Insight Focus
A recent court decision has ruled Trump’s reciprocal tariffs illegal. The proposed EU–US trade agreement gives US farmers tariff-free access to key agricultural products, amid shifting trade flows for soybeans and corn. Poor weather has been hurting harvests around the world, while global freight rates have fallen to a two-year low.
Court Strikes Down Trump’s Tariffs
A US federal appeals court has struck down President Donald Trump’s “reciprocal tariffs,” ruling they were imposed unlawfully. The decision disputes Trump’s reliance on emergency powers to justify the duties, which were reintroduced on August 7 after an earlier failed rollout in April.
Trump first announced the levies on April 2, 2025, applying a baseline 10% tax on most imports and steeper duties on selected sectors and countries. The measures were suspended just a week later after global stock markets reacted sharply. After months of stalled negotiations with trading partners, a revised version of the tariffs was unveiled in August — only to be struck down by the Court of Appeals on August 26.
Trump now has until October 14 to appeal the ruling to the US Supreme Court. If the Court declines to hear the case or upholds the lower court’s decision, the tariffs will be removed. Other measures — such as Section 232 tariffs on steel, aluminium, and copper, and Section 301 tariffs on Chinese imports — remain unaffected.
While Trump argues the tariffs are necessary, critics warn they have already harmed US exporters by straining relations with key trading partners. A final Supreme Court ruling could also raise questions about revenue collected under the duties and the credibility of US trade negotiations carried out under tariff pressure.
Proposed Tariff Quotas Open EU to US Agriculture
While the future of Trump’s reciprocal tariffs now rests with the US Supreme Court, Washington and Brussels have moved forward with a new trade agreement reached on August 21. The European Commission has begun implementing the deal, though final approval from the European Parliament and Council is still required.
The EU–US trade package lowers US tariffs on cars and EU duties on American industrial goods. Agriculture is also a major focus, with proposed 0% tariff quotas for US pork, dairy, cheese, and soybeans, along with reduced tariffs on certain fruits, vegetables, and juices. These changes give US farmers better access to the EU market.
The deal has drawn criticism within the European Parliament, where some lawmakers see it as “unbalanced” and disproportionately beneficial to the US. Concerns include compliance with WTO rules — which normally require preferential terms to be extended more broadly — and the fact that tariffs on EU steel and aluminium exports remain untouched, at up to 50%. Parliament will begin debating the package in early September, with a second legislative proposal on the wider agreement still pending.
Argentina and Uruguay Fill China’s Soybean Demand
In our last trade update, we reported that US soybean exports were losing ground to Brazil, with China turning to Brazilian supplies for the September–October window amid ongoing trade tensions.
New reports from Reuters now indicate that this trend is expanding, as Chinese buyers are also increasing purchases from Argentina and Uruguay for the 2025/26 marketing year. Analysts suggest imports from these two countries could reach up to 10 million tonnes — potentially a record — with around 2.4 million tonnes already booked for shipments between September and May.
Source: USDA
This builds on China’s existing imports from Argentina and Uruguay, which totalled five million tonnes from September 2024 to July 2025. Combined with continued purchases from Brazil, which supplied 22% of China’s agricultural imports last year, the shift further reduces US market share, now projected at just 12%.
Traders cite both policy and supply factors. Ongoing US tariffs make American soybeans less competitive, while bumper crops in Argentina (50.9 million tonnes) and Uruguay (4.2 million tonnes) provide ample supply.
For US farmers, these developments underscore the ongoing impact of trade tensions, as Latin American competitors increasingly fill the void in China’s soybean demand.
Extreme Weather Cuts Harvests Across Europe and Beyond
The Guardian have warned that “climateflation” — rising food prices driven by extreme weather — is becoming a persistent force in global markets, in a recent report.
Over the past months, prolonged drought in the UK has slashed cereal and potato output by around 50% and reduced grass for feed by as much as 80%, while in the Balkans and Middle East, dryness is cutting into wheat and vegetable harvests and forcing water rationing in parts of Turkey. In recent years, West Africa and India have also seen repeated heatwaves, driving further pressure on cocoa and onion supplies.
Corn has also been hit in Europe. The 2025 harvest fell to 58 million tonnes, 7% below the five-year average, as drought and heatwaves reduced yields in Hungary, Romania, and southern Italy. Harvested area declined by 9% year-on-year, with prices climbing to a 12-month high. Analysts expect livestock feed costs to rise 10–15% by Q4, particularly in southern EU states that are heavily exposed to higher feed bills.
Source: USDA
The climate-driven shortfall is also exposing supply chain fragility. Southern EU countries, which rely heavily on corn for poultry and dairy feed, have leaned increasingly on Ukraine to cover gaps. Spain, for example, sourced 67% of its corn imports from Ukraine in 2024, up from 51% in 2021.
Vietnam Boosts Demand for US Corn and Ethanol
While drought and heatwaves are constraining European production, US corn exports are finding new opportunities in Asia.
Vietnam plans to switch entirely to E10 ethanol-blended gasoline next year, a move expected to increase demand for US ethanol and corn as feedstock. E10 fuel—blending gasoline with up to 10% bioethanol—would replace current RON92 and RON95 standards, supporting Vietnam’s net-zero emissions goals and carbon reduction targets.
With six domestic ethanol plants currently meeting around 40% of projected demand and tariffs on ethanol reduced from 10% to 5%, the policy shift opens the door for increased US shipments. For American farmers and ethanol producers, this represents a timely export opportunity as Vietnam modernises its fuel infrastructure and expands demand for biofuel feedstocks.
Global Container Freight Rates Fall to Two-Year Low
Global container freight rates have fallen to their lowest levels in nearly two years, reflecting a continued easing in shipping costs after early 2025 volatility. The initial surge, driven by US tariffs and front-loading of cargo, has given way to a sustained decline. Ti’s Q3 Ocean Freight Tracker reports the head haul index at 131.8 in August, down sharply from May and last year.
Source: Ti Ocean Freight Tracker
Drewry’s World Container Index also highlights the decline, marking the 11th consecutive week of falling rates on major trade lanes. Transpacific rates dropped 3–5% on Shanghai–Los Angeles and Shanghai–New York, while Asia–Europe rates fell 5–10% on routes such as Shanghai–Rotterdam and Shanghai–Genoa.
Source: Drewry
The decline is driven by overcapacity and weaker global demand. Carriers have responded with blank sailings and service adjustments, which have only temporarily stabilised rates.
Looking ahead, Drewry expects the supply-demand balance to weaken further in the second half of 2025, which will continue to put downward pressure on spot rates. The timing and magnitude of changes remain uncertain, depending on future US tariffs and capacity shifts related to penalties on Chinese ships.
