In Trade Wars, Everyone Loses

The following commentary does not necessarily reflect the views of Farm Journal’s or Farm Journal. The opinions expressed below are the author's own.

Is it much ado about nothing, or much ado about everything? One hopes it’s the former, but as we’ve seen, even rhetoric can create actual losses, and the trade war with China – whether perceived or actual – is a dangerous precedent.

When President Trump announced the tariff on Chinese steel and aluminum, it sent tremors through U.S. agriculture and business, knowing retaliation was sure to come. Ironically, only 3% of U.S. steel imports originate in China, according to research firm Evercore ISI, but that fact didn’t deter China from threatening a hefty 25% tariff on U.S. pork and tariffs on other American products. Since then, the back-and-forth retorts between the two countries has continued.

There are differing thoughts on what the tariffs mean. While China was the No. 3 export market for U.S. pork in 2017, China has a glut of domestic pork, so it’s likely U.S. exports would have been lower this year, regardless. A Washington Post article reports that in the past five years, U.S. pork exports by volume to China have fallen 11%.

In addition, the proposed tariff puts America’s largest pork producer in an interesting situation. Smithfield is owned by a Chinese company, so the tariff hurts And some analysts feel a “work-around” is possible, with U.S. pork going to Hong Kong before it goes to China, thereby avoiding the tariff.

In a Reuters article last week, Smithfield president Kenneth Sullivan told analysts the markets were overreacting to the proposed Chinese tariffs, and that pork producers could easily pivot to new markets.

“We’ll find markets, we ship to more than 40 countries,” he said in the article. “We may very well ship to China even with an increased tariff.”

In addition, the U.S. pork industry has done a great job of establishing new markets. Vietnam and other Asian countries show increasing potential and Japan remains an excellent market for U.S. pork. In South and Central America, meat-buying habits are trending toward pork rather than beef, and U.S. pork groups are developing innovative cooperative marketing projects to promote pork.

Still, it’s disappointing to see the tit-for-tat situation between China and the U.S. If President Trump thought China would acquiesce the first time the U.S. threatened, he was sadly mistaken. And the fact that many of his supporters reside in rural America and are negatively impacted by the trade war could come back to bite him.

Will these world leaders learn to play nicely, or will they take their toys/products and go home? One would hope they’d realize their actions – and talk of actions – impact millions of people who are already operating on thin margins. We can’t afford the trade war to continue because no one wins, except, maybe, our competitors, who wait excitedly in the wings to take over our markets.

 

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