Crowd in China Getty Images/Kevin Frayer

Chinese retaliation on U.S. pork exports will harm the rural economy

Last year, the U.S. pork industry exported $1.1 billion of product to China, making that country the No. 2 value market for U.S. pork.

The National Pork Producers Council warned that possible Chinese tariffs on U.S. pork could have a significant negative impact on rural America. China has indicated it will impose the duties in response to U.S. tariffs and restrictions — announced today — being placed on a host of Chinese goods.

“We sell a lot of pork to China, so higher tariffs on our exports going there will harm our producers and undermine the rural economy,” says NPPC President Jim Heimerl, a pork producer from Johnstown, Ohio. “No one wins in these tit-for-tat trade disputes, least of all the farmers and the consumers.”

Last year, the U.S. pork industry exported $1.1 billion of product to China, making that country the No. 2 value market for U.S. pork.

An article on Bloomberg.com this morning says, “China unveiled tariffs on $3 billion of U.S. imports in response to steel and aluminum duties ordered by Trump earlier this month. The White House then declared a temporary exemption for the European Union and other nations on those levies, making the focus on China clear. Though Beijing’s actions so far are seen by analysts as measured, there may be more to come.”

Many economists, including Iowa State University economist Dermot Hayes, have cautioned that tariffs on U.S. agricultural products could disrupt exports to China. Lost sales would have severe economic consequences for America’s farmers, who shipped nearly $20 billion of goods to the Asian nation in 2017.

The U.S. restrictions on Chinese imports come after an inquiry by the Office of the U.S. Trade Representative into China’s practices related to technology transfer, licensing and intellectual property rights. USTR’s Section 301 — of the 1974 Trade Act — investigation determined that U.S. companies have lost billions of dollars from being forced by China to disclose intellectual property and to transfer technology.

“When it comes to trade, we expect all countries to follow international rules and to trade fairly,” Heimerl says. “We also expect all countries to resolve trade disputes in a way that doesn’t harm businesses, farmers and consumers.”

Friday’s Daily Livestock Report by Steiner Consulting Group addressed what the U.S. pork industry may face as a result of the tariff war. “If they do go into effect, however, they are bearish for U.S. pork prices, especially for fall and winter hog/pork values. U.S. pork production is expected to be record large this fall and the tariff will make it more difficult to sell into the Chinese market. The tariff would be particularly negative for byproduct values since China takes about a third of all our pork variety exports.

“But bearish as the announcement is, it should not be overstated. Our pork competes with pork from the European Union for access to China. U.S. average base hog carcass price is around $54 per hundredweight compared to $83 in the EU. Lower hog prices this fall may be needed to maintain U.S. competitiveness versus EU products. The next area of uncertainty for the pork complex is the North American Free Trade Agreement re-negotiation and the possibility that Mexico, the biggest buyer of U.S. pork, may also impose tariffs. This will continue to add uncertainty in a market that already is coping with larger than expected supplies and new trade barriers.”

According to a previous article by Bloomberg, “China would feel some impact if it cuts back — it’s heavily dependent on U.S. soybeans for cooking oil and animal feed, especially in seasons when Brazil isn’t harvesting. But the damage would be real, both economic and political. Soybean production is concentrated in middle-American states that voted for Trump.

“U.S. pork exports could be another ‘easy target,’ amid a boost in China’s sow herd, according to Vertical Group, a New York-based investment bank.”

Additional sources: Daily Livestock Report, Bloomberg L.P.
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