Potential Trade War Will Have Greatest Effect on Soy Complex

President-elect Donald Trump has made his trade policy in 2025 abundantly clear: He has unfinished business with China and Mexico, which are also the top two export markets for U.S. grains and oilseeds. Below is our analysis of the potential impact on soybeans, corn and wheat markets.

Soybeans have the most at risk in a trade war with China, comprising 45% of U.S. soybean exports in 2024. With South America expected to harvest a record soybean crop in 2025, a trade war with China is widely expected to cause China to retaliate by shifting its soybean purchases to Brazil and Argentina. China has also stockpiled soybeans in anticipation of a trade war.

U.S. soybean exports would be rerouted, but at a higher cost into smaller markets. In a supply-surplus environment, the higher transportation cost will be borne by the farmer via wider basis. Mexico – the second-biggest soybean export market for the U.S. – may also retaliate in a trade war and shift demand to South America.

However, falling soybean prices and wider basis would benefit U.S. soybean crushers and livestock operators feeding soybean meal primarily to hogs and chickens. Soybean crushers would also benefit from rising soybean oil prices if tariffs are imposed on used cooking oil (UCO) imports that come primarily from China. UCO competes with soybean oil as a feedstock in renewable diesel.

Mexico is the main export destination for corn and wheat. Trump has indicated steep tariffs on Mexican car imports but could also use broad tariffs on Mexico for leverage on issues like border security and immigration. Mexico has already made major purchases of U.S. corn and wheat ahead of the anticipated trade war.

For corn, Mexico is very reliant on the U.S. due to Mexican livestock operations being located in northern Mexico, making rail shipments from the U.S. easy and efficient. Imports from other corn exporters like Argentina or Brazil would be more difficult since those shipments are sent by ocean vessels to the coast, then unloaded onto rail to be shipped inland.

For wheat, Mexico can more easily replace U.S. wheat with Russian wheat since the flour mills are more easily accessible from the coasts. If Mexico were to retaliate, a potential drop in U.S. corn prices and basis would benefit U.S. ethanol producers and livestock/poultry feeders, while falling wheat prices and basis would benefit U.S. flour millers and bakers. Carries would also widen in the event of a slower export pace, benefiting commercial grain storage.

Tags: China, trade war, corn, Trump, Brazil, soybeans, Grains, oilseeds, wheat, U.S., Argentina, markets, Mexico