U.S. pork producers are about to be bitten by a second batch of hefty retaliatory tariffs from China and Mexico — and that has some large producers predicting they could lose big money and be forced to invest overseas. Executives say the pork industry has been expanding in recent years, in part on the expectation of export opportunities that would continue to support growth. However, the threat of a trade war is adding uncertainty and driving fear. One in 4 hogs raised in the U.S. is sold overseas, and the Chinese are the world’s top consumers of pork.
“We put a halt on all investment, not just because we will be losing money, but because we don’t know if growing in the U.S. is the right move if we won’t be an exporting country,” said Ken Maschhoff, chairman of Maschhoff Family Foods and co-owner of the nation’s largest family-owned pork producer.
Maschhoff said the farm industry has been “asked to be good patriots. We have been. But I don’t want to be the patriot who dies at the end of the war. If we go out of business, it’s tough to look at my kids and the 550 farm families that look us into the eye and our 1,400 employees.” Mexico imposed a 10 percent tariff on chilled and frozen pork muscle cuts effective June 5, and that import tax is set to double to 20 percent on Thursday. Mexico’s retaliatory action followed the Trump administration’s duties on imported aluminum and steel. China, meantime, is scheduled to start collecting an additional 25 percent import duty Friday on American pork products as it targets $34 billion worth of U.S. goods in response to President Donald Trump’s action against Beijing for alleged intellectual property theft. China also is set to add tariffs this week on U.S. soybeans, corn, wheat, cotton, whiskey and dairy, as well as U.S. autos. Nearly $20 billion in U.S. agricultural exports went to China last year, with the more than half of that amount coming from soybeans. “It’s pretty apparent that these countries will go after, by and large, Trump supporters from a political base standpoint since items exported by red states are the ones being targeted,” said Maschhoff, a past president of the National Pork Producers Council and a fifth-generation hog producer.In April, China slapped U.S. pork imports with a 25 percent duty, in retaliation for the Trump administration’s steel tariffs. When combined with previous import levies, “the other white meat” will be subjected to import taxes that approach a whopping 71 percent cumulatively, according to Rabobank. And that’s without including the 10 percent VAT, or value-added tax, that China charges for the import of agricultural products. Industry analysts say China’s high import tax essentially slams the door shut on U.S. pork imports into China, which will also begin collecting 25 percent tariffs for soybeans this Friday. “At 81 percent net tariff, you’re not moving any pork product into China,” said Christine McCracken, executive director of animal protein at Rabobank, a financial services firm for the agribusiness.
She added, “I would suspect by the end of the year hog producers will be losing quite a bit of money. Part of it is just surplus pork on the market. We’ve been in an expansion mode.”
According to Maschhoff, the tariff will result in a hit of $100 million for his Illinois-based family farm operation, which markets about 5.5 million hogs a year, and operates in 10 states.