FARE Blog

Food, Agriculture, and Resource Economics

The Impacts of Chinese Tariff on Georgia Agriculture

By Yangxuan Liu, Esendugue Greg Fonsah, Levi Russell, Adam N. Rabinowitz, and Don Shurley

The uncertainty in trade policy between China and the U.S. creates concerns among the agricultural community. We recently released an extension publication, named The Impacts of China and United States Trade and Tariff Actions on Georgia Agriculture: the Perspectives of UGA Agricultural Economists. Georgia agriculture produces many of the items targeted by Chinese tariffs, including nuts, fruits, soybean, corn, wheat, sorghum, cotton, pork, beef, and tobacco. The Chinese retaliatory trade tariff on products of U.S. origin would have a negative impact on Georgia’s agriculture and economy. However, the magnitude of the impact of these new tariffs on Georgia’s agricultural industry is unclear.  In this extension publication, we discussed in detail about the Chinese tariff and its potential impact on pecan, cotton, soybean, corn, wheat, sorghum, and livestock industry.

Click here to download the full publication.

 

Tariff Retaliation Already Hitting the Pork and Dairy Industries

by Levi Russell

Recent tariffs imposed on steel and aluminum imports to the U.S. from Canada, Mexico, and the European Union (EU) have resulted in retaliation in the form of tariffs on a range of U.S. exports to those countries. Incomplete lists can be found here, but the biggest concerns in terms of agricultural trade are Mexican tariffs on pork and cheese.  Mexico is responsible for a significant portion of all U.S. exports of pork (32% in 2017) and cheese (up to 28% annually), but the full effect of these tariffs is currently unknown.

New Mexican tariffs on cheese include a 15% duty on fresh cheese and a 10% duty on shredded or powdered cheeses. These duties increase to 25% and 20%, respectively, after July 5th. The new tariffs on pork include a 20% tariff on all chilled or frozen pork as well as cooked ham and shoulder products and a 15% tariff on pork sausages. The U.S. is still allowed to export pork to Mexico duty free under their 350,000 metric ton quota. However, this limit is only 43% of U.S. pork export volume in 2017 and the U.S. must compete with other exporting countries for this quota. To put it simply, the 350,000 metric ton quota is “first come, first served.”

The higher tariffs will likely have a severe impact on the dairy industry. U.S. Dairy Export Council President and CEO Tom Vilsack has indicated that the tariffs will make it very difficult for the U.S. to compete with other countries for exports to Mexico, putting $391 million worth of exports at risk.

The tariffs on pork will likely be prohibitive, meaning that pork otherwise exported to Mexico will have to find a new home. Wherever that pork is exported, it will likely receive a somewhat lower price. Given the demand-driven markets for pork, chicken, and beef this year (due mostly to significant supply side growth the past few years) make this especially concerning.

The Impacts of China Trade Tariff on Georgia Livestock Industry

By Levi Russell

China implemented a 25 percent increase in import tariffs on United States pork and is expected to increase import tariffs on United States beef products by 25 percent. However, unlike many row crops and other agricultural products, China is not a primary destination for United States meat products. Beef exports to China only resumed recently and there is not yet a significant amount of beef being produced in the United States that is exported to China. In 2017, the United States was the second largest pork producer after China, and the largest pork exporting country (USDA FAS, 2018b). Twenty-two percent of pork produced in the United States enters the export market (USDA FAS, 2018b). From January 2013 to January 2018, the USDA ERS reports that mainland China made up 7.5% of total United States pork exports, coming behind Mexico (29.3%), Japan (25.1%), Canada (10.4%), and South Korea (8.1%). Pork production is mainly concentrated in the Midwest and North Carolina, and Georgia is not in the major pork producing regions. The impact of the tariffs on pork will be minimal on Georgia’s agricultural industry. However, the reductions in pork prices could hurt some of the pork producers in Georgia. For beef and pork (and other meats), the NAFTA trade discussions are a far bigger concern than Chinese tariffs.

Short-term market fluctuations this year in both cattle and hog markets will almost certainly depend much more on rising supplies, domestic consumption, and exports to other countries than on Chinese tariffs. A recent report by the USDA FAS indicates that the reductions in exports to China will mostly be offset by the increases in shipments to Japan, Mexico, and the Philippines. Exports of both pork and beef from the United States are expected to rise this year, in part due to relatively low United States prices (USDA FAS, 2018a).

In the long term, however, these increased tariffs on pork and beef products constitute a missed opportunity, as China is the number one pork-consuming nation in the world. New sources of demand for United States producers are hard to come by and higher tariffs on beef and pork will likely result in increased production in other countries to fulfill China’s growing demand. This will put the United States at a competitive disadvantage in the long term if the tariff increases are put in place on United States beef and pork products.

 

References

USDA FAS. (2018a). Livestock and poultry: world markets and trade. Washington, D.C. Retrieved from https://apps.fas.usda.gov/psdonline/circulars/livestock_poultry.pdf.

USDA FAS. (2018b). Production, Supply and Distribution Database.  Retrieved April 25, 2018 https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery