While President Donald Trump’s increase of tariffs against China — and the retaliatory tariffs — will likely mean fewer U.S. agricultural exports sent there, the president has consistently suggested that American farmers can make up the difference by selling more of their products at home.
“Get ready to start making a lot of agricultural product to be sold INSIDE of the United States,” Trump wrote in a social media post on March 3.
But that vision is colliding with a hard truth: there is no domestic substitute for China, especially when it comes to soybeans, America’s second-largest crop.
The U.S. exported more than 40 percent of its soybean production in 2024, according to an Investigate Midwest analysis of USDA data.
More than two-fifths of those exports went to China. No other country comes close: Mexico accounted for 11 percent and the European Union for 9 percent.
Trump, who once called “tariff his favorite word,” has threatened or issued tariff hikes on nearly all U.S. trading partners, with the largest increase placed on China.
On Wednesday, Trump announced a 90-day pause on tariff increases for most countries, although not China, which he raised this week to 125 percent.
China had already responded with an 84 percent tariff on U.S. goods.
“You can’t replace that China market overnight,” said Josh Gackle, a third-generation farmer in south-central North Dakota. “It’s just such a big, big part of the picture that we, as farmers, need to try to make sure that we can continue to work with China and the buyers there.”
In addition to its retaliatory tariffs, the Chinese government also suspended soybean imports from three U.S. companies: CHS Inc., Louis Dreyfus Company and EGT.
Trump said higher tariffs are a tool to correct trade imbalances and spur domestic manufacturing. He also said the rate hikes are a response to China providing unfair subsidies and even sheltering criminal groups involved in synthetic opioid production.
But the economic consequences are falling squarely on U.S. farms.
States such as Illinois, Iowa and Minnesota — the nation’s top soybean exporters –rely on international buyers to keep commodity prices stable and local economies afloat.
A recent study by the University of North Dakota underscored the stakes: If China imposes a 20 percent retaliatory tariff on U.S. soybeans, the state’s soybean exports could fall by nearly 60 percent, costing North Dakota farmers an estimated $639.9 million.
Soybean exports support approximately 231,400 jobs across the country, while soybean meal exports contribute another 41,400 jobs, according to data from the U.S. Department of Agriculture’s Economic Research Service. These exports create employment not only on farms but also throughout the manufacturing, service, trade and transportation sectors.
The American Soybean Association has called for a swift shift in strategy.
“We are hoping that from obstacles can come opportunity,” said ASA President Caleb Ragland, a soybean and grain farmer in Kentucky. “And that the administration will swiftly work with the affected countries to create new market access opportunities for U.S. soy and other U.S. products in these markets so these higher tariffs can be removed. That includes pursuing a Phase 2 Trade Agreement with China.”
Trump administration officials and lawmakers are quietly discussing a potential bailout for U.S. farmers, as agricultural groups warn the president’s escalating tariff strategy could trigger a significant economic fallout.
Talks are still in the early stages, and the scope of any relief remains unclear, according to administration officials, lawmakers, congressional aides, and representatives from farm trade groups, The Wall Street Journal reported.
“We’re talking about it, looking at it,” said U.S. Sen. John Hoeven (R-N.D.), who noted he spoke with Agriculture Secretary Brooke Rollins about a possible relief package during a meeting last Thursday.
Still, farm groups have cautioned that retaliatory tariffs on U.S. agricultural exports could further depress prices for key commodities, particularly soybeans.
According to the American Farm Bureau Federation, more than 20 percent of U.S. farm income is tied to exports.
“We encourage the administration to work toward a swift resolution to trade disagreements to avoid tariffs that put farmers and ranchers in the crosshairs of retaliation,” American Farm Bureau President Zippy Duvall said in a statement, “and to pursue strategies that expand market opportunities for the men and women who grow the food every family in America relies on.”
Domestic demand isn’t enough
Soybean farmers can’t simply redirect their product to domestic markets, and they also can’t easily switch to another crop.
“It makes more sense to grow soybeans in the U.S. Midwest than it does to grow them in other parts of the world,” said Joe Janzen, assistant professor in the College of Agricultural, Consumer and Environmental Sciences at the University of Illinois. “Switching costs are pretty significant.”
China, which accounts for 60 percent of all globally traded soybeans, became a major customer for American farmers as its middle class grew and diets shifted toward more meat and dairy. Soybean meal is a critical component in the feed that powers China’s massive pork and poultry industries.
“You can’t replace that kind of demand domestically,” said Ishan Bhanu, lead commodities analyst at Kpler, a provider of technology-led data, analytics, and market insights. “It’s not just that they buy a lot — it’s that they’ve built an entire protein system around soy.”
The irony, Bhanu noted, is that while soy is often associated with tofu and soy milk in America, U.S. consumers don’t actually eat much of it directly. Instead, most soybeans grown in the U.S. are processed — or “crushed” — into two primary products: soybean oil and soybean meal.
Soybean oil is used in cooking oils, industrial lubricants and renewable diesel. But the market isn’t infinite. “The U.S. already crushes about 55 percent of its soybean crop each year,” Bhanu said. “And while demand for oil has increased due to biofuels, there’s only so much the domestic market can take.”
Building more crushing facilities would require years of investment, he added — and even then, it would raise a new problem: what to do with the byproducts. “You can’t just make more oil without also making more meal,” Bhanu said. “And if you don’t have a market for the meal, you’re stuck.”
The U.S. started exporting more soybean oil in 2024, a reversal from the past few years when most of it was consumed domestically. But Bhanu said this shift was less about strategic expansion and more about necessity — a way to offload excess production in a market with limited internal appetite.
“It’s not a niche crop,” Bhanu said. “This is a major part of our agricultural economy. And it’s grown not because Americans are soy-crazed — it’s grown because there was a reliable, high-volume customer in China.”
South America steps in
As U.S. farmers brace for another season of uncertainty, South American producers are seizing the moment.
During Trump’s first trade war, U.S. soybean producers saw a sharp shift as Brazilian soybeans captured a more significant share of the Chinese market.
When Trump took office in 2016, Brazil accounted for 46 percent of China’s soybean imports. By 2024, that share had climbed to 71 percent. Over the same period, the U.S. share fell by more than a third.
In the wake of the first trade war during Trump’s first term, Brazil became China’s preferred supplier, offering cheaper prices and fewer political strings. Its advantage isn’t just circumstantial — it’s structural.
“It’s a record crop season in South America,” said Joana Colussi, an agricultural economist with the farmdoc team, an extension program within the Department of Agricultural and Consumer Economics at the University of Illinois.
South America’s soybean-producing countries — led by Brazil, followed by Argentina, Paraguay, and Uruguay — account for roughly 55 percent of the world’s soybean supply.
Current estimates suggest that soybean output from the four leading South American producers will reach 8.41 billion bushels in the 2024-25 season, a 9 percent increase compared to the previous year, according to a farmdoc report. This situation adds even more pressure on U.S. soybean producers, who continue to feel the heat from the ongoing trade war.
Leading the way is Brazil, the dominant force in the global soybean market. Its production is projected to reach a record 6.15 billion bushels, a 13 percent increase from last year, according to a report from the National Supply Company (Conab), released last week and discussed during a farmdoc webinar last month.
With such a strong harvest, the Brazilian Association of Vegetable Oil Industries projects that soybean exports will reach 3.9 billion bushels this year, up from 3.6 billion in 2024, the second-highest volume on record.
Colussi explained that the “harvest was really good” due to two main factors: an expansion in Brazil’s soybean planting area and a favorable rainy season in the central-west region, driven by La Niña conditions.
“Much of the growth in global soybean demand in recent years has been supplied by Brazilian soybeans,” Colussi said.
Brazil’s rise to become China’s leading soybean exporter didn’t happen overnight. She said Brazil has expanded its soybean acreage over time and still has room to grow, particularly in areas currently used for livestock.
Another advantage, she explained, is Brazil’s ability to produce two crops a year — a result of favorable climate conditions and strong international demand that continues to drive soybean production.
This growth has also been supported by technological adoption and a wave of infrastructure development, with private investment over the past decade expanding the country’s capacity to transport agricultural goods.
Colussi believes the new tariff war places U.S. soybean producers in a far more difficult position than during the first trade war in 2018, largely due to higher production costs and razor-thin profit margins.
“For sure, [U.S. soybean farmers] will maybe need more help from the government than they did in 2018, when we had a different scenario, especially because of the production costs,” she said.
This article first appeared on Investigate Midwest and is republished here under a Creative Commons license. It was obtained via AP StoryShare.
