BCG

AGRIBUSINESSINDUSTRY

HowTari?sCouldReshapeGlobalAgriculture

By

MattWesterlund

,LucasMoino,

IacobKoch-Weser

,andAdamHaidermota

ARTICLEJULY24,20258MINREAD

The

tari?s

imposedbytheTrumpadministration—andtheuncertaintysurroundingthem—are

havinganenormousimpactonmanyindustriesaroundtheworld,andtheagriculturesectorisnoexception.That’sbecauseagriculture,andthefoodsystemgenerally,involvesanenormously

complexdanceoftradeacrossinternationalbordersworthhundredsofbillionsofdollars.Regionaldisruptionstothissystemcanhaveglobalconsequences,withthepotentialtoa?ectbothrural

producersandurbanconsumersalike.

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Thepastdecadehasalreadyseensigni?cantdisruptionsandcommodityprice?uctuationstotheagrifoodsystemasaresultofevolvinggeopoliticsandincreasingclimatevariability.ItbeganwiththeUS-ChinatradewarinPresidentTrump’s?rsttermandcontinuedwithclimatechange-

inducedyieldreductions,theimpactofthepandemic,theRussia-Ukrainewar’se?ectonwheatprices,andIndia’sexportrestrictionsonrice.

Initsearlymonths,thewarinUkrainecauseda28%spikeinwheatprices,whicheventuallysettled2%to3%higherthanbeforethewar.Meanwhile,India’srestrictionsonriceexports,initiatedin

2022,causedpricestorisein

emergingmarkets.

However,whentherestrictionswereeasedinearly2025,othermajorexporterssuchasThailandfacedfarmerprotestsaspricesfellby30%.

TheTrumpadministration’srecenttari?s—aswellasthepotentialforreciprocaltari?s—could

acceleratetheseshisintheagriculturesystem,bothintheshorttermandformanyyearsto

come.Anditwon’tjustbefarmerswhoarea?ected:theindustrysupportsavastarrayofseed,

fertilizer,andcropprotectioncompaniesanddistributors;machinerymakers;andlogisticsand

transportproviders,aswellasthefoodcompaniesandretailerswhomakeandselltheworld’sfood.

Thenear-termimpactsofthecurrenttradedisruptionsarecomingintofocus,evenasthelonger-terme?ectsremainuncertain.Whataretheimplicationsforthemanyplayerswithstakesinthegame,andfortheagriculturalindustryasawhole?

AreasofPotentialImpacttoWatch

Theimmediateimpactofthenewtari?svariesconsiderablyfromcountrytocountryandcroptocropbutcanbebroadlyclassi?edintothreemajorcategories:

TheintegratedNorthAmericanfoodsystem

FarmerswithintheNorthAmericanfoodsystem,knittedtogetherthroughtheUS-Mexico-CanadaAgreement(USMCA),havebeena?ordedarelativedegreeofprotectionviatari?exemptionsby

theTrumpadministration.TotaltradewithinNorthAmerica,worth$1.88trillionin2023,includesawidevarietyofagriculturalproducts—bothhuman-consumedfoodlikefreshproduceandmeat

andcriticalfarminputslikefertilizerandfeed.YetanydisruptiontoproductionorinputswillbefeltnotonlyonNorthAmericanfarmsbutalsoatthedinnertable,creatingastrongincentiveto

maintainprotectionsfromtari?sforagriculturalproductstradedwithintheUSMCA.

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GlobalvaluechainsreliantonUSdemand

ProducerswhoexporttotheUSfaceadi?erentsetofchallenges.Tari?scantranslateintohigherpricesforUSconsumers,causingdemandshocksforproduceandcommoditygrowersthatcouldamplifythee?ectsofreducedyieldsonpricesthatarealreadyoccurringduetoclimatechange.

Co?eeisacaseinpoint:commoditypricesarealreadyata50-yearhigh.UndertheInternationalEmergencyEconomicPowersAct(IEEPA),tari?sonVietnam,whichsends8%ofitsco?eeexportstotheUS,wereinitiallyannouncedatastaggering46%.(Thisratehasnotyetbeenenforced,andwherethetari?s?nallylandremainstobeseen.)

USexportsexposedtotraderetaliation

Counter-tari?sonUSproductsbya?ectednationscouldalsoimpactthesector.Forexample,ChinarespondedtotheIEEPAtari?sbylevyinga?at10%dutyonallUSgoods(downfrom125%

followingtheUS-ChinadiscussionsinGeneva)andanextra10%to15%surchargeontargeted

agribusiness

products,a?ectingroughly$23.7billioninUSfarmexportstoChinain2024.Thisiswhereweseethehighestriskofdisruptionandthepotentialforawiderspreadbetweenwinnersandlosers.

WhySoybeansMatter

Thecurrentenvironmentof

pricevolatility

formajoragriculturalcommoditiesisunlikeanythingseeninthepastfewdecades.Andnocommodityislikelytobea?ectedasmuchassoybeans.

China’swillingnesstoenforcecounter-tari?sonUSgoodscreatesavulnerabilityforsoybean

farmersinparticular.ConsideringthetwolargestUScrops,consumptionofcornislargely

domestic,butmorethan50%ofthecountry’ssoyisexported.Ofthe$44billionofUSsoybeansgrownin2024,$25billionwasexported,withmorethanhalfofthatgoingtoChina.

Itisstillunclearhowthetari?swillimpactsoytrade.Tari?simposedduringthe?rstTrump

administrationin2018o?ersomeindication.ExportstoChinafellby75%,to8millionmetrictonsfrom32milliontheyearbefore,andtheper-bushelpricefellbyalmost10%.(SeeExhibit1.)By

2020,however,boththevolumeandpriceofexportstoChinahadessentiallyrecoveredtopre-2018levels,partlyduetoatradetruceunderwhichChinaremoveditspunitivetari?sontheUS.This

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historicalprecedentsuggeststhattari?increasescanhaveimmediateimpactandincreasevolatilityforthesector.

WhileChinahadalreadybeenlookingtoreduceitsdependenceontheUSforitsfoodsecurity,

thoseearliertari?screatedastrongerincentiveforthecountrytodiversifysupplyawayfromtheUS.Asaresult,ChinahasshiedaconsiderableportionofitssoyimportstoBraziloverthepast

tenyears,reducingtheproportionofUSimportstojust23%in2024,downfrom40%in2014.(SeeExhibit2.)Giventhesecircumstances,Brazilhascomeoutaheadofthegameandwilllikely

continuebuildingonthegrowthofitssoytradewithChina.Argentina,too,hasbeenmaking

investmentstoincreasesoyproductionandfurtherdeveloptheinfrastructureneededtoboostitsexports.

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Incontrast,whiletheimpactofthisshionUSsoyfarmershasbeenmitigatedtosomeextentbyanincreaseinvolume,thelonger-terme?ectsarelikelytobemorepermanent.Signi?cantly

limiteddemandforsoymaylowerpro?tsforUSfarmersandfortheirinputandequipment

suppliers.Anditwillultimatelya?ecttheentiregraintradingecosystem,whoseeconomicsaredrivenbyvolumeandexports.

PlantingfortheFuture

Theconstantshisintradepolicy—andtheaccompanyinguncertainty—poseasigni?cant

challengetofarmersandotherstakeholdersinthesector.Thisisespeciallytruegiventhattheagricultureindustry,liketheenormoustractorstheyuse,cannotturnonadime.Cropscan’tbereplantedmid-season,andevenshiing?eldstonewcropscantakeyears.

Asaresult,farmerswillbeforcedtomaketoughchoicesregardinghowtospendandallocate

capital.Inanenvironmentofhightari?sandstraineddemand,howmucharetheywillingtospendoninputs?Aretheycomfortablemakinglargeequipmentpurchases?Thedecisionstheymakewillimpactothervaluechainplayers—infertilizers,cropprotection,farmequipment,andbeyond.

Whiletari?policyishardtopredict,allplayersintheagricultureindustrycanbene?tfrom

monitoringpolicydevelopmentsandpreparingfordi?erentscenarios.Oneleadingindicatorcould

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comeintheformofsignalsfromcertaincountriesthattheyarelookingtoo?ercarve-outsfor

certaingoods,astheUShaso?eredCanadaforpotashimports.Anothercouldbenewinvestmentsinthestorageandlogisticsinfrastructureneededtoimportorexportacertaincrop,asArgentinaisnowdoingtoboostsoyexportstoChina.

Dependingontheirdegreeoftari?exposure,everyplayerintheagriculturalvaluechainfacesa

complexriskequationinresponsetotari?s.Mitigatingriskwillrequirecarefulattentiontocurrentandprospectivetradepolicyandgreater?exibilityineveryaspectofthebusiness,fromproduct

strategytocapitalallocationtosupplychainresilience.Beprepared.

LM

LucasMoino

Partner

S?oPaulo

AdamHaidermota

SeniorAnalyst,BCGVantage

Chicago

Authors

MattWesterlund

ManagingDirector&Partner

Chicago

IacobKoch-Weser

AssociateDirector,GlobalTrade&Investment

Boston

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