Comment – Trump, tariffs & trade
Its been a tempestuous week for many, with the inauguration of President Donald J Trump (for the second time), and an immediate flurry of executive orders from on high regarding how the USA will be run from now on.
I must admit to a bit too much ‘doomscrolling’ via online news outlets, and have sought out some sense behind the headlines.
Firstly our friends over at Farm Progress in the States have an interesting analysis of those first executive orders signed by DJT. The one which mandates the use of E15 fuels all year is of interest, as E15 is effectively unleaded petrol with a 15% ethanol blend (usually from corn in the States). This will put a bottom in the corn trade and provide long term stability for US growers. As an aside it means UK farmers will not be reliant on US sourced corn, plus the additional US corn acres will displace other crops which might have found their way into the world market, ie soya.
The obvious orders around immigration might have an unexpected impact in the ag machinery world, as many estimates are that 50% of all US farm workers are undocumented, so if the squeeze starts, they will have to be replaced. Given that most American citizens don’t want to work the fields, that leaves agricultural technology to fill the gap (tick).
Next up, the tricky subject of tariffs, usually these are paid by the end user/consumer so if Trump puts tariffs on non US made tractors and agricultural machinery, the US farmers will have to pay.
If we look at tractors, the US exported $5.5Bn of tractors in 2022, whilst importing $8Bn, thats a whopping trade deficit of c $2.5Bn. Germany in particular exported c $11Bn of tractors during the same time period. The nifty interactive chart here is very useful.
It’s worth at this point considering the balance of trade for agricultural machinery between the USA and the rest of the world. The Observatory of Economic Complexity (OEC) offers an insight here (admittedly with 2022 data, but it’s decent enough to hang your hat on). The USA exported c $844M of agricultural machinery in 2022, whilst importing $1.5Bn, so that leaves the USA with a $0.6Bn trade deficit. Trumps hope is that tariffs will tackle this. Again bear in mind that tariffs are levied on end users, not the countries exporting to the USA.
The slight skew on this is that Trump said “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” during his inauguration speech. Time will tell.
In other news, I was delighted to see that most of the greenhouse remained after Storm Éowyn yesterday, although the Irish insurance industry reckons the cost of the damage to be in the hundreds of millions.
I hope you have a peaceful week.
Andy
