National Economy Snapshot

The National Economy

The largest development with regard to the U.S. and global economies has been the developing trade disputes between the United States and trading partners worldwide:

U.S. TARIFFS ON THE WORLD

The situation is highly fluid, with significant changes being announced on a daily basis.

Tariffs are a tax on imported goods, paid by the importing company or individuals.
- Who bears the brunt of this tax can be debated. Normally, the importer will pass on the tax to consumers, but sometimes exporting businesses will offer concessions to help offset the cost of the tax. Importers will also often attempt to shift their procurement to less-taxed countries of origin.
The current situation is that on April 9, the Trump Administration announced a baseline 10% tariff on nearly all countries, with higher rates on a number of them, including; 20% on EU goods, 24% on Japan, 26% on India, 49% on Cambodia, 46% on Vietnam, 37% on Bangladesh, and 25% on South Korea, to name a few countries. China was singled out for an 84% tariff, which, added to existing and previously announced tariffs, brings the cumulative tax on their exports to the U.S. to either 125 or 145%, depending on how you add them up.
- As of April 10, this tariff plan has been “paused” for most countries, for 90 days, but of course, this may change.
- Chinese-made goods are NOT subject to this pause, meaning that tariffs on them go into effect immediately.
Mexico and Canada were not included in the global tariff plan. In March, Trump imposed 25% tariffs on all Mexican and Canadian goods, but lifted them after two days. As it stands now, tariffs have been delayed on goods compliant with the USMCA trade agreement, which covers about 50% of imports from Mexico and 38% of imports from Canada. Goods not covered by the USMCA agreement face a 25% tariff, as well as steel and aluminum, and some automobiles and car parts, whether imported under the USMCA agreement or not. (complicated enough?)
These tariffs are a significant departure from previous U.S. policy which has generally been favorable to international trade. The U.S. (and it’s major trading partners) did have existing tariffs on many imports, but these have mostly been less than 5% of the value of goods on average.
The top exporters to the United States are; The European Union (when measured as a bloc), Mexico, China, Canada and the ASEAN bloc (a group of 10 Southeast Asian states).

GLOBAL RESPONSE

Many of the countries affected will (or already have) retaliated, placing tariffs on American exports. This will hinder U.S. efforts to sell goods abroad, including agricultural products.
China, in particular, has assessed an 125% import tax on most U.S. goods

EFFECTS ON U.S. AND NORTHEAST AGRICULTURE

It should be noted, that some sectors of Northeast agriculture may benefit from protection from imports.
- Fresh market vegetable growers may see a reduction in competition from Mexican imports
- Ornamental horticulture growers may see some reduction in imports from Canada
Most agricultural sectors, however, will be negatively impacted
Dairy: Roughly 17% of US Dairy production is exported, with Mexico and China as top destinations. This includes some Northeast production, and even for producers who are not directly supplying export markets, they may see depressed wholesale milk prices as a result of lost export markets. Most dairy exports to Mexico are believed to fall under the USMCA agreement and thus should not be negatively impacted by retaliatory tariffs at this time.
Grains and Row Crops: These commodities are heavily influenced by international trade. China, a major importer of soybeans and corn, has already shifted much of its purchasing from the U.S. to South America, and this trade war will accelerate that trend.
- Grain and oilseed commodity prices were already depressed before the tariff announcements, due to large crops worldwide, so the tariff announcements have not affected futures markets as much as might have been expected. However, these trade disputes do make price increases for row crops less likely.
Forest products:
- Softwood producers typically face stiff competition from Canadian imports, so tariffs on Canadian products may somewhat shield them from competition, and raise domestic softwood lumber prices.
- Hardwood producers are much more dependent on international markets, particularly China, and the tariff disputes will be a negative impact on already soft markets.
Other sectors are more case-by-case, but in general, the loss of export opportunities for large portions of U.S. agricultural products, could depress wholesale markets as that surplus product has to find a home domestically.

MACROECONOMIC EFFECTS FOR THE UNITED STATES

A lot depends on what happens in the coming days and weeks in terms of changes, but if the tariffs are enacted as proposed on April 9:
- The costs of imported goods in the United States will rise
- American manufacturers who use imported parts or inputs will face higher costs
- The ability of American farmers and manufacturers to sell their goods abroad will deteriorate
- Some U.S. companies will benefit by being protected from cheaper imports, but these benefits will likely be outweighed by the costs detailed above.
- According to Moody’s Analytics, the medium-term impacts will be an increase in overall inflation of about 1% above the baseline, a decrease in GDP of about 1.5-2.0%, and an increase in U.S. unemployment due to a slowdown in economic activity.
- The trade disputes increase the risk of recession in 2026 to above 50%, although forecasts suggest that it would be a mild one.
- Longer-term, there is a possibility that high tariffs could increase U.S. manufacturing in some sectors, however, this would require some stability and certainty in the U.S. tariff scheme so companies can make long-term investments, something currently lacking.

The U.S. economy was in good shape prior to the emergence of these trade and tariff disputes, and still shows some elements of strength. GDP growth in 2024 came in at 2.4%, and unemployment ended the year at 4.1%.

While official data on Q1 GDP growth is not yet available, estimates suggest that economic growth has slowed, even before the announcement of the new tariffs. Most estimates indicate that GDP was positive for Q1, ranging from 1.0-2.1%. Forecasts are for GDP growth to continue to decelerate with a risk of a mild recession depending on how trade disputes unfold.

Inflation has continued to slow, with the first month-over-month decline in prices seen in years occurring in March, due to falling energy prices. While prices fell 0.1% from February to March, they still increased 2.4%, year-over-year, slightly above the Federal Reserve’s target rate of 2.0%.

The U.S. labor market remains resilient, with headline unemployment coming in at 4.2% for March 2025. While government employment continues to decline significantly, the overall economy still posted a net gain of 228,000 jobs in March.