CHOICES
A publication of AAEA
Since his return to the White House in January 2025, Donald Trump has, in a few short months, upended the global trading system with a series of tariff announcements that threaten trade and have created much uncertainty in global markets. Citing the persistent US trade deficit and what he considers unfair practices by other countries, the president declared April 2 “Liberation Day” and announced a sweeping new set of supplemental tariffs on imports from nearly all major US trading partners. This announcement followed a series of previous actions taken since the beginning of the administration, including 20% tariffs on Chinese imports, 25% tariffs on automobiles and auto parts, and duties on steel and aluminum (Bown, 2025).
While the broader political and economic implications of these measures have dominated initial headlines, their impact on global agricultural trade could be equally disruptive. Agriculture sits at the intersection of global value chains, international development, and national food security. It is also a sector that has historically been highly sensitive to trade policies, retaliatory tariffs, and sudden shifts in market access. As with the wave of tariffs introduced during the first Trump administration, this new regime could reshape trade flows, drive price volatility, and introduce long-term uncertainty into the global food system.
This paper examines the impact of US tariffs on agricultural trade flows, with particular emphasis on Latin America and the Caribbean (LAC), which accounted for almost 17% of total US agricultural imports in 2024 and are significant suppliers of fruits and vegetables as well as tropical products like coffee and cocoa. US agricultural exports—such as grains and oilseeds, meat and poultry, and cotton—compete directly in global markets with exports from LAC countries like Brazil and Argentina. We examine how tariffs both impede exports to the United States and potentially create new opportunities in third markets.
We analyzed three potential scenarios to assess the implications of the new US tariff policies (Table 1). The first scenario, North America, is based on the fact sheet released by the White House on February 1, 2025 (White House 2025) This scenario includes a 25% tariff for all imports by the United States from Canada and Mexico, except for energy products, which only receive a 10% tariff.
The second scenario, Liberation Day, reflects tariffs announced on April 2, 2025, introducing a 10% supplemental tariff on imports from nearly all US trading partners. In addition, countries with which the United States runs the largest bilateral trade deficits face higher, individualized tariffs referred to by the Trump administration as “reciprocal” tariffs—though these are imposed unilaterally rather than mutually negotiated. Significantly, the Liberation Day tariffs exempt Canada and Mexico from tariff increases.
The third scenario, China + 10%, simulates the global trade impacts of the United States and China’s retaliatory tariffs in place as of April 12. On the US side, this includes the 10% additional tariffs announced on April 2 against all trading partners but Canada and Mexico (but not the additional supplemental tariffs from April 2). In addition, this scenario includes 125% tariffs specifically targeting China. In response, China is assumed to impose a 125% supplemental tariff on US exports, representing a significant counter-retaliatory measure. No other country retaliates against the US in agrifood products, but all countries impose retaliatory measures on US exports of steel, aluminum, cars, and car parts.
We analyze the impacts of the new US tariffs using MIRAGRODEP, a multiregion, multisector computable general equilibrium model that aims to explain agricultural trade patterns (as well as those of other sectors) and show how these would change in response to changes in tariff levels (Piñeiro et al., 2025). The model is designed to capture medium-term impacts, essentially providing a snapshot of the economy before the shock and another one after the shock has taken effect. Because it does not restrict factor adjustments, reported impacts on GDP and trade may be smaller than in the short run (where production adjustments may be less responsive).
Across all three scenarios, GDP declines are observed globally (see Table 2), with variations depending on the country or region. The United States itself experiences negative impacts in all scenarios, with the most significant drop occurring under the Liberation Day scenario (–1.21%). This highlights the potential self-inflicted economic harm of broad, unilateral tariff hikes, even when introduced under the premise of boosting national competitiveness.
The most severe GDP losses are seen in Canada and Mexico, particularly under the North America scenario, where tariffs are likely more concentrated on close trading partners. Mexico's GDP falls by over 2%, and Canada’s decline is also substantial (–1.5%). These outcomes reflect the deep economic integration these countries have with the United States.
In the case of China and the EU, the impacts are more moderate but still clearly negative. China is hit hardest in the China +10% scenario (–0.4%), where it faces direct supplemental tariffs, while the EU sees smaller GDP losses due to indirect effects such as trade diversion and global slowdown.
For Latin America and the Caribbean (LAC), GDP shows limited upside under the North America scenario, while the other two scenarios result in economic contraction. The region’s vulnerability stems from its dependence on global markets and agricultural exports, which are sensitive to shifts in trade policy and demand.
Sub-Saharan Africa (SSA) experiences similar directional impacts across the different scenarios, though with lower overall magnitudes. Although not a direct target of the tariffs, the region is indirectly affected through global economic linkages, such as commodity prices, reduced trade volumes, and tighter global financial conditions.
Finally, the global economy suffers under all three scenarios. The aggregate world GDP declines, showing the broader costs of escalating trade tensions, with the greatest impact under the Liberation Day scenario (–0.4%). While tariffs may be intended to protect domestic industries or rebalance trade relationships, they often backfire by reducing competitiveness.
Across the three scenarios, both imports and exports in the agrifood sector experience significant declines globally (Table 3), with variations across different countries and regions. The United States faces the most substantial negative impact on both imports and exports, with the most pronounced drop under the Liberation Day scenario (–24.5% and –39.1%, respectively). Results are broadly in line with relative results from other studies (see Bouët, Maty, and Zheng, 2024; Meltzer, 2025; Budget Lab, 2025).
Canada and Mexico see the most severe reductions in agrifood imports and exports, particularly in the North America scenario, where tariffs are more concentrated on these close trading partners. Mexico experiences a steep decline in imports, with a drop of nearly 34% in the North America scenario, and a significant reduction in exports as well (–25%). Canada's imports fall by nearly 24% under the same scenario, while its exports drop by 20%. These results reflect the deep economic integration of these countries with the United States, highlighting the interconnectedness of trade flows within the region.
For LAC (excluding Mexico), both imports and exports experience smaller impacts due to the low US share of agrifood trade in these regions. Across the different scenarios, imports in LAC (excluding Mexico) declined from 1.5% to –2.2%, while exports fell from 1.3% to 0.4%. However, their dependence on agricultural exports makes them sensitive to changes in global trade policies and demand.
Ultimately, global trade suffers under all three scenarios, with the most pronounced drop under the Liberation Day scenario (–4.7%). These trends underscore the broader economic costs of escalating trade tensions.
Beyond the impacts on total trade, the different scenarios reveal notable trade diversion effects that alter established trade patterns (see Table 4). Such diversions can have lasting implications for regional competitiveness, integration, and economic resilience. This highlights how even short-term policy shifts can trigger long-term structural changes in trade dynamics.
Under the North America scenario, agrifood exports from Mexico and Canada to the United States decline sharply, by 52% and 65%, respectively. In response, US imports from LAC (excluding Mexico) increase, partially offsetting the reduced inflows from Canada and Mexico. Bilateral trade between Canada and Mexico rises, and Mexico redirects some of its exports toward the EU and China. However, these alternative markets do not fully compensate for the substantial loss of access to the US market.
Under the China +10% scenario, US agrifood exports experience a broad-based decline across all major regions, with the steepest contraction occurring in exports to China (99%). In response, China diversifies its sourcing strategy by significantly increasing agrifood imports from alternative suppliers, particularly Canada, and LAC (excluding Mexico).
Under the Liberation Day scenario, the overall trade impacts are more pronounced across all regions. However, a key distinction emerges: Since Mexico and Canada are exempt from tariffs, intra-North American trade expands. Relative to the China +10% scenario, USexports to other global regions face more severe declines, particularly in exports destined for the EU. Notably, US exports to China exhibit a relative improvement in response to a lower tariff under the North America scenario.
To understand better how tariffs distort trade flows, consider the case of oilseeds. China plays a pivotal role in global oilseed markets, particularly as the dominant importer of soybeans. In the 2023/2024 marketing year, China imported 112 million metric tons of soybeans, 62% of the global soybean trade, driven by its need for soybean meal for animal feed and soybean oil for food use. Since 2000, China’s soybean import demand has expanded at an extraordinary average annual rate of 9.2%, vastly outpacing global growth. This voracious demand has structured the global soybean supply chain, with Brazil and the United States emerging as the two largest exporters to China, accounting for a combined 92% of China’s imports. However, shifts in trade policy, such as the proposed 125% tariff on US soybeans under the China +10% scenario, could radically disrupt existing flows and prices in the global oilseed market.
Under this scenario, US soybean exports to China would become prohibitively expensive, likely falling to near zero (see Table 5). Brazil, already China’s largest supplier, would further consolidate its position, with Argentina and other South American exporters also increasing shipments. Despite this adjustment, China’s total oilseed imports are projected to decline by 8.2% due to supply constraints and higher prices. The United States, meanwhile, would face an estimated 39% drop in oilseed exports overall, as new buyers in secondary markets(Europe and Mexico) only partially compensate for lost Chinese demand. Global oilseed trade would contract by 4.2%, revealing the scale of the distortion caused by tariff-induced trade redirection.
Together, the three scenarios underscore the complexity and far-reaching consequences of large-scale trade disruptions in global agricultural markets. While each scenario reveals distinct patterns of impact—whether highly concentrated regional losses in North America, strategic global realignments triggered by US–China tensions, or widespread fragmentation under wide-ranging US tariff policies—all highlight the vulnerability of interdependent trade systems to protectionist shocks. These findings emphasize the importance of market diversification, investment in resilient supply chains, and the maintenance of open and predictable trade environments. In an era of rising geopolitical uncertainty, evidence-based trade policy and strategic cooperation will be critical to minimizing economic harm, ensuring food security, and preserving the stability of global agrifood trade networks.
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Bown, C. 2025, August 21. “Trump's Trade War Timeline 2.0: An up-to-Date Guide.” Realtime Economics [blog]. Peterson Institute of International Economics. Available online: https://www.piie.com/blogs/realtime-economics/2025/trumps-trade-war-timeline-20-date-guide
Budget Lab. 2025, April 10. “The Fiscal and Economic Effects of the Revised April 9 Tariffs.” Yale University. Available online: https://budgetlab.yale.edu/research/fiscal-and-economic-effects-revised-april-9-tariffs
Meltzer, J. 2025, February 3. “Trump's 25% Tariffs on Canada and Mexico Will Be a Blow to All 3 Economies.” Brookings Institution. Available online: https://www.brookings.edu/articles/trumps-25-tariffs-on-canada-and-mexico-will-be-a-blow-to-all-3-economies/
Piñeiro, V., J.P. Gianatiempo, J.A. Rueda, and J. Glauber. 2025. Rewriting the Rules: How U.S. Tariff Paths Could Reshape Global Trade. IFPRI Discussion Paper 02379. International Food Policy Research Institute. Available online: https://hdl.handle.net/10568/178193
White House. 2025, February 1. “Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China.” Available online: https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/
