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Pork Tariffs China

U.S. pork producers may need to explore other markets if China imposes a 25 percent tariff on U.S. pork imports. China has been America’s largest foreign market for pork exports. | Download this photo.

Pork producers face export tariffs from China

Largest market for high-profit products at stake

April 3, 2018

 

MANHATTAN, Kan. — Sunday’s announcement from the Chinese government that a 25 percent tariff will be charged to American pork imports poses potential economic hardships for American pork producers.

“This tariff basically taxes U.S. product – our product become more expensive going into China,” said Glynn Tonsor, K-State Research and Extension livestock market economist. “So U.S. pork would be at a disadvantage compared to, for example, pork from the European Union and other major pork exporters. Our product becomes more expensive – all else equal, we're going to send less pork into China than we did before.”

Economically, this creates a surplus – supply is the same, but demand decreases. Tonsor said there are two options for the surplus pork. “Either we eat more pork here at home, or we're going to find a second–best export market for it. Either way, this is probably going to be a lower value than before, so that's why there are some concerns about this announcement.”

Lower value means pork producers will get less money when they sell their product. The expenses of that business, however – the costs for feed, shelter, veterinary care, transportation – will remain stable. That results in less profit for the pork producer.

Lee Schulz, a livestock market economist for Iowa State University and a frequent contributor to the K-State Radio Network’s “Agriculture Today,” says the biggest hit to American hog farmers could be from what many of us have never eaten, let alone heard of.

“When you look at China, it's the variety meats that are huge. More than one third of the share of our U.S. pork variety meats were sent to China last year – that accounted for about $3.50 per slaughtered hog.”

Variety meats are things like the ears, the snout, the tongue, many of the hog’s internal organs. Americans generally do not consider these food, but in China, Russia, Mexico and other export markets they have value.

According to National Hog Farmer magazine, pork ears have no edible value here at home, although a producer can sell them to pet treat producers, at a value of $0.70 per pound. Those same ears, sent to China, would earn $2.30 per pound.

Last year, in variety-meat exports alone, China was our largest destination in both volume (181,351 metric tons) and value ($425.2 million). China accounted for more than one-third of U.S. pork variety meat exports last year, adding more than $3.50 value per U.S. hog, according to the U.S. Meat Export Federation.

“It’s very important that we're able to send those products to the highest-valued market,” Schulz said. “China is a very price-sensitive market, so any time we're going to see a tariff rate increase, that's going to affect the competition for U.S. products in the country. We've been talking about pork, but this really goes across all trade with China.”

Tonsor harbors concerns that there may be implications for other potential exports – beef is on his mind – there. “The entire U.S. meat livestock industry wants to be positioned to be able to sell into that market, and anything that makes it harder going forward is going to be a harm,” Tonsor said.

“Does this become a broader trade dispute involving other countries and other products? Will it ‘snowball,’ if you like? That's where my concerns are.”



Source

Glynn Tonsor
785-532-1518
gtonsor@k-state.edu

Written by

Randall Kowalik
785-532–0994
rkowalik@ksu.edu
K-State Research and Extension
http://www.ksre.ksu.edu/

At a glance

The recently-announced 25 percent tariff on U.S. pork products exported to China could deliver a blow to U.S. pork producers, especially for things that have little dietary value in American cuisine.

Notable quote

“Does this become a broader trade dispute involving other countries and other products? Will it ‘snowball,’ if you like? That's where my concerns are.”

— Glynn Tonsor, K-State Research and Extension livestock market economist.

 

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