Financial Services Association, January 23 (Editor: Xiaoxiang) As Trump's tariff threat approaches, the US agricultural sector is expected to soon become one of the major industries affected by tariffs. This is making many people in the industry and market traders nervous and uneasy.

There are growing signs that traders, analysts, and US farmers are preparing in the same way as 2018 (when the last trade war began), despite current disagreement over the timing and scale of the Trump administration's imposition of tariffs on the European Union, Mexico, Canada, China, and even Russia.

With the exception of Russia, cereals are the main export products of the United States to all of these tariff-threatened countries. Pork is the main export product of the United States to China and Mexico.

If these countries stop buying agricultural products from the US, the price of related futures traded on the Chicago market is expected to drop sharply.

In fact, the roller coaster market for related futures products has already begun to appear this week. Grain futures on the Chicago Futures Exchange continued to fluctuate due to Trump's tariff remarks, and collectively fell during Wednesday afternoon trading in New York: corn futures, soybean futures, and wheat futures all fell by more than 1% on the same day.

Consulting firm AgResource said in a report on Wednesday, “CBOT grains and the US stock market rose sharply on Tuesday as Trump restrained the issuance of new tariffs on his first day in office. But traders are currently speculating whether this was a false reaction.”

Jason Britt, president of the Missouri brokerage firm Central States Commodities, stated, “After a lapse of four years, we must now pick up Trump's script again.”

A growing number of grain traders are now seriously weighing Trump's tariff threats. Trump said on Monday that he plans to levy 25% tariffs on Mexican and Canadian imports from February 1; by Tuesday, the tariff threat was further expanded — Trump threatened to levy a 10% tariff on products imported from China and the European Union starting next month.

On Wednesday, Trump further targeted Russia, saying that if Russia does not reach a peace agreement with Ukraine as soon as possible to end the war, the US will adopt harsher sanctions and also impose tariffs on Russian goods. Even though in 2023, the US only imported goods worth about 4.6 billion US dollars from Russia, accounting for less than 0.2% of total imports.

Britt said Trump's remarks showed his typical “way of dealing” — that is, starting with a more aggressive threat and using this as a bargaining chip. He pointed out, “Trump has always liked to release exploratory balloons to see how the other party reacted.”

Naomi Blohm, senior marketing adviser at Total Farm Marketing, pointed out that after Trump took the oath of office, he did not immediately severely crack down on tariffs in an executive order, but instead tried to make the world think about his words and intentions. Blohm believes that the February 1 date may be a signal he is sending to other countries that he is allowing “backdoor negotiations” on the implementation of tariffs, at least until next month.

China is the world's largest importer of agricultural products and one of America's most important customers for grain and meat. Analysts said that if the Trump administration imposes tariffs on China, or on Canada, Mexico, and the European Union, then the volatility of the US agricultural products market is expected to further explode, which will run counter to traders' brief sense of calm after the series of executive orders issued by Trump on the first day did not include new tariffs.

StoneX Group analyst Ana Luiza Lodi said in the fourth quarter of last year, “If there is a trade war between China and the US, the competitiveness of US (agricultural) products will be lower than Brazilian products. In this way, China will buy as much as possible from Brazil, thereby boosting demand for Brazilian agricultural products and increasing Brazil's export premium compared to Chicago.”

Economists from the US National Corn Growers Association and the American Soybean Association also pointed out in a research report released in October last year that if the economic losses caused by the hypothetical trade war were similar to those during the first trade war initiated by Trump in 2018, it could cost American farmers tens or tens of billions of dollars.

“From the beginning of summer 2018 to the end of 2019, US agricultural exports lost more than $27 billion due to retaliatory tariffs, with China (sharp decline in demand) accounting for about 95% of these losses,” the report said.