Uncertainty is the word at the moment for the U.S. economy, and that uncertainty runs straight through rural America according to the COO of a small business financing company. Ben Johnston, Chief Operating Officer of Kapitus, joined Agriculture of America this past week to break down inflation, interest rates and the state of trade negotiations with Mexico and Canada.
Johnston said it is difficult to pin down exactly where the broader economy stands right now, with elevated inflation persisting alongside rising unemployment. “We’ve had rising unemployment in the last couple of readings,” he said, noting that while the unemployment rate itself has dropped, the number of jobs created has actually turned negative in the most recent reading. That combination, he says, is putting the Federal Reserve in a tough spot. Energy prices are pushing inflation higher even as employment data trends the wrong direction, forcing the Fed to balance two goals that are currently pulling against each other.
Johnston said the market still expects at least one more rate hike before the end of 2026, though he cautioned the path forward remains unclear. For rural America and the agricultural sector specifically, Johnston pointed to tariff treaties and trade negotiations as a major source of dependency and uncertainty. He said the ag industry is trying to plan for the future while also absorbing higher energy costs on a day-to-day basis, a factor he described as arguably more immediately disruptive than uncertainty over which export markets may open up down the road.
Inside the USMCA Negotiations
Later in the conversation, things turned to discussing the U.S.-Mexico-Canada Agreement, which the U.S. entered into a scheduled review period on July 1 rather than extending for another 16 years. Johnston said Mexico has been more willing to negotiate toward a middle ground while talks with Canada have grown more contentious, with new U.S. tariffs on Canadian goods potentially taking effect as soon as August 19th.
Johnston said U.S. Trade Representative Jameison Greer has framed the administration’s core goal as shrinking the trade deficit with both countries. He cited 2025 figures showing a $197 billion overall U.S. trade deficit with Mexico, including roughly $19 billion in agriculture, and a smaller $48 billion overall deficit with Canada, including about $13 billion in agriculture. Greer has also proposed that goods sold in the U.S. contain component parts from all three USMCA countries with U.S.-made components making up half of that total, a target Johnston called “a bit of a stretch” but indicative of the administration’s broader mindset. A second stated priority, he said, is preventing China from dumping goods into Mexico or Canada and then routing them into the U.S. market through preferential trade terms.
Johnston said dairy remains a central issue in the Canada negotiations, with U.S. officials pushing for greater market access and working to curb what they characterize as dumping from Canadian producers into the U.S. Alcohol has also become a flashpoint, after some Canadian provinces banned the sale of U.S. alcohol products. Grain imports into Canada are another area the U.S. is pushing to open further.
On the Mexico side, Johnston said negotiators have focused on securing greater access for GMO yellow corn as well as expanded dairy market access.
Johnston pointed to U.S. energy independence as a relative advantage for American small businesses and agriculture compared to much of the rest of the world, even as elevated global energy costs continue to pressure producers on both the input and transportation side. He said the U.S. is likely faring better than most countries through the current energy environment, though production costs elsewhere still leave American businesses at something of a competitive disadvantage.
Despite the uncertainty, Johnston said he remains optimistic that small businesses and the agricultural industry will see gains over the coming years as trade policy continues to take shape.
