Key Takeaways
- Trump’s tariffs could disrupt U.S. agriculture by increasing costs for farmers, triggering retaliatory tariffs, and reducing market access for key exports like soybeans, pork, and dairy at least on the short term.
- Higher input costs and supply chain delays make farming more expensive and less competitive, with rising prices for equipment, fertilizers, and other essentials.
- Will market uncertainty hinder AgTech investment? While some argue that funding for precision agriculture and automation will slow in the next year or so, there may be some opportunities for increased investments, especially in Controlled Environment Agriculture for crops that would be otherwise imported.
- Long-term trade disadvantages for U.S. farmers as global competitors strengthen relationships with key buyers like China, making it harder for American producers to regain lost market share in certain countries.
- Potential for strategic investment in domestic agriculture, including automation and greenhouse production, but major shifts depend on long-term economic and policy decisions.
Understanding the Tariff Changes Signed By Trump
Overview of Trump’s Tariffs and Their Intended Purpose
Since taking office on January 20, 2025, President Trump has imposed significant tariffs on imports from several key U.S. trading partners. These tariffs were imposed through executive orders signed in the last weeks, citing various justifications including national security concerns, unfair competition & a desire to promote US-based products.
Tariffs on China:
- 10% tariff on all imports from China.
Steel and Aluminum Tariffs:
- 25% tariff on all steel imports.
- 25% tariff on all aluminum imports.
The tariffs on Canada and Mexico were initially set to take effect on February 4, 2025, but agreements were reached to delay implementation until March 4, 2025. The tariffs on Chinese imports took effect on February 4, 2025. The steel and aluminum tariffs, announced on February 10, 2025, were formally implemented on February 12, 2025.
Farmers Caught in the Crossfire
Retaliatory Tariffs and Their Effect on U.S. Agricultural Exports
While it will take several weeks to fully understand & quantify the impact of the newly proposed tariffs, past trade disputes provide insight into the potential risks. During Trump’s first presidency, retaliatory tariffs from key trading partners—particularly China, Mexico, and Canada—disrupted U.S. agricultural exports, leading to billions in lost revenue and forcing farmers to rely on government aid according to a USDA study.
Export Losses and Market Share Erosion
From 2018 to 2019, U.S. agricultural export losses exceeded $27 billion, with soybeans, sorghum, pork, and cotton among the hardest-hit commodities. U.S. farmers also faced long-term challenges in regaining lost market share. Once foreign buyers established new supply chains with alternative exporters, many did not return to American suppliers.
Case Study: The Soybean Industry’s Decline
A clear example of this market shift was the U.S. soybean industry. In response to U.S. tariffs, China—previously the largest buyer of American soybeans—imposed steep retaliatory tariffs. As a result, U.S. soybean exports to China plummeted from $14 billion in 2016 to just $3 billion in 2018, a 78% decline. With China turning to suppliers like Brazil, many American farmers struggled to find alternative buyers, intensifying financial strain on an industry already facing price volatility.
Broader Implications for U.S. Agriculture
Beyond soybeans, other sectors also suffered. The livestock and dairy industries experienced disruptions due to increased costs and lower demand for exports, while specialty crops like apples, cherries, and berries faced new trade barriers. Additionally, states heavily reliant on agricultural exports—such as Iowa, Illinois, and Kansas—saw billion-dollar losses annually.
Impact on Startups, Large Companies, and Equipment Providers
The ripple effects of Trump’s tariffs extend beyond farmers and directly impact the companies that supply agricultural technology, equipment, and inputs. Increased import costs, supply chain disruptions, and shifting investment trends are forcing businesses in this sector to adapt.
Startups Facing Funding Challenges and Rising Costs
AgTech startups, particularly those in precision agriculture, robotics, and automation, are grappling with increasing manufacturing costs. Many rely on components such as sensors, microchips, and batteries sourced from China, which are now subject to a 10% tariff. This has led to increased production expenses, making it harder for startups to scale and be competitive, especially after the inflationary period the country witnessed since 2021.
Established Companies Adjusting Strategies
Larger firms and agricultural equipment manufacturers are also experiencing significant cost increases due to tariffs on steel, aluminum, and imported machinery components. Some companies have started passing these costs onto farmers, further increasing the financial burden on the industry.
To mitigate these cost pressures, many companies are exploring domestic sourcing for components or considering expanding U.S.-based manufacturing operations. However, these shifts require time and investment, making them challenging short-term solutions.
Equipment and Input Suppliers Struggling with Higher Prices
Tariffs on imports from Canada, Mexico, and China are significantly impacting agricultural input suppliers and, in turn, increasing costs for U.S. farmers. Fertilizers, pesticides, and machinery—critical components of today’s farming—could become even more expensive than they already are due to the new tariffs. The U.S. relies on imports for 90% of its potassium fertilizers, with over 80% coming from Canada, making a 25% tariff on these goods particularly costly. Prices for potash alone could rise by more than $100 per ton according to a study by the University of Illinois, adding financial strain to farmers already facing high operational expenses.
The agricultural machinery sector is also affected, with tariffs on Chinese imports raising manufacturing costs for farm equipment by an estimated 7-8% during previous trade disputes.
Shifting Market Trends: Winners and Losers
While many AgTech startups and suppliers face challenges, some domestic manufacturers could see benefits if tariffs increase demand for U.S.-made agricultural equipment and inputs. However, in the short term, rising costs are expected to squeeze profit margins across the sector, creating financial strain for both producers and buyers.
The long-term outlook remains highly uncertain, not only due to market dynamics and potential policy interventions such as subsidies but also because of the shifting political landscape. With two years until the midterm elections and four years until the end of Trump’s presidency, there is no guarantee that he will maintain his congressional majorities. If the political balance shifts, policies could change significantly—just as they did when Biden took office, reversing many of Trump’s initial trade decisions. This uncertainty complicates long-term investment planning for startups, equipment manufacturers, and suppliers, forcing them to navigate a volatile market.
However, some argue that tariffs serve a broader strategic purpose beyond their short-term economic impact. Austin L. Maness, Chief Operating Officer at Harvest Returns, offers a different perspective:“There is no greater customer than the American consumer. If applying tariffs to imported goods resulted in your own population paying higher prices, then why would other countries enact retaliatory tariffs? Countries use tariffs as an equalizer between each other’s economies. Fortunately, the U.S. has the best consumer and thus the best leverage to use tariffs to lead other countries to do the right thing.”
Would Trump’s Tariff Lead To An AgTech Investment Slowdown?
Investment Trends in AgTech: No Clear Evidence of Decline Due to Tariffs
Historical Growth of AgTech Investment Under Trump’s First Presidency (2016-2020)
Despite concerns over trade uncertainty, there is no clear evidence that tariffs have directly caused a decline in AgTech investment. Historical data from Trump’s first presidency (2016-2020) shows that U.S. AgTech funding steadily increased, rising from $3.2 billion in 2016 to a record $7.9 billion in 2020. This period of growth persisted despite shifting trade policies, indicating that investment decisions in AgTech are driven more by technological advancements, market demand, and broader economic factors rather than tariffs alone.
Potential Investment Opportunities in Automation and Robotics
Some sources suggest that tariffs could create new investment opportunities, particularly for domestic manufacturing, automation, and robotics. Companies like Sabanto see potential to capitalize on shifting market conditions by offering autonomous farming solutions, signaling continued investor interest in certain AgTech sectors.
Skepticism About Tariffs Driving Investment in Controlled Environment Agriculture (CEA)
However, skepticism remains regarding whether tariffs will drive significant investment in controlled environment agriculture (CEA). Austin L. Maness, Chief Operating Officer at Harvest Returns, argues that structural inefficiencies, rather than trade policy, are the primary barrier to growth in CEA:
“No. The lack of investment in CEA is more directly related to its already existing inefficiencies and poor execution on the part of early adopters. Major greenhouse and vertical farming companies have already gone out of business because they just couldn’t ‘produce’ a profitable business model. Investment in CEA will likely come when it absolutely HAS to, not as a way to curb minor and temporary price fluctuations due to the negotiating tactics of politicians.”
Industry Sentiment: Mixed Views on Tariffs’ Long-Term Impact
Recent LinkedIn poll results further highlight the mixed sentiment around tariffs’ long-term impact on agriculture:
- 55% believe tariffs will increase costs for consumers.
- 15% think tariffs could lead to greater investment in greenhouse production.
- 25% expect both higher costs and some investment in CEA.
- 5% believe tariffs will have no major long-term effects.
Conclusion
Trump’s tariffs introduce a complex set of challenges and opportunities for U.S. agriculture and AgTech. In the short term, farmers face higher input costs, supply chain disruptions, and the potential for retaliatory tariffs that could limit access to key export markets. Equipment manufacturers, input suppliers, and startups reliant on imported components are likely to see rising costs, which may strain profitability. While some domestic manufacturers could benefit from increased demand for U.S.-made products, the broader industry remains cautious about the financial burden these tariffs impose.
Looking ahead, the long-term impact of these policies remains uncertain, particularly given the shifting political landscape. With midterm elections in two years and a new presidential election in four, there is no guarantee of policy continuity. This unpredictability complicates investment decisions, especially in areas like controlled environment agriculture (CEA), where existing inefficiencies remain a bigger barrier to growth than trade policy alone. While some investors and companies see opportunities in automation and domestic production, industry sentiment remains mixed. The real test will be whether the U.S. agricultural sector can adapt efficiently enough to offset cost increases, maintain competitiveness, and secure the investment necessary to drive long-term innovation.
