“Tariff whiplash” has been a popular phrase lately, as President Donald Trump has announced and delayed tariffs on goods from Canada, Mexico and China.

On March 10, China imposed taxes on American agricultural products such as pork and chicken, after Trump increased the levy on Chinese imports to 20%. On March 12, the European Union imposed new duties on U.S. industrial and farm products, covering $28 billion worth of goods.

The White House is enacting tariffs in an attempt to reduce illegal immigration and stop fentanyl and other drugs from entering the country. As of press time, tariffs on many goods from Canada and Mexico have been paused until April 2.

Trade accounts for 24% of U.S. gross domestic product, and makes up 67% of Canada’s, 73% of Mexico’s and 37% of China’s. Because trade is a lower percentage of U.S. income, tariffs will have less of an impact on this country than it will on others, the administration argues.

Trade is an important part of Iowa’s economy, with agricultural exports reaching $16.5 billion in 2022, according to the U.S. Department of Agriculture, and manufacturing exports at more than $26 billion, according to the Iowa Economic Development and Finance Authority. The Business Record asked local economists to share their thoughts about the potential effects of tariffs on Iowa’s exports and economy.

Dermot Hayes, Iowa State University economist and Pioneer Chair in Agribusiness, said December corn futures and November soybean futures are both down 40 cents a bushel since the intention to impose duties was announced.

If tariffs are in place temporarily, the impact on the state’s economy will be manageable, but if they remain long term, that will change, he said.

“We will face retaliatory duties on corn, soybeans, ethanol, pork and beef,” Hayes said in an email. “We will have to discount these commodities relative to our competitors by an amount equal to the duty.”

A telltale sign of the health of the agriculture industry is farm equipment sales, which are down, Hayes said. Sales of tractors and combines decreased 19.2% in September 2024 compared with the previous year, reported the Association of Equipment Manufacturers.

“Look at farm equipment sales. They are way off,” he said.

Christopher Pudenz, an economist at the Iowa Farm Bureau Federation, shared several ways to determine the health of Iowa’s agriculture industry – GDP, layoffs, bankruptcies and credit conditions.

• GDP: “We are still waiting on fourth quarter results, but according to the U.S. Bureau of Economic Analysis, in Q3 of 2024, real GDP for agriculture, forestry, fishing and hunting in Iowa declined 47.5% year-over-year. This is due largely to substantial declines in corn and soybean prices in 2024,” he said in an email.   
• Ag and ag-adjacent layoffs: “Since the Tyson Perry plant announced it was closing almost exactly one year ago, there have been about 4,900 ag and ag-related layoffs announced in the state of Iowa. If anything, this is a conservative estimate, because there are certain company size requirements that must be met before the company has to submit a notice to the state of Iowa. Unfortunately, layoffs at major employers in the industry continue to be announced,” Pudenz added.   
• Bankruptcies: “According to analysis conducted by the American Farm Bureau Federation, Chapter 12 farm bankruptcy filings were up 55% in 2024 compared to 2023. The number of bankruptcies (216 nationally) is still substantially lower than the all-time high in 2019 (599), though the Midwest was the region with the most bankruptcies in 2024 (71),” Pudenz said.  
• Credit conditions: “The Federal Reserve Bank of Chicago publishes Indexes of Agricultural Credit Conditions in the Seventh Federal Reserve District, which includes Iowa. Their most recent data point, Oct. 1, 2024, indicates that loan repayment is at its lowest since April 1, 2020,” he added.

Chad Hart, an agricultural economics professor at ISU, said the threat of tariffs affects the state before an actual tariff is enacted.

“The potential tariffs are already having an impact,” Hart said in an email. “For example, crop prices dropped with the announcement of potential tariffs for Mexico and Canada. For farmers selling crops after the announcement, they captured lower prices and thus, lower income.”

Over time, those tariffs could leave a mark, he said.

“Long-term usage of tariffs forces changes within markets. Production either has to find more use domestically or has to be rerouted to other export markets. In the long-run, this can have a significant impact,” Hart said.

The global soybean market is still feeling the effects of the 2017-2018 U.S./China trade war, Hart said.

“China shifted to purchase more Brazilian soybeans, replacing U.S. supplies, and that has led, over the years, to a sizable increase in soybean production in Brazil, with much smaller growth in the U.S.,” he said.

The drag on the agricultural sector is evident in multiple ways, he added.

“Iowa’s and the [United States’] ag economy has had a couple of rough years in a row. Net farm income was lower in both 2023 and 2024. That loss of income has led to some layoffs in the ag machinery sector and raised concerns within the ag lending community. The introduction of tariffs in 2025 is adding to the downward pressure on the ag economy,” Hart said.

Tariffs take more of a toll on the economy than reducing the income of farmers, said Anne Villamil, economic professor at the University of Iowa.

“Tariffs are a tax that raises the prices of imported goods, and this can raise inflation. For example, Iowa imports Canadian goods used as inputs in U.S. production such as potash (used to make fertilizers), steel and aluminum,” Villamil said in an email. “Tariffs on these inputs raise farmers’ and manufacturers’ costs and are likely to decrease Iowa businesses’ profits and increase consumer prices.”

Villamil pointed out that this year, the proposed tariffs could have a wider reach.

“Research shows that the more limited tariffs that President Trump imposed in 2018 increased prices. The current tariffs are broader and are currently leading to declining measures of consumer and business sentiment, and stock market declines,” she added.

If tariffs remain in the long term, the impact would be international.

“International trade can increase global output and standards of living. Problems regarding competition, employment, health and safety, and the environment arise and must be addressed, but they are best addressed by negotiation,” Villamil said. “Trade wars are extremely damaging. Currently we are seeing retaliation and escalation. Businesses and consumers are concerned about this, and the stock market is volatile and trending lower. Private consumption is almost 70% of GDP, and this makes the negative consumer sentiment concerning. In addition, investment requires a stable business environment, and the current escalations and policy uncertainty undermine investment. If consumption and investment fall, this will lower GDP, given government spending and net exports.”

The 2018 tariffs led to increased aid to farmers, Villamil said. From 2018 to 2020, the USDA administered about $23 billion in direct payments to farmers affected by trade disputes.

“This [funding] was viewed as insufficient, with concerns about program administration and delays,” she said.

Pudenz said the Iowa Farm Bureau Federation is seeing pricing shifts in relation to tariff negotiations.

“So far, what we have seen is a lot of large price movements in commodity futures markets – both up and down – as market participants try to figure out what is going on, and how to best react,” he said.

During the 2018 tariff, international relationships were strained, he said.

“The [2018] trade war also resulted in the Phase 1 Trade Agreement with China. It obligated China to purchase $80 billion in U.S. ag products in two years, and they fulfilled about 80%of that,” Pudenz said. “So, there is also the hope that this current tariff flare-up leads to better long-term relationships with our major trading partners. Thus far, the farmers I have spoken with have communicated a willingness to see how the tariff situation plays out and what long-term net good might come from it.”

Economic recovery
If the state economy declines because of tariffs or related actions, Villamil said speaking up is one way businesses can respond.

“At a recent Iowa Farmers Union virtual town hall, Iowa businesses raised concerns with Sen. [Chuck] Grassley about 90-day freezes on federal contracts and tariffs,” she said. “Business leaders need to continue to raise their concerns.”

Increasing demand in the ag sector – like the state did with ethanol starting in 2001 — is another way to trigger a rebound, according to Hart.

“To truly trigger recovery, we would need to see growth in agricultural demand that is large enough to consume the supplies we create/grow/raise,” Hart said. “The ethanol boom triggered a recovery in the late 2000s. The general economy surged after COVID helped the ag economy recover from COVID, as both domestic and international ag purchases grew.”

For now, there is not much business leaders can do to stop it, Hart said.

“Longer-term, business leaders can look to increase domestic production of products we import, or explore opportunities to increase domestic usage of products vulnerable to tariffs (products that export),” he said. “But in the end, international trade has generally been good for the Iowa economy. So the best thing we can do is try to remove trade barriers, such as tariffs, instead of building those barriers. Iowa businesses often produce more than what Iowa consumers can utilize, so we are constantly looking for other markets – other states, regions, countries, etc. – to sell into and provide balance to our markets.”

Pudenz said diversifying can help, too.

“Finding new sources of demand for Iowa’s agricultural commodities will be important to Iowa’s farm economy going forward. One could argue that corn exports have been more successfully diversified in recent years than soybean exports, with about 50 percent of U.S. soybean exports in any given year still going to China,” he said. “Some analysts claim this market diversification is why corn prices have been relatively stronger to start the year than soybean prices have been.”

Tax cuts will be important, he said.

“If we don’t renew the tax cuts in the Tax Cuts and Jobs Act of 2017, that would have major negative consequences for the entire Iowa economy, including agriculture,” Pudenz said.