UNITED States trade tariffs on imports from Canada, Mexico, and China, followed by targeted measures from those nations, could boost demand for some Australian grains, but may negatively impact canola prices.

However, uncertainty persists over how these measures, and the prospect of more, could affect the wider agricultural supply chain and Australia’s economic outlook.

On Tuesday, the US imposed a 25-percent tariff on imports from Mexico and Canada, with the exception being a 10pc duty on Canadian energy.

Chinese goods were hit with a 20pc tariff, double the previously announced rate.

Canada immediately responded by placing a 25pc tariff on C$30 billion of selected US imports, including orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and some pulp and paper products.

China replied by slapping an extra 15pc tariff on US agricultural imports, including chicken, wheat, corn, and cotton, and increasing the duty by 10pc on sorghum, soybeans, pork, beef, seafood, fruit, vegetables, and dairy.

China has also placed export and investment controls on 25 unnamed US firms.

Following this announcement, Reuters reported China has suspended US soybean import licences for global agribusinesses Louis Dreyfus Company and CHS Inc and grain terminal operator EGT, a Bunge-Pan Ocean America joint venture.

Mexico has flagged that it will likewise impose retaliatory tariffs on the US, with details to be announced on Sunday.

A day later, US president Donald Trump took to the Truth Social media platform to signal the possibility of tariffs being imposed on all agricultural imports from April.

“To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external product on April 2nd. Have fun!” the post said.

During a speech to Congress on Wednesday, President Trump reiterated that new tariffs on agricultural goods would be imposed from April 2.

While saying that farmers were “going to have a field day right now”, President Trump also asked them to “bear with me”.

“Our new trade policy will also be great for the American farmer; I love the farmer,” President Trump said.

“The tariffs will go on agricultural product coming into America and our farmers starting on April 2nd.

“It may be a little bit of an adjustment period.

“We had that before when I made the deal with China, $50 billion of purchases and I said, just bear with me, and they did, they did.

“You really have to bear with me again and this will be even better.”

Potential increased Chinese demand

While Australia exports only small volumes of grain to the US, the tariffs could have broader effects, potentially driving increased demand from China.

Commonwealth Bank sustainable and agricultural economist Dennis Voznesenski said the tariffs were expected to boost demand for Australian wheat, barley and sorghum from China.

According to UN Comtrade data, Mr Voznesenski said the annual average over five years of US exports to China was 1.8 million tonnes (Mt) of wheat, 9.8Mt of corn, and 4.4Mt of sorghum.

“China’s tariffs on US wheat, corn and sorghum are expected to support export demand for Australian wheat, barley and sorghum,” Mr Voznesenski wrote in his Agri Commodities Weekly Alert.

He said the immediate impacts from the tariffs could be restrained, given China has recently subdued grain imports from all origins.

“In December 2024, Chinese wheat, corn and barley import were down 75pc, 93pc and 54pc respectively.

“A large local crop, built-up stocks and subdued economic activity provides China the flexibility to temporarily reduce imports via tariff implementation on the US.

“Once China’s stocks start to be run down, it will need more grain imports from Australia.”

Canola picture unclear

Mr Voznesenski said the retaliatory tariffs on US soybeans were “unlikely to support Australian canola prices” in the short term.

“China imported record volumes of soybeans last year, despite weak economic activity.

“Once large stockpiles are utilised, demand could rise for canola.”

US tariffs on Canadian canola oil could drive more seed exports to Asian and European markets.

In 2023, the US was the destination for 3Mt of Canada’s canola oil, and 3.5Mt of meal.

China has also foreshadowed potential tariffs on Canadian canola, which could also push more into Europe, Australia’s largest market.

Mr Voznesenski said there uncertainty remained around these developments, but tariffs were expected to “likely be a negative for Australian canola prices”.

Economic challenges

With Australia’s economy closely tied to the US and Canada, the trade war is likely to have broader impacts on investment, inflation, and overall confidence.

In the minutes of its February meeting released on Tuesday, the Reserve Bank of Australia said global trade developments were part of last month’s discussions.

“Uncertainty about the global economic outlook remained high, given evolving developments in US government policies relating to trade, the fiscal position, deregulation, and immigration,” the minutes said.

“[Members] judged that the uncertainty about policy settings was likely to weigh on business investment, and perhaps household consumption, until the situation becomes clearer.”

GrainGrowers backs increased diversification

In response to the round of tariffs, industry body, GrainGrowers has urged the Australian Government to be proactive with trade diversification measures to counter global volatility.

GrainGrowers general manager policy and advocacy Zach Whale said the imposition of tariffs was expected to have significant global ramifications.

Mr Whale said with 65-75pc of Australian grain exported annually, the sector remained heavily exposed to external shocks beyond its control.

“Given the volatility of the global trading environment, we are calling for the Federal Government to invest $100M into initiatives that ensure the sustainable growth and market expansion of Australian export-orientated agricultural businesses, including additional agricultural counsellors and funding for trade-diversification grants,” Mr Whale said.

“Protectionist policies threaten to disrupt international trade flows and place additional pressure on Australian grain exports, which are already exposed to the impacts of global market volatility.”

“Rather than waiting for a market disruption to occur, proactive investment and action by the Australian Government can help mitigate risk and deliver real long-term returns to the industry.”

Aus government reaction

Minister for Foreign Affairs Penny Wong, Minister for Trade and Tourism Don Farrell, Treasurer Jim Chalmers and Minister for Defence Richard Marles are currently in the US, reportedly having conversations with their counterparts in the Trump Administration.

Asked yesterday what the Australian Government was doing about US tariffs, Australian Agriculture Minister Julie Collins said Prime Minister Anthony Albanese has had two conversations with President Trump.

“We have a 20-year Free Trade Agreement with the United States,” Ms Collins said.

“We’re a trusted partner, we’re a strategic ally.

“We are working very hard, right across government, to make sure that we’re able to continue to export our great goods to the United States and indeed, around the globe.

“We’ve worked incredibly hard when it comes to providing diversification of our trade for Australian farmers.

We now have the most diversified agriculture trade that Australia has ever had, now with 169 different markets.”

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