An Economist with Kerns and Associates says retaliatory tariffs imposed on U.S. pork by China and Mexico are likely to have a limited negative impact on U.S. hog prices, unless the situation escalates to the point that it brings down the North American Free Trade Agreement.
In April China imposed a 25 percent tariff on U.S. pork in response to U.S. tariffs on aluminum and steel and this past week Mexico imposed a ten percent tariff that will rise to 20 percent in July.
Dr. Steve Meyer, an economist with Kerns and Associates, told those on hand for World Pork Expo, the typical spring rally in live hog prices has been tempered by a steady increase in slaughter hog supplies and, while domestic demand for pork remains solid for this year, there are storm clouds on the export side of the equation.
We’re not convinced that anything that’s happened so far is devastating. The Chinese tariffs probably won’t have any impact because we weren’t going to do much business with the Chinese this year anyway. They’ve got a lot of pigs and their prices are very low.
The Mexican situation certainly drives up the price of hams for Mexican users. It drives down the price of hams that U.S. sellers will see but, even with that higher price in Mexico we still might be able to deliver a fresh ham to Monterey, Mexico for less money than anybody else.
The only one I think would be close would be the Canadians and if the Canadians ship more hams down there that’s taking hams out of the same pool so we don’t see a devastating hit, especially on the 10 percent tariff.
The 20 percent might get a little ouchy. But the important thing is that these are warning shots. The big shot would be if somebody fired a shot that put an end to the NAFTA. We think that would be the real game changer. So far we don’t like what’s going on with trade. We’re not sure the impact is going to be devastating by any stretch but with the kind of supplies we’ve got coming we’ve got to keep exports growing.
Dr. Steve Meyer-Kerns and Associates
Dr. Meyer says the NAFTA has been a huge positive for American and Canadian agriculture so preserving that agreement is critical.
