A Farmer works near sunset in a field in central Nebraska. The Trump administration enacted new tariffs on Mexico and Canada this week while upping them on China. Canada and China fired back with new tariffs, and China has targeted US agriculture in its response. The fight could harm Nebraska farmers’ crop prices while raising the prices of imported goods they buy, though, during its previous trade war, the Trump administration delivered billions in direct payment to cushion the blow. Experts warn those costs may also get passed onto consumers. Photo by Lori Potter for the Flatwater Free Press.
The Trump administration has now placed tariffs on the United States’ three biggest trading partners. They are retaliating. It’s starting to affect Nebraska businesses, who wonder: How big of an impact will it have?
By Joshua Shimkus, Roy W. Howard Fellow
The livestock feed company is already feeling the squeeze.
Imogene Ingredients is Iowa-based, with customers across Nebraska. But the company is also global, importing ingredients to use in its feed products from around the world – including from China.
The recent Trump administration tariffs imposed on that country means that the animal feed company will now pay more for a feed additive for pigs and chickens, a product that can lead to healthier animals and savings for farmers.
Speaking from his cell phone as he drove into Nebraska, Imogene Ingredients’ Managing Partner Paul Mitchell said the company and its supplier will absorb the increased cost as long as they can. But that will only work for a few months.
“Long term we’d have a significant price increase,” he said. “So if the price is increasing, it’s not gonna be 1%, 2%, it’d be a major jump up, because this would be the new normal.”
The blanket 10% tariff on Chinese imports was the Trump administration’s first concrete move to impose tariffs on U.S. trading partners. This week, Trump increased those tariffs to 20% while adding 25% tariffs on most imports from Mexico and Canada. Canada, Mexico and China responded by announcing their own tariffs, with China targeting agriculture and including three giant Nebraska exports: corn, cattle and soybeans.
Other planned Trump tariffs could soon affect the prices of steel, aluminum, lumber and copper and hit more countries that already have tariffs on U.S. goods.
Trump has alleged that trading partners are ripping off the United States because they export more goods to the U.S. than they import. Supporters have also argued that tariff threats could reopen negotiations and lead to better terms for producers in the U.S.
But new tariffs can also lead to retaliation, which can be directed at industries like agriculture.
Farmers work inside a globalized economy, depending on things like fertilizer, energy, machinery and irrigation equipment that could become more costly with tariffs. And those costs can filter down, said Nathan Bowen, a vice president for the Irrigation Association, an industry group.
Trump’s proposed tariffs on steel and aluminum won’t just harm manufacturers, he said. They’ll also impact the people that purchase those products.
“It can mean layoffs, reduced production, delayed expansion plans and fewer equipment purchases,” Bowen wrote in an email. “And when you’re talking about essential industries like agriculture and irrigation, those ripple effects hit the entire economy.”
Tariffs are nothing new to the Trump administration.
In 2018, during his first term as president, Trump imposed tariffs on solar panels and washing machines, then quickly followed them with broader tariffs on steel and aluminum. Escalating retaliations from U.S. trading partners led to a trade war that a variety of non-partisan think tanks including the Tax Foundation, the Peterson Institute for International Economics and the Brookings Institution have described as a net-negative for the American economy.
Many of the retaliatory tariffs during that trade war targeted politically sensitive areas like agricultural exports, said Brad Lubben, a UNL agricultural economics professor.
The Nebraska Farm Bureau estimated that tariff-related losses cost Nebraska farmers nearly $1 billion in 2019 alone, with soybean and corn producers impacted the most. Most of those financial losses were offset by direct payments to farmers from the federal government through a Trump administration USDA program which distributed billions to farmers.
But the trade war still had an impact here, Lubben said. Supply chains and markets shifted, with countries like Brazil and Argentina exporting more soybeans to China to fill the demand previously filled by U.S. farmers.
“Now, seven or eight years later, we still see a different pattern of trade flows around the globe,” Lubben said. “Trade losses linger and it takes a really long time to rebuild a market.”
The trade war ended on paper with the Trump administration’s “Phase One” trade agreement with China in 2020. This was supposed to lead to China expanding purchases of U.S. products. But those purchases never happened, according to the Peterson Institute for International Economics. Then the Biden administration kept the tariffs in place.
During both administrations, the United States gradually entered into agreements with individual trading partners to reduce tariffs on steel and aluminum, exempting some countries and establishing quotas on imports with others.
But this year, Trump announced that the 25% tariff on steel would return and that the tariff on aluminum would increase from 10% to 25%, scrapping previously negotiated agreements. These tariffs are scheduled to take effect March 12.
Manufacturers familiar with the 2018 trade war know to expect higher prices if those tariffs return. And it’s likely to matter in Nebraska. The Irrigation Association has major Nebraska center-pivot manufacturers like Lindsay Corporation, Reinke Manufacturing and Valley Irrigation as members. Nathan Bowen with the Association said that the immediate impact of these tariffs would be higher costs.
“All this combined is a perfect storm with less investment in efficiency and productivity and a direct hit to the businesses that keep farms running and create jobs in our communities,” he said.
President Trump says the United States is being taken advantage of by other countries, and other supporters say that tariff threats can help reopen negotiations which result in a better deal for the U.S. Photo courtesy of the University of Nebraska-Lincoln/University communications
Imogene is a good case study for the interconnected nature of the global economy, one that can be disrupted by tariff fights.
The company sources materials from other countries because many ingredients can’t be found here, Mitchell said. Psyllium husk, an additive that can benefit sow and horse diets, comes from an herb primarily grown in India. Another feed additive they sell, Farmatan, comes from a specific European hardwood tree.
Imogene Ingredients purchases enzymes from China, which are subject to the new tariffs. Enzymes could be developed domestically, Mitchell said, but the cost of complying with environmental regulations in the United States allowed overseas suppliers to produce at a lower price and outpace the domestic industry years ago. Imogene has been doing business with its supplier in China for nearly 20 years, and there aren’t other enzyme producers with comparable quality, standards and pricing, Mitchell said.
“It’s not easy to switch,” he said.
Enzyme production is capital-intensive, requiring machinery like large scale fermenters and bioreactors. These supply chains can’t just move to the United States overnight.
“There are some things that China has an advantage in, and to be able to benefit from that is free trade,” Mitchell said.
The Trump administration will likely continue to use tariffs and the threats of tariffs, said Matthew Schaefer, UNL law professor and chair for the Yeutter Institute for International Trade and Finance.
“It’s pretty clear … that tariffs are going to be used as a tool to create some leverage on the trade front, but also for some non-trade issues. I think we can expect a lot more of the same,” he said.
Supporters and Trump administration officials have said that other countries are ripping off the U.S. through closed international markets and trade deficits.
Nebraska leadership has expressed support for tariffs when used to negotiate new trade deals. On Feb. 1, Nebraska Gov. Jim Pillen posted on social media that Trump’s tariff actions were putting American prosperity and security first. K.C. Belitz, director of the Nebraska Department of Economic Development, told the Flatwater Free Press in an email that tariffs can be a tool to restore competitive balance.
Farm groups, including those often at odds politically, publicly decried this week’s tariffs.
In a statement on Tuesday, American Farm Bureau Federation President Zippy Duvall said that farmers support security and fair international trade, but that the new tariffs and retaliatory tariffs will hurt rural America.
“Adding even more costs and reducing markets for American agricultural goods could create an economic burden some farmers may not be able to bear,” Duvall said.
Nebraska Farmers Union President John Hansen said that trade agreements have sometimes catered more to international interests than those of U.S. farmers. But he also believes tariffs become clumsy instruments if leaders aren’t using nuance or differentiating between trading partners.
“I have a hammer as a tool, I just don’t hit everything with the hammer. If I stick to hitting nails, it’s a good thing. If I’m breaking windows, it’s a bad thing,” Hansen said.
International trade touches all types of Nebraska industries.
The state imported about $5.7 billion worth of commodities and products in 2022, according to trade data from the U.S. Census Bureau. And it exports even more – nearly $10 billion worth of agricultural products in 2022 according to USDA, led by exports of soybeans, corn and beef.
About $1 billion worth of Nebraska’s imports in 2022 came from China and included products at every stage of the manufacturing process: raw materials like steel and rubber; partially finished items like electric circuits and gearboxes; finished consumer products like clothing and laptops. Barring any exceptions, all will be subject to the 20% tariff.
In a recent publication by the Yeutter Institute at UNL, Yeutter Institute chair Edward Balistreri wrote that the initial 10% tariff on China would likely have a greater impact than the entirety of the 2018 trade war, largely because it will impact so many globally integrated industries.
That was before the increased tariff on China, and before the newly implemented tariffs on Canada and Mexico.
Tariffs impacting trade with Canada and Mexico are what Paul Krueger is most worried about. Krueger, a corn and soybean farmer located near Bladen in south-central Nebraska, said that grain commodity prices immediately fell when the tariffs were initially announced.
“That is the number one thing about being a farmer, you’re 100% powerless on the price of things and you’re 100% powerless on the weather, and those are the two things that affect us the most,” Krueger said.
Like others, Krueger believes tariffs may be useful in negotiations with China. But with low grain commodity prices and uncertainty in the market, he said that he plans to tighten his belt and put off large purchases until the trade environment seems more stable.
Experts expect more turbulence for an obvious reason: In 2022 Canada, Mexico and China were the top three importers of U.S. goods. That year they were also the top three exporters of goods to the United States.
The three countries combined buy most of Nebraska’s corn and soybean exports, said Nebraska Farm Bureau President Mark McHargue in a statement, and a significant chunk of Nebraska’s soybean meal, pork and beef.
That worries Krueger, and he doesn’t think he’s alone.
“Any time our country gets involved with any sort of tariffs that affect the agriculture industry, every farmer just kind of groans about that,” he said. “We’re powerless to do anything except take what comes out in the wash.”
