Not on Day 1, But Trump Tariffs Still Loom on the Horizon

Key takeaways

• Trump yields on trade tariffs on the first day of his administration
• StoneX’s Suderman said markets reacted positively to news of the pause on no tariff
• Despite threat of tariffs, China has reportedly been buying corn and soybeans from the US

StoneX Chief Commodities Economist Arlan Suderman appeared on Farm Journal’s Markets Now with Michelle Rook to discuss the market’s reaction to President Trump postponing sweeping trade tariffs against China, Mexico and Canada on the first day of his administration. He had promised to exact weighty taxes on these key trade partners promptly upon entering office throughout his 2024 presidential campaign. “There's still talk of 25% tariffs on Canada and Mexico by February 1st. That's still a real concern going forward,” Suderman said, “but for now, nothing immediate, particularly for China.”

Trump had been particularly hard on China with tariff threats during his campaign, so his inaction caught many observers and supporters off guard. Trump has worked to improve relations with Chinese President Xi Jinping, including holding a reported hour-long phone conversation “that went very well,” according to Suderman. Further, President Trump has recently offered a more favorable stance on TikTok and has even started discussing a trip to China.

For their part, the Chinese have reportedly been purchasing US corn and paying for higher priced US soybeans versus those available from Brazil, both moves seen as a possible attempt to fend off the tariffs. “[I]t may be a Goodwill gesture saying perhaps we can work out a deal that buys more US commodities, if you're kind to us on the tariffs,” said Suderman. “So there's a little bit more optimism there, and that supported corn and soybeans in trade.”

When asked for his thoughts on a phase one or phase two trade deal with China, Suderman was optimistic. ”[W]e could see that. I see both leaders moving toward amiable discussions, so that's a positive; but it'll take some time to unfold. Brazil still has a big crop.”

Brazil has been playing an expanding role in the global soybean trade. As for the Brazilian crops, weather has had an impact on both corn and soybeans. The rains underperformed what the models had predicted, and dry conditions are expected for the near future. This can cause dry stress for the plants. “[In] Brazil, our team down there estimates we've lost about 2.4 million metric tons of production in the South already,” Suderman said, “we're still looking at a crop that's 18 to 20 million metric tons larger than last year, so pretty sizable crop, but much of that big crop had already been priced, so we're kind of getting a little bit of support from those lower yield estimates.”

Like many other commodities, the hog market had reacted positively on the lack of tariff talk but pulled back after comment made by Trump regarding 25% tariffs for Mexico starting on February 1st. “Mexico's our biggest customer, pork in addition to all the corn, soybeans, meal, wheat, etc., that they buy from us, so the pork market really got concerned about that.”

Suderman remarked that there wasn’t anything in Trump’s first day executive orders that might have immediate effects on the markets, but said there was an absence of any clarity and still no indication on what direction the administration might take in regard to liquid biofuels and the inflation reduction act. Any movement on that front could have repercussions for subsidies on biodiesel renewable liquids. “[T]hat’s a big the question mark at this point,” Suderman said. “We just don't know when it will rise on the Trump priority list with the full agenda that they have.”

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Written by: Dan Morales
Expert: Arlan Suderman, Chief Commodities Economist

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