Growing Together: The North American Agricultural Powerhouse

Before the North American Free Trade Agreement (NAFTA), Canadians rarely ate strawberries in February, nor were they spreading avocado on their morning toast. Twenty years after NAFTA was signed, not only were Canadians enjoying the fruits of an integrated market, but Americans too were consuming twice as much fruit and three times as many vegetables from Mexico and Canada, and Mexicans consumed more eggs, milk, and meat. The future of this interdependent agricultural system and the economic prosperity it brings depends on a tariff-free North America.

An Integrated Market

The agricultural sector in the United States, Canada, and Mexico has greatly benefited from deep market integration under NAFTA and its successor, the United States-Mexico-Canada Agreement (USMCA), unleashing the different strengths of each country’s industry and geography. In fact, the elimination of North American agricultural trade barriers quadrupled the movement of agricultural products from the United States to Canada and Mexico over the last decade. In 2023, the United States exported $174.9 billion worth of agricultural products around the world, with $32 billion going to Canada and $28.6 billion to Mexico. Agriculture, food, and related industries also employ tens of millions of people in the United States, Canada, and Mexico and represent a significant percentage of each country’s gross domestic product: 5.5 percent, 7 percent, and 6 percent, respectively.

The United States and Canada trade fruits and vegetables, canola oil, beef and pork, chocolate, frozen fries, grain alcohol, food preparations, baked goods, dog and cat food, and corn, among other agricultural products. Grains, fruits, vegetables, meat, and related products accounted for nearly two-thirds of U.S. agricultural exports to Canada in 2023. Much of U.S.-Canada agricultural trade consists of intra-industry trade, where each country sends to the other products within certain sectors. Most importantly, Canada sources livestock feed, veterinary products, and farm machinery. In 2019, the United States exported $3.7 billion worth of tractors, and Canada accounted for 48 percent of those exports. Canada is also a critical supplier of potash, which is used as an essential fertilizer to improve crop root strength, disease resistance, water retention, and yield; the United States imports 85 percent of the potash it needs each year from Canada.

Looking south, the United States is Mexico’s largest agricultural trading partner. Corn, soybeans, dairy products, and pork were the leading U.S. farm exports to Mexico in 2024. In return, the United States sources 63 percent of its vegetables and 47 percent of its fruit from its southern neighbor. Mexico is the largest supplier of avocados, tomatoes, and strawberries to the United States. A good example of the economic interdependence between the two countries is in the production of beer. Breweries in Nava and Obregón, Mexico, rely on malted barley from Montana, Idaho, and North Dakota, as well as hops from Washington state. After brewing, beer is exported back to the United States, where the Mexican brand Modelo Especial is a bestseller.

Exports to the World

North America produces significantly more food than it consumes, making it an agricultural export powerhouse. Beyond regional trade, East Asia, led by China, Japan, and South Korea, along with the European Union, represent the largest markets for North American agricultural products. Consumers in these countries are willing to pay premiums for high-quality goods, such as fresh fruits and meat.

East Asia, especially China, is the largest export market outside of the North American bloc. Between 2020 and 2024, 31 percent of U.S. agricultural commodities were destined for East Asian markets, primarily oilseeds, grains, and meat. In 2022, U.S. agricultural exports to China reached a record-breaking $36.4 billion, making it the largest market for U.S. farm goods at the time. However, U.S. agricultural exports to China fell 24 percent in 2023 with softening demand.

The European Union is the fourth-largest export market for U.S. agricultural products. In 2024, U.S. agricultural exports to the bloc reached $12.8 billion, driven primarily by record sales of tree nuts and distilled spirits. Mexico’s top agricultural exports to the European Union in 2019 included avocados, tequila, coffee, and fruit juices, with Germany, Spain, and Italy among the main markets. The European Union is Canada’s fourth-largest export market for agricultural commodities. Canada exports fish and other seafood products, along with wheat, corn, and soybeans to the European Union, as well as 60 percent of its total ethanol export volume.

Canada currently has 15 free trade agreements (FTAs) with 51 different countries, including an agreement with the European Union, collectively covering 1.5 billion consumers worldwide. Both Canada and Mexico are members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, with Mexico also having 14 FTAs with 52 countries. The lack of a similar number of free trade agreements by the United States hinders U.S. farmers’ access to new markets.

Challenges and Opportunities

Emerging technologies and agricultural innovation hold the promise of greater efficiency, sustainability, and productivity for the agricultural sector. Yet, the sector also faces great challenges, such as climate change, transportation and logistics bottlenecks, and rising tariffs.

Tariffs

While agriculture has long been a cornerstone of U.S. exports, trade tensions have undermined U.S. global market share. The United States was China’s main soybean exporter until 2018, when U.S. tariffs imposed under the first Trump administration and Chinese retaliatory tariffs led to a steep decline in these exports, dropping by 74 percent from the prior year. The United States and Chinese economies each lost about $2.9 billion annually due to those retaliatory tariffs on U.S. soybeans, corn, wheat, and sorghum. Total U.S. agricultural export shipments to China for the first 10 months of 2018 fell by 42 percent from the prior year. This created a window of opportunity for South America to fill gaps in China’s needs, especially imports of soy from Brazil. From 2017 to 2024, China increased its imports of Brazilian soybeans 35 percent to 72.5 million metric tons while cutting imports of U.S. soybeans 14 percent to 27 million metric tons.

Given the highly integrated and dependent trade in agricultural products and fertilizer within North America, it is not surprising that many farm associations have expressed their opposition to tariffs imposed on Canada and Mexico (as well as China) by the second Trump administration. One report calculating the impact of the 25 percent tariffs imposed by President Trump on March 4 against Canada and Mexico concluded that agrifood exports to the United States would fall by 46.4 percent and 60.5 percent, respectively, and bilateral trade between Canada and Mexico would increase 33 percent. Farmers across the United States say they could face financial ruin—unless there is a huge taxpayer-funded bailout to compensate for losses generated by the administration’s sweeping cuts and tariffs. In the event of retaliatory tariffs of 25 percent by both Canada and Mexico, the same report determined that U.S. agrifood exports to those countries would decline 66.3 percent and 68.6 percent, respectively. With farm bankruptcies in 2024 up by 55 percent over 2023, dramatic shifts from tariffs would put many more U.S. farmers out of business, as well as raise the price of food. “When you’re upsetting your neighbors, your biggest trading partners that are easy-access markets,” said the president of the Kansas Farmers Union, the tariffs are “cutting your nose off to spite your face.”

Climate Change

North America’s productive capacity is increasingly threatened by climate change, with changing weather patterns and more recurrent extreme events impacting agricultural output and food security. Throughout 2022 and 2023, extreme heat and droughts in the Southwest reduced U.S. cotton production by 14 percent, resulting in the lowest harvest since 1868. While U.S. agricultural production is still set to grow for staple crops, the effects of climate change will impact yields and contribute to inefficiency, which in turn will contribute to the United States losing some of its global agricultural market share. In Canada, wildfires caused wheat and canola production in 2021 to fall by 35.4 percent and 38.5 percent, respectively. In 2023, the country experienced its most severe wildfire season on record: Over 7,000 fires scorched more than 17 million hectares. Furthermore, excessive smoke from these fires drifted across the border, delaying corn harvests in states like Ohio and Indiana. In Mexico, a 2022 study revealed that climate-related agricultural losses amounted to $37.9 million. In January 2024, the Mexican Ministry of Agriculture forecast a 20 to 40 percent reduction in corn production due to droughts spreading across 76 percent of the country.

In the face of these escalating challenges, innovation in crop science, particularly gene editing, holds significant promise for helping plant breeders develop seed varieties that are resistant to the effects of climate change and adapted to local climates. Traits that improve resilience to heat, drought, and flooding; enhance resistance to pests; improve carbon sequestration; and optimize photosynthesis to boost crop yields can be genetically engineered. Together, these advances can contribute to more sustainable and climate-adaptive agricultural systems. 

Transportation and Logistics

Transportation and border infrastructure projects have not kept pace with the surge in trade across North America. Aging highways and bridges, congested border crossings, and insufficient rail capacity slow down the movement of agricultural goods, impacting efficiency, cost, and supply chain reliability, especially for perishable goods. In its 2025 Report Card, the American Society of Civil Engineers gave U.S. infrastructure a “C” score. The group estimates a $3.7 trillion investment shortfall across 18 different infrastructure categories from 2024 to 2033.

Looking north, Canada’s ratio of infrastructure investment to trade volume has steadily declined since 1970. Canada’s National Supply Task Force qualified the country’s transportation supply chain as “nearing its breaking point,” according to its 2022 report. Canada would need to invest $4.4 trillion over a 50-year period from 2020 to 2070 in marine and transportation infrastructure to meet projected economic and population growth, the report said. Mexico’s public investment as a proportion of GDP in transportation infrastructure has historically been low, allocating 0.2 percent of GDP in 2024. Port congestion in Mexico, which has had a significant impact in recent years, lengthens the transportation time.

Border infrastructure has become a competitive disadvantage for all three North American economies. A 2019 World Bank report revealed that border compliance time and costs had risen significantly over the past decade, with North America’s percentile rank on the World Bank “trading across borders” indicator decreasing by 14 percent. Investments directed to digitization of border processes and coordinated pre-screening and pre-clearance would significantly alleviate time congestion and costs. A 2023 report also showed that reducing wait times by as little as 10 minutes at the U.S. southern border could create thousands of jobs in Mexico, increase the GDP of some Mexican states, and increase spending in the United States by hundreds of thousands of dollars.

Other challenges to the movement of agricultural goods stem, ironically, from government policy. Despite its laudable goal to rebuild the U.S. shipbuilding industry, the Trump administration’s new rules to impose million-dollar service fees on Chinese vessel operators or Chinese-built vessels calling at U.S. ports will complicate the bulk shipment of U.S. agricultural products to foreign markets, as there are simply not enough non-Chinese ships to provide alternate transportation.

Furthermore, a lack of automation and digitization of customs systems, automated border control systems, and risk assessment tools, especially at the border with Mexico, further hinders efficiency, resulting in delayed times, increased costs, and reduced loading capacity. Software management and cloud-based logistics would allow companies to monitor the supply chain in real-time and identify disruptions or delays, leading to better planning. Automation and machine learning in logistics can also help mitigate the long-term impacts of labor shortages.

Technology

Agricultural technology is changing the way farms operate, boosting production capacity while minimizing environmental impacts. However, some technologies are still in their early stages, and connectivity gaps, particularly in rural areas, pose major barriers for adoption. In the United States, only about 25 percent of farms use any connected equipment or devices to access data, and much of this equipment still operates on outdated 2G or 3G networks, according to a 2020 McKinsey & Co. report. Yet, improving agriculture connectivity in crop monitoring, livestock monitoring, building and equipment management, drone farming, and autonomous farming machinery could unlock $45.7 billion and 8.7 percent of the industry’s value in North America by 2030, according to the same report.

In Canada, 27 percent of Canadian farms use auto-steer equipment and only 13 percent utilize GPS mapping. Adoption of robotic equipment is even lower, with 3.5 percent using drones, 1.2 percent using robotic milkers, and 0.18 percent using robotic greenhouse equipment. An RBC report predicts that agriculture technology could alleviate labor shortages and further grow Canada’s agricultural GDP to $51 billion by 2030.

In Mexico, farmers are turning to “solid rain”—polymers that are mixed into crop soil and are engineered to expand and capture 400 times their weight in water—to help to address the water scarcity affecting 60 percent of Mexico’s territory. While not to the same extent as its northern neighbors, Mexico is using precision agriculture, including technologies such as telemetry, remote sensing, and geographic information systems, to enable more precise crop management. Farmers can monitor soil moisture, temperature, and air quality, optimizing input use and reducing environmental impact.

Despite this potential, societal resistance to new technologies and concerns over data ownership slow progress. Some concerns are well founded; Chinese drone manufacturers are leaders in the smart agriculture industry. They collect very specific data on agriculture that could be weaponized to gain leverage over food production, resources, and supplies in North America, which has prompted the U.S. Congress to consider banning them. Building trust among farmers around data governance and ensuring that innovation benefits all producers, large and small, is essential.

Conclusion

“Any obstacle is only one elegant design away from being toppled,” stated Donald Killorn, executive director of the Prince Edward Island Federation of Agriculture, during a CSIS Americas conference on strengthening North America’s agricultural competitiveness and resilience. Indeed, today’s challenges provide the United States, Mexico, and Canada with an excellent opportunity to collectively identify and build strategies to enhance agricultural resilience and competitiveness, beginning with a recognition that tariffs on agriculture in North America are bad for farmers and consumers in all three countries.

The United States, Canada, and Mexico should create strategies to coordinate data collection and analysis to aid in precision farming, share technologies to mitigate and adapt to the impacts of climate change on agriculture, reduce physical and digital bottlenecks in transportation and at border crossings, foster more trilateral academic and research exchanges on agriculture, as well as ensure greater collaboration in both the discovery and deployment phases of innovation.

The power to produce food reliably is a core element of the security of any region in the world, and realizing North America’s full potential as a strategic and competitive global trading bloc will require deeper integration and a collective effort to overcome tariff and non-tariff barriers.

Christopher Hernandez-Roy is a senior fellow and deputy director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Natalia Hidalgo is an intern with the Americas Program at CSIS. 

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