What impact will Donald Trump's victory have on the agtech industry?
First is China and the impact of protectionism. ‘Tariff man’ Trump has consistently called for tariffs on imports. During his first term, he imposed significant tariffs on various countries, notably China. He has proposed even more extensive tariff plans for his second term.
Trump believes his tariff policies will boost US manufacturing and bring jobs back to America. He has threatened specific companies like John Deere with tariffs if they move production abroad.
The extent of the impact of tariffs on the agtech world will ultimately depend on the specific tariffs implemented, their duration, and how successfully the agtech industry can adapt to the new trade landscape.
Many agtech companies rely on imported components, sensors, and equipment for their products. Import tariffs could therefore lead to higher costs for essential technological components used in the likes of precision agriculture tools, farm management software, and IoT devices.
Tariffs can further lead to potential supply chain disruptions if certain components become unavailable or too expensive, and potentially reduce the competitiveness of US agtech exports in international markets.
Crucially, increased prices for finished agtech products could potentially slow adoption rates among farmers, which is a big concern for the industry as it is.
Tariffs could, however, in theory create opportunities such as increased demand for domestically produced agtech solutions as alternatives to more expensive imports, and the potential for new US-based manufacturing of agtech equipment.
Tariffs may also spark growth in technologies focused on improving self-sufficiency in the US agricultural sector.
Biofuels and carbon credits
Trump’s presidency may influence biofuel policies and renewable energy in the agricultural sector.
The Clean Fuel Production Credit (CFPC) is set to replace the current Blenders Tax Credit in 2025. The CFPC is a new tax incentive created by the Inflation Reduction Act to promote the production of low-emission transportation fuels.
Implementation details and deadlines could now be delayed Trump may be more lenient towards oil interests compared to a progressive shift towards renewables.
He may grant more small refinery exemptions from biofuel blending requirements. This could potentially dampen demand for biodiesel, which is slowly emerging as a viable income source for farmers.
It’s estimated about 40% of US corn crops are now processed in bioethanol plants. Around 1.3-1.5 billion tonnes of agricultural byproducts that previously went unused annually can now be converted into biofuels.
Growing crops for biofuels can also improve soil health when combined with sustainable farming practices. There's therefore potential for farmers to earn additional income through carbon credits for good land stewardship practices.
Some reports suggest that biofuel use of grains and soybeans is expected to continue growing regardless of the election outcome.
Carbon-related programmes in agriculture too are likely to continue expanding regardless of the election outcome, though the pace and federal support for these initiatives may be affected, which could influence the development and adoption of carbon sequestration technologies in agriculture.
Tax and immigration policy
In his first presidency Trump implemented the Tax Cuts and Jobs Act (TCJA) of 2017 – one of the largest tax overhauls in recent US history. His new victory will likely ensure a lower tax environment. This could potentially benefit both agtech companies (by allowing them to retain more of their profits) and farmers (by allowing them to keep more of their earnings to reinvest in their operations).
However, it has been warned these tax cuts may come with increased government borrowing, potentially leading to higher interest rates in the medium term.
Another significant part of Trump’s campaign are plans to restrict immigration from the southern border. It has been suggested that this may drive increased demand for automation and agtech solutions to address potential labour shortages.
R&D concerns?
Trump's previous term saw efforts to reduce funding for certain agricultural research programmes. Trump's budget proposals called for significant cuts to the United States Department of Agriculture, including a 21% reduction in funding. This would have impacted various agricultural research and extension programmes.
The industry will await clarification on this and much else.
