 2050 to meet domestic aviation fuel demand entirely.  

Yet questions remain. Will Trump’s policy support SAF development? Can SAF costs, currently three times higher than petroleum fuels, be reduced? Is there enough arable land to produce the required feedstock for SAF? Studies indicate that converting forested land for crops releases carbon from the soil. What will be the net environmental impact?