RJO’s Tariff Update

The following analysis is from R.J. O’brien’s PJ Quaid:

Tariff update

President Donald Trump has launched a sweeping “reciprocal tariff” policy, imposing sharp new tariffs on key U.S. trading partners. The plan includes a 34% tariff on Chinese imports — which, when added to an existing 20% tariff, brings the total to 54%. Other affected countries include the European Union (20%), Vietnam (46%), and Taiwan (32%). The move builds on Trump’s previous trade actions targeting China, Canada, Mexico, and specific industries such as autos, which already face a 25% import duty.

The White House’s message is clear: the United States is negotiating from a position of power. With the world’s largest consumer market, the U.S. holds unmatched leverage. Many of these targeted countries rely heavily on American demand to sustain their export-driven economies. China, Germany, Vietnam, and others sell significantly more to the U.S. than they buy, leaving them more exposed in a tariff war. As such, the rest of the world could face far greater economic consequences than the U.S. consumer.

While media coverage has focused heavily on the potential costs to Americans — such as inflation or supply chain disruptions — it often overlooks the broader global impact. For many foreign economies, losing access to U.S. markets is a major threat. Trump’s approach is not just about protectionism; it’s about forcing other nations to lower their trade barriers and buy more American goods. Stocks fell sharply in after-hours trading following the announcement, signaling short-term market anxiety. But in Trump’s view, the pressure applied now will secure stronger long-term terms for U.S. industries

A look at the impact on Ags

1. Corn

Bullish forces:

• Tariffs on South American corn (especially Brazil, Argentina, Paraguay) could open import substitution — especially for U.S. end-users in the southeast and Gulf.

• Domestic ethanol & feed demand could rise if foreign DDGs or ethanol inputs face tariffs.

• If retaliatory tariffs hit U.S. soy, corn could gain acres in 2025/26.

Bearish/Neutral risks:

• Livestock exports may suffer from retaliation (e.g. pork to China), which could trim feed demand.

• Corn is not a major U.S. import — the effect here is more about secondary demand (ethanol, meat, industrial).

Net outlook: Mildly bullish, particularly for old-crop demand balance and basis in export regions if Brazil corn is constrained.

2. Soybeans

Bullish forces:

Import substitution: If tariffs are placed on South American soybean oil, meal, or beans — crush margins improve and domestic crushers could ramp up.

• Biofuels support: Soy oil demand may stay firm if renewable diesel incentives persist and palm oil faces tariff headwinds.

• Bearish risks:

• china retaliation risk is very real. Already imposed tariffs on U.S. soybeans in March. Any further escalation could crush export demand.

• Global meal trade war could pressure crush margins if buyers pull back across Asia or the EU.

Net outlook: Very volatile. If China escalates, soybeans are the first in the firing line. Watch for basis weakness in PNW + Gulf. Bearish export program vs. bullish domestic crush potential.

3. Wheat

Bullish forces:

• High foreign tariffs (esp. on the EU, UK, Canada) could benefit HRW and HRS if U.S. wheat becomes relatively cheaper in tariff-adjusted terms.

• Feed wheat displacement: If feed imports are hit, wheat may gain demand via feed substitution (especially if corn rallies).

• bearish risks:

• EU could target U.S. wheat exports in retaliation — especially for soft wheat.

• Demand is sticky, and global wheat is still competitively priced.

Net outlook: Neutral to slightly bullish for HRS (spring wheat) and HRW, especially if EU/CAN wheat faces penalties.

4. Livestock (Pork, Beef, Poultry)

Bullish forces:

• Tariffs on imported meats (especially from Brazil, Australia, New Zealand) could support domestic demand for U.S. beef and poultry.

• Reduced import competition + domestic feed availability could improve packer margins.

Bearish risks:

• Export vulnerability is massive — pork exports to China, Japan, South Korea all at risk.

• Retaliation could slam cutout values, leading to backlog and heavier weights.

Net outlook: Near-term domestic demand boost, but major downside risk if Asia retaliates on pork/beef — monitor weekly export sales closely.

Cross-Cutting Themes:

• Input inflation: Ag chem, pharma, and machinery imports may rise in cost, pressuring margins.

• Supply chain reshuffling: Domestic processing (e.g. soy crush, ethanol, meatpacking) may ramp up — potentially bullish for basis in production regions.

• Futures spreads: Watch for old-crop/new-crop inversions if domestic demand picks up but exports falter — especially in soybeans and corn.

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