Are U.S. Pig Farmers Giving Up Hope on Trade to China?

02:59PM Aug 20, 2019
Cargo ship
Trade relations between the US and China are tense as both nations impose tariffs on imports.
( MGN/Pixabay )

Despite President Trump’s positive outlook on the trade war with Beijing ending “soon,” some U.S. pig farmers are frustrated that they are missing opportunities to sell more pork to China. But others still have hope and are not giving up yet.

“I was hopeful we’d have USMCA ratified by now and the trade situation with China settled,” says Trent Thiele, an Iowa pig farmer and president of the Iowa Pork Producers Association. “They are all important partners to the United States. I’m trying to be understanding as I know it takes time to get things done right. It’s always easy to draw conclusions that we could have done it better, but I doubt I could have done it better, so I have to be understanding.”

The 50% punitive tariffs on top of existing 12% duties on U.S. pork, brings the current tariff rate to 62%. As a result, U.S. pork producers have lost $8 per hog, or more than $1 billion on an annualized basis, according to Iowa State University Economist Dermot Hayes.

The United States Trade Representative (USTR) recently announced the next steps in the process of imposing an additional tariff of 10% on approximately $300 billion of Chinese imports.

“President Trump reversed himself and suspended plans to impose new tariffs on just over $150 billion of $300 billion in previously threatened Chinese goods, saying the move was driven by concerns about the impact an escalating trade fight would have on businesses and consumers ahead of the holiday shopping season,” says Pro Farmer’s Jim Wiesemeyer. “The shift shows that no analysis of the initially threatened tariffs to take place Sept. 1 had been done prior to Trump's tweet announcing the surprising action.”

The Trump administration agreed to postpone until Dec. 15 tariffs of 10% on smartphones, laptops, toys, videogames and other products that were set to take effect on Sept. 1.

The list of imports that will be hit by tariffs on Sept. 1 are products where less than 75% of 2018 U.S. imports came from China, Wiesemeyer says. The Dec. 15 list contains products where the U.S. in 2018 imported 75% or more of from China, according to a White House document. Actual trade in 2018 in the items affected by the threatened tariffs on $300 billion in Chinese products was closer to $262 billion, according to Wall Street Journal calculations. The U.S. currently imposes tariffs of 25% on about $250 billion of Chinese imports.

“Traders and farmers now know that the trade negotiating sands can flow through the hourglass,” Wiesemeyer says. “This, however, allows more time for the two countries to seek an agreement that has been elusive, and pressure is already mounting on the Trump administration to temper the types of products facing threatened new tariffs. The Dow rallied nearly 500 points on the potential steps forward in the trade battle saga. This again shows that what looks like very negative news can turn around quickly with talks and delays in threatened tariffs.”

The pork industry is one of the few sectors of the U.S. economy that can immediately reduce the trade imbalance with China, NPPC wrote in Issues & Insights. http://nppc.org/wp-content/uploads/2018/09/2019-China-Issues-Insights.pdf

“Pork is believed to represent a significant amount of the Chinese consumer price index. Eliminating or reducing tariffs on pork and improving access to China – by addressing a collection of other non-tariff barriers has chronically suppressed U.S. pork exports to China over the years – would result in a significant increase of U.S. pork exports,” NPPC wrote. “As long as the retaliatory tariffs are in place, U.S. pork exports remain significantly disadvantaged to other nations supplying pork to China.”

Wiesemeyer reminds pork producers that the Market Facilitation Program 2 provides eligible hog producers $11 per head, but not all producers are eligible. 

 

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