WASHINGTON — Part 2 of our 2-Part Series on the Future of American Farming in the Tariff War.
In Part 1 of our series, we explored the potential upside if the United States “wins” the tariff war, gaining agricultural market strength, expanding exports, and bringing essential supply chains back home.
But all strategies come with risks.
As trade barriers rise and international tensions rise, American farming faces a very real possibility: What if this gamble doesn’t pay off? What if other countries stand firm or even strengthen alliances that further marginalize U.S. agriculture?
When tariffs go from a short-term tactic to a long-term policy, other countries don’t just wait around: they adapt. Markets evolve, trade routes shift, and once new supply chains are established, they don’t easily revert. For American farmers, that kind of change can leave them on the outside looking in.
Long-Term Loss of Key Export Markets
When trade relationships break down, it’s not just a short-term loss, it’s a long game. Once foreign buyers find other suppliers, those new partnerships tend to stick.
The biggest threat is that key trading partners like China, Mexico and Canada permanently change their purchasing patterns toward competitors like Brazil, Argentina, Australia, or Russia. These countries are ready to step in and replace U.S. products.
- China, already buying record soybeans from Brazil, may lock in extended agreements with South American producers.
- U.S. pork, poultry, and beef exports could fall behind competitors in the EU or Southeast Asia.
- Once relationships and supply chains shift, it’s extremely difficult to regain those markets.
For farmers, this could mean years of lower prices, surplus supply, and lost revenue.
If global buyers move on, that product still has to go somewhere. With fewer places to ship it, more grain, meat, and other goods stay in the U.S., and that extra volume puts pressure on prices. It’s a domino effect that quickly spills into the local economy.
Oversupply at Home, Lower Prices Across the Board
If demand abroad dries up, U.S. farmers don’t stop producing. The result? More grain, meat, and dairy hitting a domestic market that wasn’t built to handle the overflow. With too much supply and nowhere for it to go, prices tend to fall fast, and the ripple effects reach far beyond the farm gate.
This drives down prices, especially for staple commodity crops.
- Corn and soybean prices could drop below breakeven levels for extended periods.
- Livestock producers may oversaturate domestic markets with goods, driving down meat prices.
- Rural communities reliant on farm income would feel the economic shock.
Lower prices may help consumers, but they put U.S. agriculture’s financial stability at risk. Even in the best years, farming margins are thin. But when costs keep climbing and income starts to slip, there’s not much room to maneuver. That kind of squeeze makes it difficult to plan ahead or even keep up with what the farm needs today.
Rising Costs Amid Declining Revenues
It’s one thing to deal with falling prices. It’s another when input costs refuse to follow suit. That gap between what it costs to farm and what the market pays for your product becomes harder to close.
One of the riskiest situations is when costs rise and income drops. Tariffs on vital imports like fertilizer and machinery can keep operating expenses high, even as farmers bring in less:
- Fertilizer and input costs may remain inflated by 10–25% or more.
- Machinery repairs and parts shortages could lead to more delays and costs.
- Farm profit margins will narrow, making it harder to service debt or invest in operations.
For many farmers, this could mean reducing workforce, delaying improvements, or selling land to stay afloat.
Farmers aren’t the only ones feeling the pressure. When margins dip, lenders face harder choices too. They still want to support their borrowers, but rising risk means tougher conversations, and fewer options for those already stretched thin.
Pressure on Rural Lending and Credit Systems
While lenders aren’t walking away, they are asking tougher questions. When farms struggle to meet financial benchmarks, the entire lending equation changes, inevitably leading to more financial stress. With reduced profitability, access to capital becomes more important, and harder to get. A prolonged trade conflict could trigger:
- Increased loan defaults and tighter credit access.
- A spike in debt restructuring or land sales.
- Increased consolidation, with big players acquiring struggling operations.
Rural banks and ag lenders will face pressure to manage risk, support clients, and steer through a weaker farm economy.
As trade policy holds firm, other countries are forming new partnerships. These aren’t temporary fixes; they’re long-term arrangements that could shift the balance of power in ag exports. The more connected those competitors become, the harder it is for the U.S. to reclaim lost ground.
Stronger Alliances Between Foreign Competitors
While the U.S. stays locked in trade disputes, other countries are forming their own economic game plans. Regional partnerships are growing, and new trade agreements are being signed, without American products in the mix. These shifts don’t just change the playing field: they reshape agriculture altogether.
- BRICS countries (Brazil, Russia, India, China, South Africa) are already strengthening trade relationships.
- China may accelerate infrastructure investments in Latin America to lock in access to ag commodities.
- New trade agreements excluding the U.S. may become the norm in Asia and Africa.
These shifts could cement lasting disadvantages for American agricultural exports.
The outlook might be tough, but there are still ways to stay ahead of it. Even when global dynamics feel out of reach, farmers and lenders can take practical steps to manage risk and stay flexible in the face of change.
Facing Uncertainty: What Farmers and Lenders Can Do
While this worst-case scenario paints a difficult picture for American farming, waiting for clarity in policy or trade negotiations isn’t always an option. The most resilient operations are already adapting, finding ways to protect their margins, expand their marketing channels, and lean into flexibility. Whether you’re managing crops or capital, staying nimble matters more than ever.
Here are a few steps the industry can take:
- Diversify crop rotations and revenue streams to reduce reliance on a single market.
- Explore value-added processing, direct-to-consumer sales, or regenerative certifications.
- Focus on cost-efficiency and margin protection, especially with inputs.
- Stay informed on policy developments and be ready to pivot strategies quickly.
And most importantly, work with lenders who fully understand agriculture and can help you adjust your financing as conditions evolve.
Balancing Risk and Opportunity
Nobody can control how a global trade strategy plays out, but farmers can decide how to adapt. Whether tariffs create better market access or introduce more hurdles, the ag economy won’t stand still.
Either way, the growers and lenders who stay focused, flexible, and proactive will be better prepared for what’s ahead. It’s not about chasing headlines, it’s about staying ready and making informed decisions when conditions shift.
But what’s the other side of the story? Read Part 1: What if the U.S. Wins the Trade War?
If you’re navigating these shifts in real time, don’t go it alone. Find an experienced lender, like Conterra, who has experienced the cycles of agriculture and can help you pressure-test your plan, thinking through what’s next, before you’re forced to react.
The Farming America Blog can be found on the Conterra Ag website: conterraag.com/farming-america-blog/
Conterra is dedicated to financing American agriculture, offering specialized agricultural loans tailored to meet the specific needs of farmers and ranchers nationwide. With a team of experienced relationship managers strategically located across the country, we provide regional expertise and personalized service to our clients. Whether you’re a seasoned producer or new to the industry, Conterra is committed to supporting your agricultural endeavors. Our people, products, and process-driven approach to lending makes us unique.
Disclaimer: Please note that the information provided in this article is for educational and informational purposes only, and should not be construed as financial or investment advice. While we have made every effort to ensure the accuracy and reliability of the information presented, Conterra Ag Capital and its affiliates make no representation or warranty as to the completeness, correctness, timeliness, suitability, or validity of any information contained in this article. You should always consult a qualified financial advisor, tax professional, or other qualified professional for advice on your specific financial situation.
–Conterra
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