Trump’s tariffs risk driving record food costs in the US even higher
Sign up now: Get ST's newsletters delivered to your inbox
Tariffs will also make it more expensive for American farmers to grow crops.
PHOTO: AFP
Follow topic:
WASHINGTON - US President Donald Trump’s tariffs
Plans to impose duties on American agriculture imports are set to boost the price of fruit and vegetables as well as sugar and coffee, with the Consumer Brands Association saying tariffs on Canada and Mexico could lead to higher consumer prices. Meat is also at risk – with the lowest cattle herd in 74 years, the US imported a record US$11.7 billion (S$15.6 billion) in beef and derived products last year.
Further, tariffs on Canadian fertilisers will make it more expensive for American farmers to grow their own crops. Consumers have already been pinching pennies, with Walmart chief executive officer Doug McMillon saying some are showing signs of stress and running out of money before the end of the month.
“Any way you slice it, this is a tax on American citizens, and will have a real impact on our economy,” said Mr Matt Campbell, a risk management consultant at futures and options brokerage StoneX in West Des Moines, Iowa. “Ultimately, this has inflationary impacts.”
Food costs were already on the rise before Mr Trump announced tariffs, largely because of record-high egg prices after the spread of bird flu killed millions of chickens across the country. A family of four currently spends US$993 a month on average on a “thrifty” grocery plan, compared with US$675 four years ago, according to the Department of Agriculture.
On March 3, Mr Trump said the US would impose tariffs on “external” agricultural products starting on April 2. The move came just as US food imports balloon, driving the country’s agriculture trade deficit to a record US$49 billion this year. He also raised tariffs on China to 20 per cent and introduced 25 per cent duties on most Canadian and Mexican imports.
Commerce Secretary Howard Lutnick said on March 4 that the administration could announce a pathway for tariff relief on Mexican and Canadian goods as soon as March 5, though he discounted the idea that levies would be fully rolled back. Mr Trump’s moves on tariffs have continually raised questions over whether he is using levies as a negotiating tactic.
Fruit, vegetables and other horticultural goods typically account for at least half of inbound crop shipments into the country. Sugar, coffee, cocoa and other tropical products make up about 15 per cent. Mexico is also the biggest supplier of sugar to the US, accounting for about a third of all inbound shipments on a typical year, according to the USDA.
Fresh produce
US consumers could see tariff-driven price increases quickly, especially for products like fresh produce with shorter supply chains, Target chief executive officer Brian Cornell told reporters after posting quarterly results on March 4. He said it is too early to predict which items will get more expensive and when.
Mr Tom Madrecki, vice-president of supply chain resiliency at the Consumer Brands Association, urged “leaders in Mexico and Canada to work with President Trump to protect consumers’ access to affordable products and remove tariffs that could contribute to grocery inflation”. The group added the consumer packaged goods industry supports a strategic “America First Trade Policy”.
“Despite sourcing the vast majority of ingredients and inputs from US farms and domestic suppliers, CPG companies depend on global supply chains for certain imports due to unique growing conditions and other limiting factors around the world,” Mr Madrecki said.
The US has also become more reliant on beef imports after cattle supplies dropped to the lowest since 1951 as dry pastures prevented the herd from expanding for the fifth straight year. Imports are flowing in from Australia, Canada, Mexico, Brazil and New Zealand.
Tariffs will also make it more expensive for American farmers to grow crops. The US relies on imports for roughly 90 per cent of its potash needs, with about 85 per cent coming from Canada. The Fertilizer Institute and Republican Senator Chuck Grassley of Iowa have already called on the Trump administration to exempt the product from duties.
“These across-the-board tariffs will make it harder for Americans to put food on the table and will squeeze farmers who will lose valuable export markets and see higher input costs,” said Minnesota Senator Amy Klobuchar, the top ranking Democrat on the Senate Agriculture Committee.
To be sure, many farmers have already brought in the fertiliser they need for this year’s planting season, and any impact of tariffs will be delayed, said vice-president Josh Linville of fertiliser at StoneX.
“There has been a concerted effort in recent weeks and months to move product across the border just in case tariffs were implemented,” Mr Linville said. “While we do not believe everything was shipped prior to the start of the current tariff, a vast majority of the tons were. That should help to alleviate a lot of the nearby tariff effect.”
Dampening demand
Retaliatory tariffs from places like China
Soya bean futures for May delivery fell as much as 2 per cent to US$9.91 a bushel, the lowest for a most-active contract since January. Corn for the same month fell as much as 3 per cent to US$4.425 a bushel, the lowest since December. Wheat also declined.
“The US exports sizable amounts of each and if countries retaliate as China did last night, it adds to farmers’ financial woes and keeps domestic prices lower than they would be before,” said Mr Dan Basse, president of consultant AgResource Co. “These tariffs are kind of like a tax on the US farmer.”
Growers have already been grappling with falling crop prices, with farm income under pressure for the last three years as the cost of seeds, fertiliser and equipment have also gone up. And that was before any tariffs were in place.
Democratic governors of states that are largely dependent on agriculture have expressed their concern. In Illinois, Mr J.B. Pritzker has met agriculture leaders to identify how the tariffs will impact the state’s beef, corn, pork, and soybean industries. Minnesota Governor Tim Walz was visiting a corn and soybean farm on March 4 to highlight the impact of duties on the state’s growers.
“Donald Trump swore to bring down costs on Day One,” said Mr Pritzker, who is widely thought to have White House ambitions for 2028. “Instead, he’s taxing working families.”
Food prices rose 1.9 per cent in January from a year earlier, extending a string of gains after years of supply-chain disruptions and widespread inflation led to a surge in prices in the aftermath of the pandemic. Walmart’s McMillon said lower-income consumers are feeling the most pain.
“There are lots of income levels in this country – if you’re at the lower end of that scale, you are feeling more frustration and pain because of higher food prices,” he told about 1,000 executives at the Economic Club of Chicago last week. “They’ve persisted for years now, and you’re just tired of it.” BLOOMBERG
