Posted on February, 5, 2025 at 10:25 am
On Saturday (1 February), President Trump moved ahead with his tariff plan, imposing 25% tariffs on imports from Mexico and Canada, and 10% on China. The tariffs are being implemented due to the trade surpluses as the countries sell more to the US than what they import from the US.
Uncertainty about impact of the tariffs and potential retaliatory measures put pressure on prices on Friday, with Chicago wheat, maize and soyabean futures (May-25) dropping by 1.2%, 1.7% and 0.2% respectively, from the previous day.
Yesterday (3 February), it was announced that the implementation of tariffs on Mexico and Canada would be postponed for 30 days following agreements with the respective countries. We saw initial reaction to this development in prices yesterday, as noted in the market commentary above.
However, a deal has not been reached with China, and from 3 February a tariff of 10% on Chinese imports into the US came into effect. China has subsequently imposed a few different tariffs on American products.
Mexico is the largest importer of US maize, purchasing over 30% of US maize annually, while China is the top buyer of US soybeans, accounting for 53% of US exports on average over the past five seasons (USDA). Meanwhile, Canada dominates global rapeseed production and trade. The country is forecast to account for 43% of global exports in 2024/25 season, along with 53% of rapeseed oil and 60% of rapeseed meal trade (USDA). The US imports 96% of Canada's rapeseed oil and 66% of its rapeseed meal (Jan – Nov 2024, Canola Council of Canada).
The global commodity markets are interconnected and if trade barriers rise in some areas, products may shift to other markets. However, this could need to be at lower prices to reflect the different shipping costs, or demand may shift to other commodities. The potential impacts are amplified given the large volumes of grain and oilseed involved, with a particular risk to rapeseed, with implications for the UK. For example, if the tariffs put pressure on prices, such as for Canadian rapeseed (canola), this could put pressure on domestic prices.
But there’s also wider implications. Tariffs are inflationary and can slow global economic growth. AHDB’s Jess Corsair explores this in more detail here. While there are no direct changes to trade with the UK from these announcements, the knock-on effects will still impact the global economy.
It will be important to continue monitoring the markets as the situation develops to understand both the short- and longer-term impacts. If prices do decline in response to the tariffs and changes in trade flows, it could also change cropping plans for harvest 2025/26.
Source: AHDB