Trump Policies Add to Farming Distress as Bankruptcies Increase

President Donald Trump’s global tariffs and freezing of federal agriculture grants have added to financial strains on American farmers, who are seeking refuge in bankruptcy at the highest rate in years.

Family farm bankruptcies increased by 55% last year compared to 2023 and are trending even higher this year as farmers continue to grapple with depressed agricultural commodity prices and high input costs. And while much of the industrywide distress predates his second stint in the White House, Trump has quickly nudged more farmers closer to the brink of going under and created turbulence for producers trying to make ends meet.

Unpredictable tariffs, immigration overhauls, federal program cuts and frozen Agriculture Department funding are now part of the discussions farmers are having as they seek financial help.

“‘What’s going on in Washington?’ is the subject of almost every conversation that I have,” said North Carolina farm bankruptcy attorney David Mills of Narron Wenzel PA. “There’s a lot of anxiety.”

Farm bankruptcy filings soared in 2019 during the height of Trump’s trade war with China, which targeted US agriculture with a sweeping retaliatory tariff regime mirroring the response China is pursuing today. Trump’s administration sent farmers an estimated $23 billion covering export losses to try to stop more farms from going under.

Following the bailout, family farm bankruptcies—filed under Chapter 12 of the US bankruptcy code—declined each year until 2024, when the number of new cases jumped to 216 from a near 20-year low of 139, according to court records. Filings have continued to speed up this year, with 82 cases filed over the first three months of 2025, nearly doubling the figure for the same period a year ago.

With new tariffs and USDA spending freezes layered on pre-existing distress factors, even more uncertainty has been injected into the sector, leading some to expect a banner year for farm bankruptcies.

“There’s not a lot of optimism that things are going to improve,” Mills said.

‘Simmering’ Issues

The recent rise in Chapter 12 bankruptcies is driven by “economic issues that have been simmering for a while,” Peter Fear of Fear Waddell PC said in an email.

A “three-way squeeze” of higher interest rates, higher operational costs, and lower crop and livestock prices has led to “a substantial uptick in farmers seeking consultations regarding debt issues,” the Fresno, Calif., bankruptcy attorney said.

The number of farm loans at risk of defaulting is the highest it’s been since 2020 as demand for non-real-estate farm loans has surged while repayment rates dropped, according to the Federal Reserve Bank of Chicago, which covers much of Midwestern farm country.

The economic headwinds have major industry lobbyists urging Congress to renew a long-delayed farm bill that could offer farms greater financial support. But updating those safety net provisions before they expire in December is already in question amid spending debates and legislation securing Trump’s policy priorities.

Billions of dollars in economic and disaster assistance sent to farmers under the December American Relief Act of 2025 (Public Law 118-158) could reverse declining net farm income, according to a USDA forecast. But Trump’s deportation plans and tariffs threaten to cause further budgetary pain for farmers reliant on migrant labor and international markets.

There are real questions about whether overseas end purchasers will look elsewhere for agricultural commodities, said Wichita, Kan.-based bankruptcy attorney Eric Lomas of of Klenda Austerman LLC.

“Everybody has been told to expect short term pain from these tariffs,” he said. “There’s just a whole lot of uncertainty on how this is going to play out.”

The president said last week that the US would “protect” its farmers, but the administration hasn’t announced any specifics. That comment followed remarks by Agriculture Secretary Brooke Rollins, who on April 9 said the administration is considering plans to assist agricultural producers stung by the US-China trade war.

Frozen Funds

On top of changes to foreign trade, the Trump administration’s freezing of federal grant programs has squeezed groups of farmers that were counting on USDA assistance to support or expand their operations.

Several federal agencies have suspended or terminated grants, but “USDA has been one of the most aggressive,” said Jillian Blanchard, vice president of climate change and environmental justice at nonprofit Lawyers for Good Government.

Blanchard’s organization is providing legal assistance to over 500 federal program grantees blindsided by the funding freeze.

Farm Labor Grant Recipients Warn Funding Freeze Risks Bankruptcy

Many grantees are small farmers “thinking about closing their doors,” she said. “Two whole months without the critical funding that they were entitled to could break them.”

Diana Padilla, an organic farmer in Harlingen, Texas, is worried she may have to file for bankruptcy soon if the government doesn’t send her Biden-era grant money being held up while officials review programs to ensure alignment with Trump’s executive orders.

She and more than 170 farms around the country were promised the funding to increase legal recruitment and retention of migrant farm workers, but the agency so far hasn’t met reimbursement requests and won’t tell them when or whether it will.

A grassroots coalition of Farm Labor Stabilization and Protection grant recipients recently lobbied the Trump administration to release their money, warning that the funding pause risked sending farms belly-up.

Padilla has already spent nearly $200,000 that she expected USDA to replace in February for completing requirements under the FLSP program. Without the reimbursement, she’s had to wipe out her personal savings to cover ongoing expenses.

“To us the margin is so small that any catastrophe that we go through puts us behind,” Padilla said in a phone interview. “If USDA doesn’t give us anything back, we have thought about just selling everything. We don’t have any safety net if something were to happen.”