On his first day in office, President Trump sought to make a significant display of his priorities by issuing dozens of executive actions. Executive orders are regularly used by incoming presidents to kick off their administrations. Implementation of orders can be slowed down or halted by legal challenges and by Congressional action. Numerous orders signed by President Trump this week are already facing legal challenges.
While the true impact of Trump’s executive actions remains to be seen, some of the orders could have positive or negative impacts on the agricultural sector. Here is a list of some of the orders that could ultimately impact agriculture.
Energy
Trump declared a “national energy emergency.” This executive order directs federal agencies to expedite permitting of new energy projects.
Notably, new wind and solar projects are not included in the list. This aligns with another order issued by Trump which halts all off-shore wind leasing and pauses approvals, permits and loans for both on-shore and off-shore wind projects. This could impact agricultural landowners who have proposed wind projects on their property.
Also included in the executive order is a provision for the Administrator of the Environmental Protection Agency to consider issuing emergency fuel waivers allowing year-round E15 sales. Year-round E15 has long been a goal for ethanol producers and the growers of biofuel feedstock. Year-round E15 was included in an earlier version of the year-end congressional spending bill but was stripped out after Elon Musk objected to extraneous provisions being included in the bill.
Regulatory Freeze and 45Z Tax Credit
One of the executive orders signed by President Trump this week puts a freeze on the issuance of new regulations by federal agencies.
In the final weeks of the Biden administration, the Treasury Department revealed their long overdue guidance on how the 45Z tax credit for clean fuel producers could be implemented. The credit, which took effect Jan. 1, was established under the Inflation Reduction Act and is important for incentivizing ethanol production. Unfortunately, Treasury fell short of finalizing the program’s key details and the guidance the Biden Administration issued was largely a statement of the ‘intent to issue guidance’ at a later date.
Also during the final weeks of the Biden Administration, USDA issued its interim rule on climate-smart agriculture which details how carbon-reduction in agricultural feedstocks could affect the issuance of credits. If the USDA rule is finalized and incorporated into Treasury’s 45Z guidance it could yield significant economic benefits for farmers and biofuel producers.
Because USDA issued only an interim rule, the Trump administration will need to decide whether and how to proceed on these issues. The regulatory freeze announced by President Trump this week will affect recent initiatives such as the clean fuel tax incentive guidance. It is currently uncertain whether the Trump administration intends to proceed with the clean fuel tax incentive program.
Inflation Reduction Act Funding Pause
Trump ordered federal agencies to “immediately pause” the spending of money from the Inflation Reduction Act (IRA). Overall, the Inflation Reduction Act contains over $40 billion in funding to agricultural conservation, rural development, and forestry programs. This included an additional $18 billion in funding for agricultural programs administered by USDA including the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP).
These popular programs have long been oversubscribed with demand far outpacing supply of funds. Program funds were directed to climate change-related goals and prioritized mitigation activities with funds provided to farmers and ranchers who implement voluntary agricultural practices designed to combat climate change.
A considerable amount of IRA funding has already been allocated, but not all. For example, the IRA allocated about $500 million for the Higher Blend Infrastructure Investment Program (HBIIP), and not all of that has already been obligated. The purpose of the HBIIP is to increase significantly the sales and use of higher blends of ethanol and biodiesel by expanding the infrastructure for renewable fuels derived from U.S. agricultural products.
In addition to IRA funding, the Partnerships for Climate-Smart Commodities initiative was also put on hold. The initiative helps companies and nonprofit organizations to develop programs to help producers implement climate-smart practices such as lowering methane emissions from rice production, reducing the carbon footprint of beef, and increasing the use of cover crops.
Trade
A hallmark of Trump’s policy agenda has consistently been his advocacy for tariffs. Trump has called for a universal baseline tariff on all US imports of 10 percent to 20 percent and 60 percent tariff on all US imports from China.
Global markets are critical for the financial health of U.S. agriculture, with approximately 20% of U.S. farm products being exported. During his first term, Trump aggressively pursued his trade policies, implementing tariffs on U.S. adversaries and allies alike. This led to retaliatory tariffs from targeted nations with soybean sales to China dropping by almost 79% in the first two years of his presidency. This prompted the administration to implement the Market Facilitation Program which distributed $23 billion in payments to farmers for losses caused by the trade disruptions.
One of executive orders Trump signed calls on Office of the United States Trade Representative, the Commerce Department and the Treasury Department to investigate the causes of “persistent annual trade deficits” and to recommend measures by April 1 to address associated national security risks.
While his order did not impose new tariffs, Trump has threatened to start implementing tariffs in just a few weeks on Canada, Mexico, and China. This order could serve as the foundation for implementing tariffs and trade policies.
Immigration
Trump issued numerous executive orders addressing immigration including declaring an emergency at the U.S.-Mexico border, constructing additional border barriers, and attempting to end birthright citizenship. The extent to which these orders will affect farmers remains uncertain.
However, with a roughly half of hired farm workers lacking immigration status, any labor disruption could potentially slow production and increase costs for farmers. Particularly sensitive agricultural sectors include meat processing, dairy, and specialty and permanent crops.
Reach out to a Pinion advisor to discuss tax and business preparations ahead of potential legislative changes and actions.
