Tariffs, Trade Wars, and Farmland Values: Understanding the Total Economic Cost to U.S. Agriculture

Tariffs have been used for centuries as a tool to control trade balances and protect domestic industries. While the motivation may be to promote American manufacturing or national security interests, the agricultural sector most often bears the indirect brunt of these protectionist policies. For landowners and farmers in the United States, tariffs have the impact of creating volatility, increasing costs, and reducing profitability all of which reverberate through the farmland market.

In this article, we’ll break down how tariffs work, examine their historical effects on U.S. agriculture, and explore how they influence land values. We’ll also offer strategic insights for landowners seeking to navigate the ongoing policy uncertainty.

How Tariffs Impact U.S. Agriculture: A Two-Front Battle

1. Cost Inflation on Critical Inputs

Most U.S. farm production relies heavily on imported input fertilizers, herbicides, machinery parts, and fuel. As tariffs are applied to these goods, the increased costs are absorbed by farmers with no potential to transfer the heightened costs to buyers.

For example:

Potash, a potassium-based fertilizer, is primarily imported from Canada. A tariff on Canadian potash would significantly increase per-acre input costs for major crops like soybeans and corn.

Farm machinery, especially components for combines and sprayers, regularly includes imported steel and electronic parts from Europe and Asia. Tariffs on these imports translate to higher machinery costs and repair expenses.

2. Retaliatory Tariffs on U.S. Ag Exports

If the U.S. imposes tariffs, its big trading partners tend to respond in kind with tariffs and agriculture is most publicly prominent and politically viable target. This reduces demand for U.S. exports therfore decreasing prices and net farm revenue.

Main point: USDA calculates that roughly 20% of U.S. farm revenue is dependent on exports. If it cannot sell to foreign customers, especially in Asia and North America, domestic excess supply drives prices down.

Case Study: The 2018–2019 U.S.–China Trade War

The Trump administration imposed a series of tariffs beginning in 2018, supposedly to reduce trade deficits with China. Retaliatory tariffs hit the U.S. agricultural sector especially hard:

Soybean exports to China fell 75% in one year, with many producers warehousing crops or selling at a loss.

USDA initiated over $28 billion in direct compensation programs to replace lost revenues.

Cumulative estimated losses to U.S. ag exports during 2018–2019 amounted to over $27 billion, according to the Congressional Research Service.

Iowa, Illinois, Kansas, and Minnesota all commodity export-reliant were disproportionately affected. Land values in these states started to plateau during this period, particularly in counties with higher exposure to export-oriented crops.

The Tariff Effect on Farmland Values: Mechanisms and Market Psychology

Cropland is a long-term asset whose value is based on net income potential. There are two key economic drivers that shift land values:

1. Input Costs

Higher input costs due to tariffs reduce profitability on a per-acre basis. When spread across multiple crop years, this suppresses cash rents and blunts buyer demand leading to downward pressure on land values.

2. Commodity Prices

Tariff-induced market volatility will generally result in lower commodity prices. Where farm margins are slim, a 10–15% drop in price is the difference between profit and loss.

Example: 2019 corn futures dipped below $3.50/bushel during the trade war not because there were yield issues, but because export demand had been undermined and market confidence had been shaken.

3. Investor Confidence

Institutional investors, REITs, and farmland funds closely track international trade metrics. Policy uncertainty around trade reduces transaction volume, sidelines investors, and suppresses appreciation.

Current Outlook: Trade Policy and Its Impact in 2025 and Beyond

As the U.S. enters another election cycle, tariffs are again on the table not just with China, but with valuable agricultural trading partners like Mexico and Canada. This is particularly concerning given the following:

Mexico is the largest purchaser of U.S. corn and pork.

Canada purchases U.S. barley and dairy products and exports valuable inputs like fertilizer and machinery parts.

Trade disruptions with either country would affect over $50 billion in annual ag trade, causing ripple effects across the Midwest.

Watch Points for 2025:

U.S.–China tensions are high, particularly on technology and national security.

USMCA (old NAFTA) disputes regarding dairy, grain grading, and biotech approvals continue.

Enforcement mechanisms at the World Trade Organization have eroded, so more bilateral disputes are arising.

Landowner Strategy: What Should You Do?

Farm owners and investors need to be on their toes and well-informed. Here’s how you can protect your position:

1. Conduct Regular Valuation Appraisals

If you haven’t had your land professionally appraised since before 2020, get it done now. Even the more stable markets can shift very quickly with macroeconomic stressors like tariffs, interest rates, and commodity volatility.

2. Monitor Global Trade Developments

Trade policy affects your income even if you’re not exporting directly. Pay close attention to USDA export reports, trade negotiations, and tariffs on ag inputs. Consider subscribing to updates from:

USDA ERS (Economic Research Service)

USTR (U.S. Trade Representative)

Farm Bureau’s Market Intel

3. Diversify Income Where Possible

If your land is suited for conservation programs, recreational leasing, or renewable energy partnerships (solar, wind, biochar, etc.), these can buffer income during trade downturns.

Conclusion: The Balancing Act of Policy and Profitability

Tariffs may serve national economic or political purposes, but their impact on agriculture is immediate and far-reaching. As the U.S. renegotiates its trade partnerships, farmland owners must be proactive in safeguarding their revenue and equity.

Whether through professional appraisal, rent negotiations, or tactical land sales, this is a critical time to assess your farm’s standing in a shifting global landscape.

Struggling to comprehend how tariffs could affect your land value? Contact a qualified Land Professional today for a consultation and market insight specific to you. Call us at 641-423-6400 or email [email protected]

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