During his March 4 address to a joint session of Congress at the U.S. Capitol, President Donald Trump defended his use of tariffs as a core economic and political strategy, adding a message to the agricultural community.
"Our farmers are going to have a field day right now," Trump said during the speech. "So to our farmers, have a lot of fun. I love you too."
In South Dakota, a state whose reliance on agricultural trade makes it more susceptible to the risks of tariffs and trade wars, the president's words were viewed as hopeful but not entirely reassuring.
Farmers have sturdy memories. They recall the volatility of commodity prices and exports during Trump’s first White House stint, when much of the state's soybean flow to China was halted due to tariff retaliation and has struggled to recover.
"(Tariffs) will hurt our pocketbooks, obviously," said Rodney Koch, who grows soybeans and other crops north of Garretson, about 20 miles northeast of Sioux Falls. "But will we come out of it better in the long run? That's the hope."
U.S. Sen. Mike Rounds echoed that sentiment in a statement to News Watch, saying that "there needs to be an end game, and I believe the president is working with that same goal in mind."
So far, the only certainty is uncertainty.
On March 4, Trump slapped 25% tariffs on almost all imports from Canada and Mexico and an additional 10% on imports from China, rattling stock markets and triggering retaliatory actions from the countries involved.
Two days later, the president announced that he was postponing 25% tariffs on many imports from Mexico and some imports from Canada for a month amid widespread fears of the economic fallout.
Corn, wheat and soybean prices dropped in the days following the trade shakeup, and farmers weighed the impact of more expensive machinery and fertilizer coming down from Canada.
"One thing the market doesn't like is uncertainty because uncertainty means risk," said Jared McEntaffer, CEO of the Dakota Institute, an economic research and analysis organization in Sioux Falls. "If farmers are concerned that they're going to see lower commodity prices in the future, then naturally, they're going to start pulling back on their spending. And it becomes a ripple effect."
News Watch talked to farmers, business leaders, economists and politicians to try to clear up some misconceptions about tariffs and examine how South Dakota's farm economy could be impacted in the coming months and years. Each question and answer below is covered in its own section that can be expanded to show the details by clicking on the title or the down arrow.
What are tariffs exactly?
Tariffs are a tax on imports, in which the buyer pays a foreign seller an established tax rate based on what is being sold. Percentages are generally lower for countries with which the United States has a favorable trade agreement.
The money is collected by Customs and Border Protection agents at 328 ports of entry across the country. Because companies are paying more for the goods, that extra cost frequently gets passed on to consumers in the form of higher prices.
"There's a narrative out there that we're going to be imposing these taxes on Canada and Mexico," said McEntaffer. "That's not the case. The tax will be paid by American companies and consumers."
Before the federal income tax was established in 1913, tariffs were a major revenue source for the United States. That changed as global trade grew after World War II and the government needed larger revenue streams to support its operations.
In the fiscal year that ended Sept. 30, the government collected about $80 billion in tariffs and fees. That pales in comparison to the $2.5 trillion from individual income taxes and the $1.7 trillion from Social Security and Medicare taxes.
How do tariff policies impact South Dakota?
Farming helps drive the state economy, with agricultural production and processing accounting for about 14% of South Dakota’s gross domestic product (the total value of all goods and services produced).
The wholesaling of corn, wheat and soybeans brought in $10 billion in overall revenue in 2024, second among South Dakota industries to credit card issuing ($18 billion).
Though many of these farm goods are sold domestically, a large percentage (including 60% of soybeans) are sold to international buyers.
South Dakota is the country’s 12th largest agricultural exporting state, shipping $5.4 billion in farm goods abroad in 2022, led by soybeans, corn, feed grains, beef, veal and wheat.
The largest international markets for these exports are, in order, Canada, Mexico and China, which are the three countries that Trump’s administration has placed tariffs upon.
Don’t tariffs impact U.S. imports, not exports?
The thing about tariffs is that there is almost always retaliation, as we’ve seen with Canada, Mexico and China. That’s what is meant by trade wars.
In 2018, when Trump imposed a 25% tariff on goods from China, the Chinese government responded in kind. That greatly reduced the exporting of soybeans into China as that country looked to Brazil to fill the void.
As of November, China accounted for 44% of total U.S. soybean sales, down from 62% in 2016. From 2019-2023, an average of 73% of Brazil’s exported soybeans went to China.
Following Trump's 2025 tariff announcement, Beijing retaliated with levies of up to 15% on various U.S. agricultural exports, including soybeans, wheat, meat and cotton.
Mexico's response will be watched closely, since that country is the top destination for United States corn exports.
"They're our No. 1 customer, and we value our customers," said DaNita Murray, executive director of South Dakota Corn, which represents the interests of corn producers across the state. "There's a balance between wanting to negotiate strong trade agreements and asking those countries to come to the table to negotiate in good faith while they're being slapped with tariffs."
What is President Trump's reasoning for the tariffs?
The economic reasoning revolves around boosting revenue and addressing trade deficits as well as trying to incentivize American companies such as automakers to shift manufacturing back to the United States.
But Trump has also talked of using tariffs as a bargaining tool to strengthen border security. During his March 4 address, he said that Mexico and Canada have "allowed fentanyl to come into our country at levels never seen before, killing hundreds of thousands of our citizens.”
The Centers for Disease Control and Prevention estimates that there were 87,000 fentanyl-related U.S. deaths between October 2023 and September 2024, down from 114,000 the previous year.
Critics have questioned equating the northern border with the southern border on the subject of drug smuggling. U.S. customs agents seized 43 pounds of fentanyl at the Canadian border during the last fiscal year, compared to 21,100 pounds at the Mexican border.
"We understand that the president is using (tariffs) as a negotiating lever to stop the flow of fentanyl into the country," said Scott VanderWal, president of the South Dakota Farm Bureau. "Usually he gets what he wants by doing things like that."
But VanderWal, a third-generation family farmer from Volga, just west of Brookings, is also concerned about the fragile state of South Dakota's farm economy so soon after the COVID-19 pandemic, droughts and flooding as well as uncertainty about a new farm bill and federal spending cuts.
Nationally, net farm income decreased 4% in 2024, following a 19% drop the year before.
VanderWal met with South Dakota Republican and U.S. Senate Majority Leader John Thune on March 4 in Washington to urge caution on trade policies as Trump acknowledged in his speech to Congress that there could be a "little disturbance" in the markets before the strategy bears fruit.
"What we hear from our members is that they can handle some temporary pain as long as there's some benefit on the other end," VanderWal said. "But we've been careful to help the administration understand that with the current ag economy, we would prefer that the president uses the tariffs sparingly."
What are South Dakota politicians saying?
Tariffs present a political quandary for South Dakota’s congressional delegation, which is caught between Trump’s enduring popularity (he carried the state with 63% of the vote in 2024) and the economic needs of their ag-based constituents.
So far, Thune, Rounds and U.S. Rep. Dusty Johnson have publicly backed Trump's aggressive trade strategy while also calling for reasonable time limits and parameters.
"Unlike former President Biden, who didn’t negotiate any new trade agreements which led to lower commodity prices, President Trump is a businessman and uses tariffs as leverage in negotiating important issues such as border protection," Rounds told News Watch. "He’s pretty clearly expressed his desire for us to be patient as he works through those issues. Naturally, those of us that have always promoted free trade continue to look for progress."
Johnson told News Watch in February that fair trading relationships and stopping the flow of fentanyl across the border are important priorities and "it seems to me that the president has been very clear that these are areas where he wants to have leverage in conversations with these countries.”
Kristi Noem, former South Dakota governor and U.S. representative who's now secretary of the Department of Homeland Security, has ardently supported the trade measures as a means of securing the border. Thune told CNN that Trump's actions are "an attempt to use (tariffs) in a targeted way to achieve and accomplish something that I think a lot of the Americans expect him to address.”
Those statements illustrate a much different political climate than South Dakota Republican leaders operated under in 2018, when Trump levied tariffs against China during his first term in office.
At that time, Thune, Rounds and Noem sent a public letter to the president expressing “serious concern” over the tariffs and other trade policies that they said could push “an alarming number” of South Dakota farmers and ranchers “to the brink of economic collapse.”
“Please keep in mind that U.S. export market share is diminishing daily at an alarming rate, and history has proven that once lost, export markets can take years, even decades to recapture,” read the July 2018 letter.
How will tariffs impact current trade agreements?
One of the concerns is that igniting a tariff battle will reverse recent gains in the trade relationship with Mexico under the United States-Mexico-Canada Agreement (USMCA), which was signed during Trump’s first term.
Mexico repealed its ban on importing genetically modified (biotech) corn from the U.S. in February after a favorable ruling in an arbitration case brought by American trade representatives.
“We had some ups and downs with the previous Mexican administration, but things seem to be headed in the right direction," said Murray of South Dakota Corn, which monitors policy for a state ranked sixth in overall corn exports. "I know that the current administration (in Mexico) is interested in looking at USMCA and possibly making some improvements, and it could be a tough conversation with tariffs in the picture."
On March 6, Trump announced that imports from Mexico that comply with USMCA would be excluded from the 25% tariffs for a month. He also stated that potash (fertilizer) that U.S. farmers import from Canada would be tariffed at 10%, the same rate at which Trump wants to tariff Canadian energy products.
As for changing the dynamic and exploring global markets for corn exports, Murray noted India as a possibility and also various countries in Africa.
“You have mature corn markets like Mexico and Japan,” she said. “And then you have new emerging possibilities, like India and, frankly, the continent of Africa. What are their protein needs? And can U.S. corn compete on a quality basis, as well as price, to make sure that it's U.S. corn that's feeding those chickens and pigs.”
Will there be a farm bailout coming this time?
The “temporary pain” of U.S. farmers during the first go-round of Trump tariffs in 2018-19 was addressed by authorizing payments to U.S. farmers of $28 billion to offset their losses from Chinese trade retaliation.
That was more than the $21.8 billion that the Department of Defense spent in fiscal year 2019 for “nuclear delivery systems and weapons,” including ballistic missile submarines, intercontinental ballistic missiles and bombers, according to Forbes.
“Taxpayers are going to be asked to initial checks to farmers in lieu of having a trade policy that actually opens and expands more markets," Thune said at the time. "There isn’t anything about this that anybody should like."
Given the state of the federal deficit and the administration's focus on cutting government spending, it seems unlikely that a similar round of farm bailouts will be offered this time around.
That could make the sting felt by farmers more long-lasting if trade wars linger and tariffs become the norm, said Doug Sombke, president of the South Dakota Farmers Union.
“We haven't gained markets back from the last time, and we probably never will," said Sombke, a fourth-generation Brown County farmer. "The only reason we made it through last time was that we got substantial payments from the government, which contributed to the current budget deficit."
Tariffs on Canada could make it more expensive to buy farm machinery and other equipment, Sombke said, worsening an already difficult cycle of farmers struggling to make ends meet without government support.
In 2023, South Dakota received $1.23 billion in farm subsidies, which ranked fourth behind Texas, Kansas and North Dakota.
“If you ask any CPA (certified public accountant) who is doing taxes for farmers, they'll tell you the same thing – farmers are making it on the payments," Sombke said. "If it wasn't for the subsidies and tax breaks and other payments they receive, they wouldn't make anything. That’s how tight things are right now."
The Associated Press contributed to this story, which was produced by South Dakota News Watch, an independent, nonprofit organization. Read more stories and donate at sdnewswatch.org and sign up for an email every few days to get stories as soon as they're published. Contact Stu Whitney at stu.whitney@sdnewswatch.org.
