Global trade conflicts and the war in Iran are negatively impacting rural communities, said Federal Reserve Gov. Michael Barr. .Speaking April 14 in Washington, D.C., Barr said the impact has been especially felt in rural communities that rely on foreign markets. President Donald Trump has implemented extensive tariffs with the stated goals of reducing trade deficits and reducing the flow of illicit drugs. While a Supreme Court ruling in February invalidated tariffs instituted under the International Emergency Economic Powers Act, Trump responded by instituting a 10 percent Temporary Import Surcharge on goods under Section 122. That action will expire in July unless Congress extends the surcharge. In 2024, international partners acquired $175 billion, or 20 percent of U.S. production. Forty percent of U.S. soybean production is exported. According to USDA, soybean exports to China in the first three quarters of last year were 38 percent lower than the same period in 2024. Major disruptions to the Strait of Hormuz sparked by the war in Iran has impacted global fertilizer supplies and prices. Diesel prices have risen 50 percent over the past year. “Rising fuel prices place significant pressure on cattle farmers in rural communities by increasing both direct and indirect production costs,” he said. “Higher diesel prices raise expenses for operating equipment and transporting livestock, while also driving up the cost of key inputs like fertilizer and feed.”Though tariffs bring price increases in the short term, their long-term benefits — reducing trade imbalances and helping domestic energy producers — show good leadership and will benefit the United States, said Kent Buer, president and CEO of First Bank Kansas in Salina. He sees the Trump administration’s tariffs policy as especially important because the United States spends a greater percentage of its GDP — 3.3 percent to 3.4 percent — on defense than other members on average — 2.3 percent. “It is going to be very good for the United States,” he said of the long-term benefits. “I am super optimistic.” On April 15, Trump expressed optimism about a potential agreement with Iran to end the war, which is currently paused amid a two-week ceasefire reached April 7. Though the U.S. said it has imposed a total blockade over the Strait of Hormuz, Iran has challenged that assertion. Barr also described the impact he expects data centers and artificial intelligence will have on rural communities. More AI data centers are being concentrated in rural areas and bringing tax revenue and infrastructure investment along with water and energy demands. Barr sees AI potentially improving agricultural profitability, citing a Federal Reserve Bank of Kansas City study that found more than half of sector employment could see major gains by using the technology. “Broader structural changes in the U.S. economy — particularly the long-term shift from goods-producing industries toward knowledge-intensive service sectors — have disproportionately affected rural regions, which often lack the capital, connectivity and workforce needed to fully participate in these higher-skill industries, contributing to widening rural-urban economic gaps,” he added.Barr said rural areas face other existential issues, such as an aging population. According to a 2023 study from the U.S. Department of Agriculture, less-populated areas had relatively few adults ages 25 to 54, while the population of those over 65 increased to 9.7 million from 7.4 million in 2010. Long-term employment decreases in agriculture and manufacturing amid automation and globalization have reduced jobs in rural areas, he added. Affordable housing is also a constraint, Barr said, though housing costs take up less income in less-populated settings than metropolitan areas.Barr said migration is crucial to increasing the population of rural counties. While nearly half of rural counties grew between 2020-25, only 25 percent gained residents through increases in their local population, Barr said. The vast majority relied on net migration.
