As a trade war between the U.S. and China escalates, tariffs imposed by the two nations have business owners in industries ranging from cars to wine feeling nervous. But one sector that’s likely to be hardest will directly affect your breakfast table.
Pork, one of the 128 U.S. exports that China slapped with tariffs of up to 25%, represents a major part of the $100 billion American livestock industry. Since China was the world’s second-largest buyer of U.S. pork by volume between 2008 and 2017, behind only Mexico, that has major implications for pork producers.
In a statement, National Pork Producers Council CEO Neil Dierks said the organization is “disappointed” in the tariff, and is “hopeful” that it “will be short lived.”
That’s because, “We send about 60% of our pork variety meats” — things like pig feet and hocks — “to China currently,” explains Dr. Scott Brown, an assistant extension professor of agriculture and applied economics at the University of Missouri. “That’s some of where the biggest impact’s going to be.”
If U.S. pork products are levied with a 25% tax, Chinese customers will be less likely to buy them, resulting in lower profits for U.S. farmers. That loss would force farmers to either look for new markets or produce less pork, Brown explains.
While some meats could be sold to other countries, Brown says it’s unlikely that they’d entirely make up for what is presently sold to China, which is ultimately bad news for both pork producers and U.S. consumers (a.k.a. bacon fans).
“We’re pushing very large supplies of pork onto the marketplace today,” Brown says. “We’re already talking about lower prices [for farmers] occurring just because of the large supplies of pork we’re bringing to the marketplace,” so losing business abroad could further put the squeeze on pig farmers.
That, in turn, could at some point lead to “marginally higher” prices on pork products commonly sold stateside, such as ham and bacon.
“Those will remain steady in the short term,” Brown says. “Then we could, long-term, see a little higher pork prices here in the U.S., as U.S. producers adjust down production in response to those lower variety [meat] prices.”
Wendong Zhang, an assistant professor of economics at Iowa State University, estimates that pig farmers stand to lose $4 or more per animal as a result of the tariffs. That’s a burden, to be sure, but he says it pales in comparison to the results of proposed steep tariffs on soybeans, given that one out of every four bushels of soybeans grown in the U.S. currently goes to China.
“This will have negative impacts, but this could be way worse for soybeans,” Zhang says.
Soybean tariffs could, however, actually offer a silver lining to pig farmers, who feed their livestock soybeans, Brown says.
“If we see our U.S. soybeans facing a larger tariff going to China, which is a large market for us, we’re probably going to have to crush more domestic soybeans here in the U.S., which means we’re going to get more soybean meal and soybean oil than otherwise,” Brown explains. “More soybean meal will help U.S. pork producers. Trying to decide the net effect of all those things is very difficult right now.”
Zhang agrees that such a benefit is possible for hog producers, but notes that the effect of soybean tariffs could still be catastrophic for the larger agricultural industry, given the size of the Chinese soybean market.
“The livestock industry actually benefited a lot from corn prices dropping in late 2013, early 2014,” Zhang agrees. “But we are talking about a gigantic portion of oversupply [of soybeans], potentially, through the trade actions, and it is hard to derive an optimistic view based on the hog production.”
It’s too soon to say exactly how, or if, a soybean tariff will be implemented, as China has given the U.S. time to agree to a settlement. (China is also reliant on the soybeans it buys from the U.S., Zhang explains, so straining that relationship could actually be mutually destructive.) If and when it is applied, both experts say, we’ll have a much clearer picture of the impact on consumers and farmers alike.
“Everyone is waiting to see when the shoes actually drop,” Zhang says. “It’s hard to say how that eventually will translate into food prices.”