Voracious U.S. Demand Means Biggest Food and Ag Trade Deficit Ever

Americans are consuming ever-larger amounts of imported fruits, vegetables, wine, alcohol, coffee, and beef, an appetite that will drive the food and ag trade deficit to a record $45.5 billion this fiscal year, estimated the Agriculture Department on Tuesday. Imports would be a sizzling $9.3 billion larger than in just-ended fiscal 2024, while food and ag exports decline for the third year in a row due to lower commodity prices.

Mexico and Canada, the largest U.S. food trade partners, would account for $4 of every $10 in American ag exports and imports totaling $385.5 billion, said the USDA in a quarterly forecast. Roughly one-fifth of U.S. agricultural production is exported, so trade is an important part of farmer revenue.

President-elect Donald Trump said earlier this week that he would impose 25% tariffs on Mexico and Canada when he takes office unless they stop illegal migration into the United States. President Claudia Sheinbaum of Mexico said mutual cooperation would be more fruitful than tariffs, “which will be followed by another in response.” Prime Minister Pierre Trudeau of Canada, who spoke to Trump by telephone, said he would meet provincial leaders to discuss how to approach the U.S.-Canada relationship, reported CBC News.

Agricultural trade generally is tariff-free in North America under the U.S.-Mexico-Canada Agreement (USMCA) negotiated by the first Trump administration, as it was under the preceding North American Free Trade Agreement.

“Every single day, Americans visit grocery stores and buy food imported from Canada and Mexico,” said Georgia Rep. David Scott, the senior Democrat on the House Agriculture Committee. Building materials and fertilizer also are imported, he said. “Trump’s tariffs will cost us at the grocery store, in our homes, and make it harder for American farmers to stay in business.”

Trump also threatened a 10% tariff “above any additional tariffs” on goods imported from China on grounds that Beijing was not doing enough to stop smuggling of fentanyl into the United States. U.S. agricultural exports fell by 6% during the Sino-U.S. trade war that ended in 2020. The Trump administration sent $23 billion in payments to farmers to offset the loss. Trump suggested import duties of up to 60% on Chinese goods during his election campaign.

Iowa Sen. Chuck Grassley told reporters that “I think he’s using tariffs as a negotiating tool.” The USMCA is open for renegotiation in 2026. “Maybe he’s leading up to that.”

The bustling U.S. economy encourages food and ag imports at the same time the strong dollar makes export sales more difficult, said USDA economists. Food and ag sales to foreign buyers were forecast at $170 billion this fiscal year, as sales continue downhill from the record $196.1 billion in 2022. Imports would surge to $215.5 billion, up by 4.5% from fiscal 2024, with horticultural products generating nearly half of the $9.3 billion growth in purchases,

Mexico and Canada were forecast to provide $92.4 billion, or 43%, of U.S. food and ag imports this fiscal year. “Growth is expected to continue to come from a wide range of agricultural products — especially processed food and beverages, alcoholic beverages, and livestock and animal products,” said the USDA, referring to the estimated $49.9 billion in purchases from Mexico. The strong dollar and rising U.S. demand will bolster imports of Canadian prepared foods, baked goods, frozen potatoes, and other frozen vegetables, it said.

China used to be the No. 1 customer for U.S. food and ag exports but now ranks third. Mexico was forecast to buy $29.9 billion, a hair less than last year, and Canada $29.2 billion of U.S. food and ag products this fiscal year. China would buy $23.3 billion worth. Sales to Mexico “are expected to remain robust, particularly for corn, beef, pork, dairy, fruits, and vegetables,” said the USDA.

The quarterly Outlook for U.S. Agricultural Trade was available here.