The US President came out swinging this week with renewed enthusiasm for tariffs. This time, the targets were steel and aluminium imports with Australia right in the firing line.
A broad ‘no exceptions, no exemptions’ 25% tariff is to be placed on all steel and aluminium imports. In 2023, Australia exported 223kmt of steel and 83kmt of aluminium to the US worth AU$377M. This new tariff would create significant difficulties for Aussie companies going forward. Spare a thought for the Canadians (again). 60% of the aluminium that the US imports comes from Canada, so coupled with the 30% tariffs (on hold for now), it continues to be an uncertain time for North American trade to say the least.
The world economy is also fearing the worst as promised ‘reciprocal’ tariffs are to be introduced. This means that any country that has tried to protect itself from US goods by introducing import tariffs will have the same level of duty applied to them. For example, the US charges a 2.5% tariff on Brazilian ethanol, but Brazil charges an 18% on US ethanol exports. The EU charges a 10% levy on US vehicles, but the US only charges 2.5% duties on European vehicles. This strategy is about levelling up the playing field to reduce the US trade deficit of over US$1T. There are any number of examples that the US is using as ‘unfair’ trading practices. Are we watching a New World Order unfold before our very eyes?.
The wheat market is relatively flat at the moment. There are the usual stories that create the odd ripple here and there, but overall, while the Northern Hemisphere is dormant, the wheat market will basically just tread water. This week’s USDA release didn’t really move the market either. Global stocks of the main agricultural commodities are getting tighter, but China’s imports of corn and wheat are now expected to be down 50% of earlier forecasts. Argentina’s Rosario Grain Exchange also took the knife to corn and soybean production, down to 46mmt and 47mmt, respectively, due to hot and dry conditions. Two months ago, corn was expected to produce 50mmt and beans at 53mmt.
India is becoming a ‘watch and act’ flag. Early on, there was speculation that they may need to import as much as 12mmt to replenish stocks. A good growing season brought their season full circle, and some belief they may not need to import anything at all. But a dry and hot January (only 20% of average rainfall) is raising concerns that the harvest may come in short.
Next week
The chaotic nature of US politics continues to create volatility. The Spring weather market may throw up the odd surprise in the coming weeks, so keep an eye out for any sharp pricing opportunities.
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A new world order?
A broad ‘no exceptions, no exemptions’ 25% tariff is to be placed on all steel and aluminium imports. In 2023, Australia exported 223kmt of steel and 83kmt of aluminium to the US worth AU$377M. This new tariff would create significant difficulties for Aussie companies going forward. Spare a thought for the Canadians (again). 60% of the aluminium that the US imports comes from Canada, so coupled with the 30% tariffs (on hold for now), it continues to be an uncertain time for North American trade to say the least.
The world economy is also fearing the worst as promised ‘reciprocal’ tariffs are to be introduced. This means that any country that has tried to protect itself from US goods by introducing import tariffs will have the same level of duty applied to them. For example, the US charges a 2.5% tariff on Brazilian ethanol, but Brazil charges an 18% on US ethanol exports. The EU charges a 10% levy on US vehicles, but the US only charges 2.5% duties on European vehicles. This strategy is about levelling up the playing field to reduce the US trade deficit of over US$1T. There are any number of examples that the US is using as ‘unfair’ trading practices. Are we watching a New World Order unfold before our very eyes?.
The wheat market is relatively flat at the moment. There are the usual stories that create the odd ripple here and there, but overall, while the Northern Hemisphere is dormant, the wheat market will basically just tread water. This week’s USDA release didn’t really move the market either. Global stocks of the main agricultural commodities are getting tighter, but China’s imports of corn and wheat are now expected to be down 50% of earlier forecasts. Argentina’s Rosario Grain Exchange also took the knife to corn and soybean production, down to 46mmt and 47mmt, respectively, due to hot and dry conditions. Two months ago, corn was expected to produce 50mmt and beans at 53mmt.
India is becoming a ‘watch and act’ flag. Early on, there was speculation that they may need to import as much as 12mmt to replenish stocks. A good growing season brought their season full circle, and some belief they may not need to import anything at all. But a dry and hot January (only 20% of average rainfall) is raising concerns that the harvest may come in short.
Next week
The chaotic nature of US politics continues to create volatility. The Spring weather market may throw up the odd surprise in the coming weeks, so keep an eye out for any sharp pricing opportunities.
Have any questions or comments?
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Data sources: Reuters, SovEcon, USDA, Next Level Grain Marketing, Bloomberg, World Ag Weather, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
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Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.