CHOICES
A publication of AAEA
On February 1, 2025, the Trump administration announced tariffs on imports from Canada, Mexico, and China, framed as part of efforts to curb fentanyl trafficking and illegal immigration (Hammond and Burkhart, 2025). This move prompted swift retaliation from longstanding US trading partners, notably Canada and Mexico, and reignited the 2018–2019 trade dispute with China. Two days later, on February 3, the Trump administration paused the tariffs in exchange for commitments to strengthen border security and to enforce drug laws. Since then, as summarized in Table 1, the White House has maintained a steady flow of announcements throughout 2025 involving new tariff threats (“on”), pauses (“off”), and trade deals.
A key development occurred on April 2, known as “Liberation Day,” when the White House announced a 10% blanket tariff on all imports, alongside additional duties of up to 40% on certain countries, including Vietnam and Sri Lanka. Trump administration officials stated that these tariffs have prompted foreign governments to negotiate bilateral trade deals with the US (The White House, 2025). The path toward such talks, however, proved far from straightforward. As Figure 1 illustrates, the immediate market response was a decline in confidence in the US dollar. Historically, the 10-year US Treasury bond yield and the US Dollar Index, which tracks the dollar’s value against a basket of six major currencies, have tended to move together. Since Liberation Day, however, the Dollar Index has fallen below the Treasury yield, signaling a decline in foreign investors’ confidence in the currency. When investors perceive the US economy as riskier, they sell Treasury bonds, which drives down prices and pushes up yields. At the same time, selling dollar-denominated assets puts downward pressure on the US dollar.
The trade conflict with China escalated more sharply than that with other countries. Following the US increase in tariffs on Chinese goods, China responded by raising its tariffs on American exports by 125%. In turn, the US raised its duties to as much as 145%. While the two countries eventually resumed talks, negotiations remain ongoing (Hammond and Burkhart, 2025). Meanwhile, the Trump administration has signed new trade deals with several countries, including the United Kingdom (UK), Japan, South Korea, Indonesia, and the European Union (EU). Still, the direction of US trade policy and the potential impact on US agriculture remain uncertain.
To identify which agricultural products are more vulnerable to export losses from potential tariff retaliation, we calculate each product’s foreign market dependency, defined as the share of total US exports sent to China, Canada, Mexico, or the EU. This approach, based on Huang et al. (2023), assumes that a higher share indicates greater reliance on that market. These four destinations are highlighted because they are key targets in the current White House trade agenda. Figure 2 presents the top ten BICO (Bulk, Intermediate, and Consumer-Oriented) product groups with the highest export dependencies in each market in 2024. Export dependence ranges from 0 to 1, where 1 indicates that all exports are directed to that market. For context, the figure also reports the total export value of each product to that destination in 2024.
We begin with Canada and Mexico, shown in Panels A and B of Figure 2, given their proximity to the US and their participation in the United States-Mexico-Canada Agreement (USMCA), which resulted from the renegotiation of the North American Free Trade Agreement (NAFTA) during President Trump’s first term. Among the products exported to Canada, several show dependencies above 0.60, with some exceeding 0.80. However, the most significant products in terms of both export dependency and export value are fresh vegetables, with a dependency of 0.79 and nearly $3 billion in exports in 2024. They are followed by baked goods, cereals, and pasta, with a dependency of 0.61 and $2.7 billion in exports. These products would be among the most exposed to losses if Canada were to impose retaliatory trade measures on US goods. For Mexico, the products with the highest potential impact are corn, dairy products, and pork and pork products. In 2024, the US exported $5.7 billion in corn to Mexico, accounting for 40% of total corn exports. Dairy and pork exports to Mexico totaled $2.5 billion each, representing 30% of total US exports for both product groups.
For China, presented in Panel C of Figure 2, five product groups stand out as most at risk when considering both export dependency and export value. The most important is soybeans, with an export dependency of 0.52 and $12.7 billion in exports to China in 2024, the highest export volume among all product groups analyzed. Next are coarse grains (rye, barley, oats, andsorghum, among others), with a dependency of 0.83 and$1.3 billion in exports. Cotton follows, with a dependency of 0.30 and $1.5 billion in exports. The last two are beef and beef products, as well as pork and pork products,each with export dependencies below 0.20 but with export values of $1.6 billion and $1 billion, respectively. The case of soybeans recalls the experience of the 2018–2019 trade dispute, when they became China’s primary choice for tariff retaliation (Carter and Steinbach, 2020; Adjemian, Smith, and He, 2021; Baryshpolets, Devadoss, and Sabala, 2022).
In the EU, as shown in Panel D of Figure 2, two product groups stand out as the most at risk. First are tree nuts (almonds, cashews, walnuts, etc.), which have an export dependency of 0.27 and are projected to have $2.7 billion in exports to the EU in 2024. Of the total tree nut exports, over 50% were almonds, 23% were pistachios, and 13% were walnuts, highlighting that producers in California are the most exposed (Carter and Steinbach, 2019, 2022; Asci and Devadoss, 2021; Steinbach and Zhuang, 2023). Second are distilled spirits, with an export dependency of 0.45 and $1.3 billion exported, more than 56% of which was whiskey. This places a larger burden on producers in Southern US states (Muhammad, Menard, and Smith, 2025).
US agricultural exports were hit harder by retaliation from China than from any other country, primarily due tothe long-standing trade dispute between the two nations. Usually, China applies its most-favored-nation (MFN) tariff rate, which, for example, is 3% on soybeans.However, during the 2018–2019 trade dispute, China imposed steep retaliatory tariffs after the US used Section 232 of the Trade Expansion Act and Section 301 of the Trade Act to charge additional import duties onChinese goods. As part of the US-China Phase One Agreement in 2020, China granted exemptions to the Section 301 tariffs on certain agricultural imports (USDA-FAS, 2020).
Under the current trade policy, most US agricultural exports face an additional 20% retaliatory tariff. Tariffs briefly peaked at 150% in April but were reduced to 20% after the US and China announced a framework agreement in May. China has indicated that it will cease granting certain Section 301 tariff exemptions after October 30, 2025, with all approved exclusionsremaining valid until December 13, 2025 (USDA-FAS,2025). If the exemptions are lifted, the 20%–30% retaliatory tariffs imposed since 2018 will remain in effect without relief. Table 2 presents the tariffs on the top 10 US agricultural exports to China in 2024, comparing the MFN rates, tariffs in effect through July 2025, and rates if the Section 301 exemptions are terminated. Soybeans, cotton, wheat, and tree nuts are among the hardest hit, with tariff increases of 27.5%, 25%, 25%, and 29%, respectively.
To assess how China’s 2025 retaliatory tariffs could affect US agricultural exports to China in 2026, we model two policy scenarios and compare them to the projected exports under the MFN tariff baseline. Scenario 1 models a tariff increase from the MFN rate to the rates applied in July 2025, corresponding to the change from column 3 to column 4. In Scenario 2, in addition to the tariff hike in Scenario 1, China removes all Section 301 tariff exemptions, corresponding to the change from column 3 to column 5. We estimate the partial effects on US exports using the methodology of Steinbach, Yildirim, and Zurita et al. (2024) and Steinbach et al. (2024), calculating them separately for each product group. This method applies tradeelasticities estimated by Grant et al. (2021) to baselineexport values in 2024, enabling us to simulate howchanges in applied tariffs affect US agricultural exports to China, while holding other factors constant.
Table 3 presents the potential impacts of Scenarios 1 and 2 in 2026 for the top US agricultural exports to China. The first column reports the projected export values under MFN tariffs, totaling $27.3 billion. The remaining columns present the effects in percentages under each scenario. Under Scenario 1, exports would decline to $18.6 billion, representing a 32% decrease. The most affected products include soybeans (down 61.2%), wheat (down 87.9%), and coarse grains excluding corn (down 47.3%). Scenario 2 shows a greater impact, with total exports falling by 81% to $5.1 billion. In this case, exports of soybeans, wheat, and poultry to China would effectively be shut off.
The White House states that its trade policies aim to encourage other countries to enter into agreements with the United States, thereby providing American farmers with increased access to foreign markets. We now assess the potential benefits of new trade deals. Our focus is on trade deals with the UK and Japan, as these specifically outline purchase commitments for agricultural products (Ridley and Devadoss, 2025). A comparable example is the Phase One agreement with China, in which China committed to purchasing and
importing approximately $40 billion annually in agricultural and seafood products over two years. China ultimately met only 83% of that target (Bown, 2022). UK and Japanese importers are likely guided by market prices and conditions. In contrast, China’s Phase One commitments were primarily driven by government directives, making export potential in the former more dependent on market competition.
On May 8, the White House announced a trade deal with the UK, which is said to include greater access for US ethanol, beef, cereals, fruits, vegetables, animal feed, and tobacco. Using UN Comtrade (2025) data, we estimate the market potential for the products included in this new agreement. We define the overall market potential as the additional exports the US could achieve if it were to supply 100% of the UK’s import demand. To estimate this, we calculate the average annual share of US exports in the UK’s total imports and multiply the complement of that share by the UK’s total import value in 2024. The results, presented in Panel A of Table 4, indicate that for the mentioned products, the UK has a total market potential of $19.4 billion for US agricultural producers. The largest market potential values are found in processed and fresh vegetables, as well as poultry and poultry products, each at around $4.2 billion. Beef and beef products have an estimated market potential of approximately $2.1 billion, while ethanol has an estimated market potential of around $435 million.
To evaluate whether US exporters can realistically capture this potential, we examine market share and CIF import prices (in $/kg) for BICO product categories with a market potential exceeding $1 billion, as shown in Panels A–D of Figure 3, focusing on HS codes with a potential of more than $300 million. For UK imports in 2024, we plot market share against import price for processed vegetables, poultry meat and products (excluding eggs), fresh vegetables, and beef and beef products. Of these, only processed vegetables show strong potential, with import prices below the average in the British market and a low US market share. The leading suppliers of processed vegetables are Belgium, the Netherlands, Italy, Portugal, and Spain. All of these countries are geographically closer to the UK than the United States, suggesting that transportation costs may be a key barrier to expanding US exports in this category. The other products do not show the same combination of favorable market conditions. However, these market potential estimates should be interpreted cautiously, as consumer preferences, regulatory standards (e.g., for poultry and beef), and existing trade agreements the UK has with Australia and New Zealand may further constrain US export opportunities.
The second relevant agreement for our analysis is the US–Japan trade deal, announced on July 23. Under thisdeal, Japan made two purchase commitments. First, itwould increase US rice imports by 75% under its existing WTO minimum access quota, giving the US a larger share of Japan’s total quota and providing a rareopening in a highly protected market. Japan also committed to purchasing $8 billion in US agricultural and biobased products, including corn, soybeans, wheat, beef, grain products, fertilizers, bioethanol, and sustainable aviation fuel (SAF). Estimates of Japan’s market potential are shown in Panel B of Table 4. The results indicate that, for the products covered in the agreement, Japan offers a total market potential of $12.5 billion. The largest opportunities are in pork and pork products, valued at $3.6 billion, and beef and beef products, valued at $2.4 billion. Other significant prospects include SAF, corn, and wheat, each with a market potential exceeding $1 billion.
As with the UK, we assess the potential for US producers to capture the Japanese market based on import price competitiveness, as shown in Panels E–F of Figure 3. Here, the focus is on pork and pork products and beef and beef products. The US already holds a significant share; around 20% for pork and 40% for beef. Import prices in both categories are below average, suggesting room for additional market share growth. In the pork market, the strongest competitors are Canada, Spain, Brazil, and Mexico. For beef, the competitors are Australia, Canada, New Zealand, and Mexico.
The Trump administration states that its trade policies, focused on raising certain tariffs, aim to encourage foreign leaders to engage in negotiations with the US based on the principles of fairness and reciprocity. However, there is also the risk that other countries will respond with retaliatory trade actions, as China, Canada, Mexico, and the EU did when the US first announced additional tariffs. To maximize impact, these countries target products that have the greatest effect on American producers. Our analysis suggests that these could include soybeans to China, corn, dairy, and pork to Mexico, fresh vegetables to Canada, and nuts and whiskey to the EU. Conversely, if tariffs are paused or scaled back, it could signal that the US is seeking negotiations rather than escalating toward a trade war.
Moving forward, US agricultural producers face both significant risks and substantial opportunities. Retaliatory tariffs from major trading partners could sharply reduce exports in key sectors, particularly if tensions with China continue. At the same time, new trade deals, especially those with purchase commitments, provide openings that the US can actively leverage. It will be essential to include purchase commitments for products most vulnerable to retaliation, such as soybeans in China and whiskey in the EU. Effectively managing these risks and opportunities will be essential to sustaining and expanding US agricultural exports in the years ahead.
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