Trump Delays Tariffs on Furniture & Cabinets
ACA subsidy cliff hits | Why rice, cotton FBA pay rates are higher than corn, soybeans, wheat | Cotton review and outlook
| LINKS |
Link: USDA’s Brooke Rollins and the Rise of Small, Family Farms Rhetoric
Link: Rollins Touts UK Breakthrough as Opening Salvo in Trump-Era
Agriculture Trade Push
Link: U.S. Food Insecurity Holds Steady in 2024, USDA Finds
Link: Per-Acre Payment Rates for Farmer Bridge Assistance Program…
& More Info
Link: Video: Wiesemeyer’s Perspectives, Dec. 27
Link: Audio: Wiesemeyer’s Perspectives, Dec. 27
| Updates: Policy/News/Markets, Jan. 2, 2026 |
| UP FRONT |
— U.S. backtracks on punitive pasta duties: Washington sharply scaled back proposed antidumping tariffs on Italian pasta after a Commerce review, easing tensions with Rome and signaling a retreat from some of the Trump administration’s most aggressive trade actions.
— U.S. tariff pause buys time for wood products talks: The White House delayed scheduled tariff hikes on furniture and cabinets for one year while keeping existing 25% duties in place, giving negotiators more time to pursue deals amid national-security and subsidy concerns.
— ACA subsidy cliff hits in 2026: The expiration of enhanced ACA/ObamaCare premium tax credits is driving double-digit premium increases and potential coverage losses for millions, setting up a high-stakes congressional fight over a late fix.
— Markets snapshot: Global equities opened 2026 modestly higher, while U.S. stocks closed 2025 with solid annual gains and Wall Street forecasts point to further upside this year.
— Precious metals surge: Gold and silver rallied sharply into 2026, hovering near record highs as investors extended a powerful metals boom driven by macro and geopolitical uncertainty.
— Cotton stuck in a low-price trap: Weak demand and fierce export competition kept U.S. cotton prices subdued in 2025, pushing growers to rely more heavily on farm programs and USDA bridge aid heading into 2026.
— Tunisia’s olive oil surge: Bumper harvests are set to propel Tunisia past Italy in olive oil production, reshaping Mediterranean supply dynamics and offering rare economic relief for North Africa.
— Ag markets recap: Grains and oilseeds weakened midweek, cotton slipped, while livestock prices showed mixed strength.
— Why cotton and rice top FBA payments: Higher production costs and deeper modeled losses explain why USDA’s Farmer Bridge Assistance program delivers larger per-acre payments to cotton and rice than to corn, soybeans, or wheat.
— Oil markets enter 2026 cautiously: Crude prices stabilized near $60 after a steep 2025 decline, with oversupply fears offset by geopolitical risks and looming OPEC+ decisions.
— DEF and engine policy pivot: A potential rollback of EPA’s endangerment finding could reshape diesel engine design priorities, easing climate-driven constraints while keeping NOx controls intact.
— Section 45Z clean fuel credit: Treasury has launched the 45Z credit for 2025 with partial guidance, but key uncertainties remain — especially for ag-based biofuels — and OBBBA changes will cap benefits after 2025.
— USMCA review looms: The July USMCA review is shaping up as a major stress test of Trump’s hard-line trade strategy, with Canada and Mexico bracing for prolonged, high-stakes negotiations.
— Weather outlook: A wetter pattern returns to the West Coast, above-average warmth spreads across much of the central U.S., and lake-effect snow remains active in the Great Lakes region.
| TOP STORIES—U.S. backtracks on punitive pasta dutiesItaly says proposed tariffs of up to 92% have been drastically reduced Italy’s foreign ministry said the United States has sharply cut back controversial tariff proposals on imported Italian pasta following a review by U.S. authorities, a move that eases diplomatic tensions over one of the most striking trade disputes under President Donald Trump’s administration. According to Italy, the U.S. Dept. of Commerce had initially targeted 13 Italian pasta producers with additional antidumping levies of as much as 92% on top of the existing 15% EU tariff — a total potential duty approaching some of the highest rates seen in the Trump administration’s trade policy. However, after reassessing the case, Commerce significantly lowered the proposed duties on the companies that cooperated with the review: major exporters such as La Molisana saw their preliminary rate cut to around 2.26%, and Garofalo’s to about 13.98%, while the remaining firms were assigned a standardized rate near 9.09%. Italian officials welcomed the outcome, saying the reduction reflected a recognition of the producers’ cooperation and a substantial retreat from the initially punitive stance that had alarmed Rome and industry groups alike. The full conclusions of the U.S. review are expected by March, and Italy has pledged continued support for affected companies as negotiations continue. —U.S. tariff pause buys time for wood products talksWhite House keeps 25% duties in place while shelving scheduled hikes on furniture and cabinets for another year The Trump administration has postponed planned tariff increases on upholstered furniture, kitchen cabinets and vanities, citing ongoing negotiations with trading partners, according to a White House fact sheet released late Dec. 31. Link Donald Trump signed a proclamation invoking Section 232 of the Trade Expansion Act of 1962 to delay the higher rates for one year. While the formal proclamation had not been released by press time, the White House confirmed that existing 25% tariffs on the covered products will remain in effect. The delayed increases were scheduled to take effect Jan. 1. Under a September proclamation, tariffs on certain upholstered wooden furniture were set to rise from 25% to 30%, while duties on kitchen cabinets and vanities were slated to jump from 25% to 50%. Those duties stem from a Commerce Department Section 232 investigation that concluded wood products were being imported “in such quantities and under such circumstances as to threaten to impair the national security of the United States.” The White House reiterated Wednesday that the administration remains concerned about overreliance on foreign timber, lumber and derivative products, arguing it could undermine U.S. defense readiness, construction capacity and broader economic strength. The fact sheet also pointed to foreign government subsidies and what it called predatory trade practices that weaken the competitiveness of U.S. wood products manufacturers. It referenced the long-running U.S./Canada softwood lumber dispute, which last year resulted in Commerce raising antidumping and countervailing duties on Canadian lumber to 35%. According to the White House, the tariff delay is intended to “allow for further negotiations to occur with other countries” amid what it described as productive talks over wood product imports. A September fact sheet signaled that trading partners willing to negotiate remedies could secure alternatives to the scheduled tariff hikes. That earlier proclamation also outlined more favorable treatment for countries that have already reached trade agreements with the second Trump administration, including Japan, the United Kingdom and the European Union. —ACA subsidy cliff hits in 2026, driving sharp premium increases and coverage lossesLapsed pandemic-era tax credits push average marketplace costs up double digits as Congress eyes a late fix The expiration of enhanced Affordable Care Act (ACA/ObamaCare) premium tax credits on Dec. 31 has triggered steep premium increases for millions of Americans and set the stage for renewed congressional battles in early 2026. The subsidies — first enacted during the pandemic — had lowered monthly costs and expanded eligibility beyond the 400% federal poverty threshold, fueling record enrollment. Why it matters: Health policy experts warn the lapse will reverse coverage gains, price many households out of the marketplace, and disproportionately affect younger adults, middle-income earners, and some racial groups — even if Congress acts later this month. What’s changing • Premium shock: Average ACA premiums are expected to rise about 26%, with larger jumps in states using Healthcare.gov. •Out-of-pocket impact: KFF estimates annual premium payments will more than double on average — up 114% (about $1,016). •Coverage losses: Analysts project 2.2 million to 7.3 million people may forgo or drop coverage due to higher costs. Who is most affected • Age & income: Young adults and those earning 250–400% of the federal poverty level are expected to see the largest increases in uninsurance. • About 2.8 million rural residents in counties using HealthCare.gov rely on ACA marketplace plans — and thus on the premium tax credits now expired. Roughly 17% of ACA marketplace buyers are rural residents. •Race: Projections from the Urban Institute indicate the biggest uninsurance rise among Black non-Hispanic Americans, followed closely by white non-Hispanic Americans. • States: Premium spikes vary widely — Arkansas (up to 69% for benchmark plans) and Washington (41%) face some of the largest increases, while Alaska, Vermont, New York, and D.C. see smaller jumps. Enrollment timing• The deadline for coverage starting Jan. 1 has passed, but consumers can still enroll by Jan. 15 for coverage beginning Feb. 1 — now at higher prices. What Congress might do next • A House discharge petition to extend the credits for three years has bipartisan signatures and could pass the House, but faces resistance in the Senate. Republicans are pushing for tighter eligibility rules and minimum premium payments. • Of note: State marketplaces say they can implement a retroactive extension, but leaders warn it would be costly and slow, requiring system resets and new consumer notices — weeks, if not longer. Bottom Line: The subsidy lapse is already reshaping the 2026 marketplace with higher premiums and expected coverage losses. Any late congressional fix could blunt the damage — but operational hurdles mean relief wouldn’t be immediate. |
| FINANCIAL MARKETS |
—Equities today: U.S. equity futures show moderate gains following more tariff reduction (see Blue Box above). In Asia, Japan closed. Hong Kong +2.8%. China closed. India +0.7%. In Europe, at midday, London +0.5%. Paris +0.3%. Frankfurt +0.2%.
—Equities Wednesday:
| Equity Index | Closing Price Dec. 31 | Point Difference from Dec. 30 | % Difference from Dec. 30 |
| Dow | 48,063.29 | -303.77 | -0.63% |
| Nasdaq | 23,241.99 | -177.09 | -0.76% |
| S&P 500 | 6,845.50 | -50.74 | -0.74% |
—For the year, the Dow climbed 13%, the S&P 500 16.4%, the Nasdaq 20.4% and the Russell 2000 rose 13.3%.
—Analysts polled by FactSet have forecast, in aggregate, that the S&P 500 target will finish 2026 just below 8,000. That would imply another 16% gain from Wednesday’s year-end close of 6,845.50, and would put the S&P 500 on its best four-year pace since the 1990s, according to Bloomberg. An overall improved business outlook and fairly low odds that the U.S. is headed for recession help explain why Wall Street’s models point to solid gains again this year.
—Precious metals rally roars into 2026 as gold, silver near records
Gold tops $4,400 an ounce after a 65% annual gain, silver jumps 4.5% toward $74, and mining stocks rally as investors extend the metals boom into the new year
The rally in precious metals picked up fresh momentum Friday, carrying gold and silver closer to recent record highs while mining stocks posted strong early gains to start 2026.
Gold futures in New York climbed 1.5% to above $4,400 an ounce, extending a powerful run that has lifted prices more than 65% over the past year. The metal set a record above $4,580 in late December, underscoring its role as a favored hedge amid persistent macroeconomic and geopolitical uncertainty.
Silver outperformed again, with futures spiking 4.5% to nearly $74 an ounce. The white metal has surged almost 150% over the past year and notched a fresh record above $82 just last Sunday, fueled by tight supply dynamics and strong industrial demand alongside investor flows.
Together, the moves signal that the precious-metals boom that defined much of 2025 is carrying decisively into 2026, with both bullion and miners benefiting from sustained bullish sentiment.
| AG MARKETS |
—Cotton stuck in the low-price trap in 2025, with policy support doing more heavy lifting in 2026
Weak global textile demand, a strong dollar and surging Brazilian competition kept U.S. cotton from rallying — leaving growers leaning harder on ARC/PLC, crop insurance and fresh USDA bridge aid as they plan 2026
U.S. cotton spent much of 2025 grinding through a “cheap-but-not-cheap-enough” market: prices were low relative to the post-pandemic highs, yet not low enough to quickly force a global demand rebound. Futures frequently traded in the mid-60¢/lb neighborhood late in the year, reflecting a market that could not sustain rallies without a clear demand catalyst.
That price behavior fit the underlying fundamentals: global buyers remained cautious, U.S. export sales were uneven — especially into China — and competing origins (most notably Brazil) kept pressure on U.S. offers.
2025 in review: demand fatigue meets exporter competition
1) Demand was the problem, not supply alone.
Textile demand globally has been slow to regain momentum, and U.S. mill use remains structurally depressed. USDA’s December trade outlook noted U.S. mill use around 1.6 million bales, described as the lowest in nearly 150 years — an important signal that domestic demand is no longer the swing factor it once was.
2) The U.S. crop wasn’t a disaster — so the market needed demand to improve.
USDA’s Acreage report pegged 2025 all-cotton planted area at 10.1 million acres, down about 10% from the prior year — supportive on paper, but not enough to overcome demand softness.
Meanwhile, late-season USDA production updates showed yields firming compared with earlier expectations, which reduced the urgency for rationing via higher prices.
3) Brazil’s rise keeps capping rallies.
Brazil’s expanding production and export capacity has increasingly positioned it as the “price setter” into key Asian mills. That competition — often paired with currency effects — has repeatedly forced U.S. cotton to defend market share on price and terms rather than quality alone.
4) China and geopolitics stayed central.
China is still a critical marginal buyer, but purchasing has been inconsistent, and policy/geopolitical risk remains embedded in trade flows. When Chinese buying slows, the burden shifts to Vietnam, Bangladesh, Pakistan and Turkey — markets that are highly price-sensitive and willing to switch origins quickly.
The farm-policy backdrop shifted toward more support.
With cash margins tight, policy became a bigger part of the 2025 cotton story — and it will matter even more for 2026.
Seed cotton safety net: higher reference price beginning with the 2025 crop.
The National Cotton Council has highlighted that the “One Big Beautiful Bill Act” changes include a seed cotton reference price increase to $0.42/lb beginning with the 2025 crop (up from $0.367), improving the odds of PLC support if market prices stay subdued.
Independent analysts have also projected meaningful PLC support for seed cotton under 2025 projections (on the order of roughly $128 per base acre in one farmdoc projection), reinforcing that the “income stack” is shifting from market to program support when prices languish.
Crop insurance: bigger subsidies for add-on coverage in 2026.
Starting with crops harvested in 2026, USDA-linked policy updates point to higher premium subsidies for area “add-up” products such as ECO/SCO—raising the attractiveness of layered coverage strategies for cotton operations managing thin margins and weather risk.
New USDA bridge aid: cotton near the top of the list.
On Dec. 31, USDA detailed an $11 billion Farmer Bridge Assistance package for row crops, with cotton among the highest per-acre payment rates (behind rice and alongside oats). That matters for early-2026 cash flow and lender conversations, even if it doesn’t “fix” the underlying demand problem.
Outlook for 2026: a market still searching for a catalyst. USDA’s late-2025 outlooks converged on a cautious baseline: the 2025/26 U.S. season-average upland farm price forecast near ~60¢/lb, down from the prior marketing year’s final level (63¢/lb), implying the market expects plentiful competition and only gradual demand recovery.
Here are the big swing factors for 2026:
• Demand revival (or lack of it): a real lift requires retail apparel demand to strengthen and mills to rebuild confidence, not just “less bad” purchasing.
• China policy/trade risk: any additional friction can redirect flows toward Brazil/Australia; any détente can tighten nearby supplies fast.
• Brazil’s crop and logistics: continued expansion (and currency advantage) can keep a lid on rallies; weather or freight disruptions are the most plausible upside shocks.
• The U.S. dollar and macro: a firm dollar makes U.S. fiber less competitive into Asia, amplifying Brazil’s edge.
• Policy as price insurance: with the farm price outlook subdued, PLC/ARC settings, cotton insurance choices, and the enhanced add-on coverage subsidies become more central to revenue planning than in higher-price regimes.
Bottom Line: Cotton in 2025 was defined by range-bound pricing and demand uncertainty, not a dramatic supply shortage. The 2026 setup looks similar on the surface — modest price expectations, intense export competition, and China risk — but with a key difference: farm policy support is materially firmer (higher seed cotton reference price, richer insurance subsidies, and fresh bridge aid), which may stabilize acreage and balance sheets even if the market itself struggles to rally.
—Tunisia’s olive oil surge reshapes Mediterranean rankings
Record harvests propel North African producer past Italy, offering rare economic relief
Tunisia is poised to overtake Italy as one of the world’s largest olive oil producers after a string of bumper harvests, a shift that underscores how climate patterns and investment cycles are reshaping the Mediterranean’s agricultural hierarchy, according to reporting by the Financial Times.
After several seasons of strong rainfall and improved grove management, production in Tunisia is expected to surge well above historical averages. Industry estimates suggest output could exceed Italy’s this season, marking a notable reversal in a sector long dominated by European producers.
By contrast, Italy has struggled with erratic weather, disease pressure in key growing regions, and rising production costs. These challenges have constrained yields and added volatility to European olive oil supplies, even as global demand remains firm.
For Tunisia, the olive oil boom offers a much-needed economic lift. Olive oil is among the country’s most valuable agricultural exports, providing hard-currency earnings at a time when public finances are under strain and growth has been sluggish. Higher output is expected to boost export volumes, improve rural incomes, and help narrow trade deficits, even if global prices soften from recent highs.
The shift also carries broader implications for global markets. Greater North African supply could ease some pressure on international prices, while reinforcing Tunisia’s role as a critical supplier to European bottlers and global food companies. Meanwhile, analysts caution that the sector remains highly sensitive to rainfall cycles, meaning today’s bumper crop does not guarantee sustained dominance.
Still, the coming season is set to underline a changing balance in olive oil production — one in which North Africa’s resilience contrasts with mounting structural challenges facing traditional European growers.
—Agriculture markets Wednesday:
| Commodity | Contract Month | Close Dec. 31 | Change vs Dec. 30 |
| Corn | March | $4.40 1/4 | -1/4¢ |
| Soybeans | March | $10.47 1/2 | -14 3/4¢ |
| Soybean Meal | March | $299.40 | -$2.90 |
| Soybean Oil | March | 48.56¢ | -88 pts |
| Wheat (SRW) | March | $5.07 | -3 3/4¢ |
| Wheat (HRW) | March | $5.14 3/4 | -7 1/4¢ |
| Wheat (Spring) | March | $5.74 | -4 1/2¢ |
| Cotton | March | 64.27¢ | -5 pts |
| Live Cattle | February | $231.60 | +$1.125 |
| Feeder Cattle | January | $350.25 | +70¢ |
| Lean Hogs | February | $85.10 | -35¢ |
| FARM POLICY |
—Why cotton and rice top USDA’s Farmer Bridge Assistance payments
Higher production costs, weaker price recovery, and export headwinds drive larger modeled per-acre losses than corn, soybeans, and wheat under USDA’s loss-based formula
Here’s why cotton and rice producers are seeing much higher per-acre payment rates under USDA’s Farmer Bridge Assistance (FBA) program compared with corn, soybeans, and wheat:
1. FBA pays based on estimated economic losses. The core of the FBA design is that USDA models national average economic losses for each commodity based on:
• planted acres reported to the Farm Service Agency,
• USDA cost-of-production estimates from the Economic Research Service,
• national yield and price data from WASDE and other USDA sources,
• and then calculates a single per-acre payment rate for each crop that fits within the total available funding.
2. Cotton & rice have larger estimated losses. Cotton and rice have experienced larger modeled net losses per acre in 2025 compared with crops like corn, soybeans, and wheat:
• Rice estimated losses per acre have been among the highest of row crops, with an FBA payment rate of 132.89.
•Cotton projections are similarly elevated, with a payment rate of $117.35 per acre.
By contrast, corn, soybeans, and wheat have lower per-acre loss estimates in the FBA modeling.
These loss differences largely reflect crop-specific market conditions — including price trends, demand disruptions, and cost structures — that fed USDA’s modeling for this temporary aid.
3. Price & market conditions differ by crop. The higher per-acre payments for cotton and rice reflect weaker price environments and greater economic strain relative to cost of production:
• Cotton and rice markets have faced stubbornly low prices and significant export challenges recently (e.g., competition from foreign producers, slower trade recovery), so losses per acre are larger.
• Corn, soybeans, and wheat prices have also been depressed but tend to have broader domestic demand channels (feed, ethanol, export) that dampen modeled average losses per acre in USDA’s calculations compared with cotton/rice.
4. Uniform formula, not a flat rate for all crops. Importantly, FBA does not pay every crop the same per-acre rate — instead, it applies a uniform loss-based formula that results in different rates because each crop’s economic loss per acre differs.
So, cotton and rice get higher rates because, under USDA’s modeling:
• their net economic losses per acre are higher, and
• the program aims to compensate a proportional share of those losses across crops.
In contrast, corn, soybeans, and wheat — while also seeing losses — have lower loss estimates per acre under the same model, resulting in smaller per-acre payments.
Bottom Line: (1) Rice payment went up because the rice price has plummeted this year (collapsed compared to other crops).
(2) This is virtually identical to the ECAP approach from last spring… in terms of payment calculation sources.
(3) Had USDA taken a more narrowly trade-focused approach, total assistance would likely have been half of what USDA announced. The FBA approach was more farmer friendly.
| ENERGY MARKETS & POLICY |
—Friday: Oil markets enter 2026 on uneven ground after steep 2025 slide
Prices stabilize near $60 as traders balance oversupply fears against geopolitical flashpoints from Ukraine to Venezuela, with OPEC+ policy seen as the key swing factor
Oil prices opened the first trading session of 2026 largely steady after suffering their sharpest annual losses since 2020, underscoring a market caught between weak fundamentals and persistent geopolitical risk.
Brent crude slipped 27 cents to about $60.58 a barrel, while West Texas Intermediate fell 26 cents to roughly $57.16, reflecting cautious positioning after a bruising 2025.
On the geopolitical front, tensions remain elevated. Russia and Ukraine exchanged accusations of attacks on civilians on New Year’s Day, even as talks overseen by Donald Trump aim to end the nearly four-year war. Ukraine has intensified strikes on Russian energy infrastructure, targeting Moscow’s revenue streams.
Meanwhile, the Trump administration tightened pressure on Nicolás Maduro by sanctioning four companies and associated tankers operating in Venezuela’s oil sector, adding uncertainty around exports.
In the Middle East, a dispute involving Saudi Arabia and the United Arab Emirates linked to Yemen escalated after flights were halted at Aden’s airport — just ahead of a key OPEC+ meeting scheduled for Jan. 4.
What to watch in 2026: Analysts broadly expect OPEC+ to maintain its pause on output increases through the first quarter, keeping a lid on volatility. Still, the backdrop is challenging. Brent and WTI fell nearly 20% in 2025, the steepest drop since 2020, driven by oversupply concerns and tariff uncertainty that outweighed geopolitical risk. It marked Brent’s third consecutive annual decline, the longest losing streak on record.
Looking ahead, analysts see limited upside absent a major supply shock.
—Wednesday: Oil prices close out year near lows as oversupply fears trump geopolitics
Crude posts steepest annual drop since 2020, with markets bracing for another surplus-heavy year ahead
Oil prices finished the year on a soft footing, capping a sharp annual decline as concerns about sustained global oversupply overwhelmed a year marked by conflict, sanctions, and shifting trade policy. Brent crude settled at $60.85 a barrel in the final session, down 0.8% on the day, while U.S. West Texas Intermediate ended at $57.42, off 0.9%.
For the full year, Brent fell about 19% and WTI nearly 20%, the steepest annual losses since 2020 and Brent’s third consecutive yearly decline. Despite repeated geopolitical flashpoints — including wars involving Russia and Ukraine, clashes tied to Iran and Israel, and instability in the Red Sea — markets increasingly focused on rising supply and softer demand growth.
Late-year inventory data reinforced that bearish tone. While U.S. crude stockpiles edged lower in the final week of December, gasoline inventories jumped by nearly six million barrels and distillate stocks rose well above expectations, signaling weak seasonal demand heading into winter.
U.S. production remained a major source of pressure. Output hit record highs in October, and analysts noted that widespread hedging at higher prices earlier in the year allowed shale producers to keep pumping even as prices slid. That resilience has dulled the market’s usual price-supply feedback loop.
Geopolitical risks offered only fleeting support. Sanctions disrupted Russian flows, Ukrainian drone attacks damaged infrastructure, tensions flared briefly between Iran and Israel, and risks mounted around shipping lanes near Yemen and the Strait of Hormuz. More recently, a U.S. blockade on Venezuelan exports added a risk premium — but none proved durable enough to counter the surplus outlook.
Pressure intensified as OPEC+ accelerated the return of previously withheld barrels, adding roughly 2.9 million barrels per day since April. Although the group has paused further increases for the first quarter of 2026, most forecasts still point to supply exceeding demand next year by roughly 2 to nearly 4 million barrels per day.
Looking ahead, analysts expect prices to remain under pressure, with some projecting Brent could dip into the mid-$50s before stabilizing later in 2026. While geopolitics remain an unpredictable wild card, the dominant view is that fundamentals — ample supply, elevated inventories, and subdued demand growth — will continue to drive oil prices unless OPEC+ signals a meaningful policy shift.
—DEF, Deregulation, and the Engine Pivot
Endangerment finding rollback would reshape emissions rules — and accelerate a shift in heavy-duty engine technology
A potential rescission of the greenhouse-gas endangerment finding by the Environmental Protection Agency would mark one of the most consequential regulatory pivots for diesel engines in decades — especially for agriculture, construction, and heavy-duty trucking that rely on diesel exhaust fluid (DEF)–based aftertreatment.
What changes if the finding is rolled back? The endangerment finding underpins federal limits on CO₂ and related greenhouse gases. If rescinded, EPA would retain authority over criteria pollutants (NOx, PM) but lose the legal basis for climate-driven standards. That distinction matters because today’s engine designs are optimized to meet both sets of rules simultaneously.
Implications for DEF and aftertreatment. DEF doesn’t disappear. Selective catalytic reduction (SCR) systems exist primarily to cut NOx, not CO₂. As long as NOx standards remain — which they almost certainly will — SCR and DEF stay in the picture.
But optimization changes. Without climate constraints, manufacturers could dial engines for durability, torque, and fuel economy first, then meet NOx with less aggressive calibration. That could mean simpler hardware, fewer sensors, and wider operating windows—reducing downtime and cold-weather DEF headaches farmers often cite.
Engine technology pivots likely to accelerate.
•Simpler diesel architectures: Fewer layers of aftertreatment integration and more robust duty-cycle tuning for off-road equipment.
• Advanced combustion: Higher compression, improved air handling, and fuel-system upgrades that lower soot formation upstream—reducing regeneration events.
• Selective electrification: Mild hybridization (e-boosting, electric accessories) where it cuts fuel burn without forcing full electrification.
• Fuel optionality: More openness to renewable diesel and biodiesel blends as compliance tools for fleets—driven by availability and cost rather than mandates.
Why agriculture is watching closely. For farm equipment, reliability and serviceability often outweigh marginal emissions gains. A rollback could slow the pace of mandated redesigns, extend model lifecycles, and temper cost increases — while keeping NOx protections intact. The trade-off is policy uncertainty: OEMs may hedge with modular platforms until the legal path is settled.
Bottom Line: Rescinding the endangerment finding wouldn’t end DEF — but it would reframe engine design priorities. Expect fewer climate-driven constraints, more pragmatic diesel optimization, and a technology roadmap that emphasizes uptime and operating cost — outcomes many producers have been pressing for.
—Section 45Z Clean Fuel Production Credit (2025)
Tax Mechanics, Treasury Guidance, and Key Uncertainties
What Treasury has officially done. The U.S. Department of the Treasury, working with the Internal Revenue Service, issued initial guidance in January 2025 outlining how the Section 45Z Clean Fuel Production Credit would operate starting Jan. 1, 2025. This guidance takes the form of IRS notices, not final regulations.
Core Tax Structure (Applies for 2025 Returns)
Credit Type
• Income tax credit (not an excise credit)
• Claimed annually on federal income tax returns
• Eligible for transferability under IRA rules (cash-like value for producers)
Eligible Activity
• Production and sale of qualifying clean transportation fuels
• Includes biofuels and sustainable aviation fuel (SAF)
• Fuel must be produced and sold during the taxable year
Credit Value Framework
Statutory Base Rates
• Non-SAF fuels: up to $1.00 per gallon
• SAF: up to $1.75 per gallon
Prevailing Wage & Apprenticeship
If labor requirements are not met, credit falls to:
• $0.20 per gallon (non-SAF)
• $0.35 per gallon (SAF)
Carbon Intensity Adjustment
• Final credit amount is scaled by lifecycle greenhouse-gas (GHG) emissions
• Treasury/IRS rely on DOE’s 45ZCF-GREET model
• Lower emissions = higher credit value
• Treasury must publish annual emissions rate tables
What Treasury Guidance Covers (So Far)
✔ Confirms credit applies beginning Jan. 1, 2025
✔ Defines general eligibility framework
✔ Establishes lifecycle emissions methodology
✔ Confirms interaction with prevailing-wage rules
✔ Signals future regulations are coming
What Is Still Unresolved
Final regulations still not issued
• January 2025 guidance is notice-level, not binding final rules. Participants are still waiting on Treasury Dept. details.
Agricultural feedstock treatment
•Uncertainty around:
- Cover crops
- Reduced tillage
- Crop-specific emissions accounting
• Major issue for corn-ethanol and SAF feedstock producers
Recordkeeping & verification
• Detailed audit, reporting, and documentation standards still pending
Interaction With Other Credits
• How 45Z coordinates with legacy biofuel incentives remains unclear
Practical Implications for 2025
• Credits are claimable for 2025, even without final regulations
• Producers face planning risk due to unresolved emissions and compliance details
• Tax advisors are urging conservative documentation and modeling
• Treasury has signaled it may allow transition relief once final rules are issued
Bottom Line: Treasury has formally launched 45Z for 2025, but with partial guidance only. The credit is real, valuable, and usable — yet still surrounded by material regulatory uncertainty, particularly for biofuel producers tied to agricultural feedstocks. Final rules will determine who captures the full value and who does not.
| How OBBBA Changes the Section 45Z Statutory Base Rates Under the original Inflation Reduction Act (IRA):• Non-SAF fuels: base credit up to $1.00 per gallon and increased value if prevailing wage/apprenticeship met.• Sustainable Aviation Fuel (SAF): base up to $1.75 per gallon with adders for compliance.(This is the statutory framework for 2025 as originally enacted.) OBBBA modifications (Effective for fuel produced after Dec. 31, 2025): SAF enhanced rate eliminated:• For fuel produced after Dec. 31, 2025, the enhanced “up to $1.75 per gallon” rate for SAF is no longer available — SAF becomes eligible for the same maximum $1.00 per gallon credit as other qualifying fuels. Credit cap tightened:• Because OBBBA prohibits negative emissions rates (except for specified RNG from animal manure) and excludes indirect land-use changes from emissions calculations, the practical maximum 45Z credit for most fuels is capped at ~$1.00 per gallon after 2025. Extension of credit window:• The credit’s expiration is extended from Dec. 31, 2027, to Dec. 31, 2029 — giving producers a longer runway to earn credits, even though higher SAF rates no longer apply after 2025. Additional eligibility conditions:• OBBBA imposes domestic feedstock requirements and other eligibility limits effective for fuel produced after 2025. Practical impact • 2025: Credits claimed by producers for fuel produced in 2025 generally follow the IRA’s original 45Z statutory rates (including the $1.75 SAF maximum). • 2026–2029: For fuel produced after Dec. 31, 2025, the 45Z credit is capped at ~$1.00/gal across fuels, SAF loses its enhanced rate, and other compliance/sourcing requirements apply. |
| TRADE POLICY |
—USMCA review looms as high-stakes test of Trump Trade Strategy
Administration signals hard-line, bilateral approach as Canada and Mexico brace for a fraught July decision
The upcoming statutory review of the U.S.-Mexico-Canada Agreement (USMCA) is shaping up to be one of the most consequential — and contentious — trade moments of President Donald Trump’s second term, with the administration signaling it will only back renewal if a sweeping list of U.S. grievances is resolved.
Former officials and trade lawyers expect a turbulent six-month run-up to the July 1 review deadline, marked by aggressive U.S. demands, heavy reliance on bilateral talks, and uncertainty over whether the pact will be extended beyond its current 2036 sunset date.
At the center of the process is U.S. Trade Representative Jamieson Greer, who has made clear that a “rubberstamp” renewal is off the table. Greer told lawmakers the administration will recommend extending USMCA only if both country-specific disputes — such as Mexico’s labor enforcement and Canada’s dairy and digital policies — and broader “structural” issues affecting U.S. competitiveness are addressed.
A key wrinkle: the review mechanism itself is unprecedented. Greer emphasized that nothing comparable exists in other U.S. free trade agreements, leaving Congress, stakeholders, and U.S. partners navigating largely uncharted territory. If the three countries fail to agree on an extension this July, they must reconvene annually, potentially stretching negotiations out for years.
Analysts widely expect Washington to pursue talks largely on a bilateral basis, rather than through traditional trilateral negotiations. That approach could even yield two “operationally separate” arrangements with Canada and Mexico that remain housed under the USMCA framework, trade analysts signal.
Mexico appears more engaged so far, having raised tariffs on non-FTA partners like China, aligned export controls more closely with U.S. rules, and moved toward tighter investment screening. Canada, by contrast, has made limited concessions beyond scrapping its digital services tax, and U.S./Canada talks have been chilled since Trump suspended negotiations in October.
Business groups broadly support keeping USMCA intact, citing integrated North American supply chains — especially in agriculture, manufacturing, textiles, and technology. Labor groups, however, are pressing for tougher rules of origin and stronger labor provisions, warning against renewal without significant reforms.
Most observers doubt a clean renewal in July. Instead, the likeliest outcome is an extended period of rolling negotiations, shaped by election-year politics and Trump’s reluctance to risk massive supply-chain disruption through outright withdrawal.
For farmers, manufacturers, and exporters across North America, the message is clear: the USMCA review is less a procedural checkpoint than a stress test of Trump’s broader trade doctrine — and its results may remain uncertain well beyond this summer.
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