OMAHA (DTN) -- Agricultural commodity prices slipped slightly Tuesday in morning trade following President-elect Donald Trump's vow to impose 25% import tariffs on Canada and Mexico, and a 10% tariff on products from China.
The currencies for all three countries took a slight dip on Tuesday. Agricultural commodities didn't respond quickly, but by mid-morning, they began to see some dips. Cattle prices dropped slightly, but hog prices continued upward ticks even in contract months for early 2025. Corn futures dropped 2-3 cents depending on the contract, and soybeans fell by 4 1/4 cents on the January 2025 contract. Wheat contracts rose 3 1/2 cents to 4 cents for future contracts.
Trump returned to his strategy of diplomacy by social media post. On Monday night, he posted on Truth Social that he would set a 25% tariff on Canada and Mexico on his first day in office, accusing the two countries of promoting illegal immigration into the U.S. and allowing more fentanyl into the country.
DTN Lead Analyst Rhett Montgomery said the lack of reaction could be tied to the holiday week, suggesting there could be more response by the markets when traders return next week. Traders may also wait to see if Trump follows through. Montgomery suggested there is some risk involved, especially if Mexican buyers begin looking at South American corn.
"Overall, soybeans are already within a dime of contract lows. The new bearish twist with this morning's comments is the inclusion of tariffs on Mexico who, as it currently stands, accounts as the buyer for over a third of outstanding corn export sales for the United States' 2024-25 marketing year," Montgomery said. "I hadn't been very concerned about corn demand, but I am more so now. The long-term fear is that Mexico makes an ally out of Brazil, and that business has proved to be hard to get back once it switches."
Trump would have to declare an emergency to establish the tariffs, which also would disrupt the United States-Mexico-Canada Agreement (USMCA) Trump signed during his first term and went into effect in 2020.
During his campaign, the president-elect had said he would again impose tariffs on other countries to extract deals and improve the U.S. trade balance. While Trump's Truth Social post called for a 10% tariff on Chinese goods, Trump said during the campaign he would impose as much as a 60% tariff on Chinese products.
Agricultural groups have been leery about new plans to impose tariffs because the 2018-19 trade dispute with China led to a collapse in exports. The Trump administration provided $23 billion in aid payments during those years to offset the lost sales.
COUNTRY RESPONSES
Canadian Prime Minister Justin Trudeau told reporters in Canada he had spoken with Trump about some of the border issues and said, "It was a good call," according to the Wall Street Journal.
Canadian ministers had issued a statement earlier emphasizing the two countries have some of the closest trade and border relationships in the world. They also noted Canada is responsible for 60% of U.S. crude imports.
Mexico's new President Claudia Sheinbaum said Mexico could respond in kind with tariffs that would put the common interests of the U.S. and Mexico at risk. She also said Mexico has stemmed the flow of immigrants and there are no caravans of people heading to the U.S. border, Associated Press reported.
A spokeswoman for the Chinese embassy also responded that trade between the two countries "is mutually beneficial in nature. No one will win a trade war or a tariff war."
USMCA: WHO BENEFITS?
U.S. imports of agricultural goods from Canada and Mexico have risen faster than exports under the USMCA, according to USDA trade data.
For the first nine months of 2024, the U.S. has shipped $21.9 billion to Canada while importing $30.3 billion in agricultural products from the north.
For Mexico, the U.S. has exported $22.5 billion in agricultural products in the first nine months of the year while importing $37.1 billion in agricultural goods.
USMCA AG IMPORTS
In 2023, the U.S. imported a combined $85.8 billion in agricultural products from Canada and Mexico compared to $54.4 billion in 2019, the year before USMCA went into effect. That's nearly a 58% jump in value in four years.
USMCA AG EXPORTS
U.S. agricultural products flowing to Canada and Mexico have gone from $41.3 billion in value to $56.8 billion, an increase of around 38% overall.
CHINESE SALES
U.S. agricultural sales to China in the first nine months of 2024 came in at $14.8 billion, a 17% drop from the same period a year ago.
Agricultural exports to China in 2023 topped $28.8 billion, slightly higher than exports to either Canada or Mexico.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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