Tariff talks: President-Elect Trump’s tariff plans could impact cattle industry
Incoming President Donald Trump has warned of significant tariffs on products from Mexico, Canada and China, reported the AP and other news outlets.
On Nov. 25th on his Truth Social site he stated that he will impose 25 percent tariffs on Mexico and Canada immediately upon his inauguration, and add an additional 10 percent tariff to Chinese products “until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our country!”
Four days later, President Trump posted that he had “a very productive conversation” with Mexican President Claudia Sheinbaum Pardo, suggesting that Canada and Mexico may be able to take action to quell this particular tariff action.
Nonetheless, Trump campaigned on broader tariff policies, including a universal tariff on all imports ranging between ten and twenty percent, so tariff increases are still expected.
The United States is the world’s biggest importer of goods, with Mexico, China and Canada as the largest suppliers.
Charles Benoit is Trade Counsel for the Coalition for a Prosperous America (CPA), a pro-tariff organization that has championed President Trump’s tariff plans.
Benoit says that depending on the month, between one-third and one-half of the products America imports from China are currently subject to a 25 percent supplemental tariff currently, which was imposed by President Trump in 2018.
CPA calls itself the leading national, bipartisan organization representing exclusively domestic producers and workers across many industries and sectors of the U.S. economy.
Most of the tariffs President Trump enacted in his first term are still in play, said Benoit, and President Biden has actually increased some of them. For example, a supplemental 25 percent tariff on cars made in China had already been in place, but President Biden increased that to 100 percent for electric cars made in China.
Benoit said that tariffs on China tend to enjoy “broad bi-partisan consensus,” but tariffs on other countries can be a harder sell in Congress.
Benoit points to President Trump’s 25 percent global tariff on steel and 10 percent tariff on aluminum as a successful approach to renegotiating trade relationships with countries that aren’t China.
The incoming president used the steel and aluminum tariffs in 2018 as leverage to transition trade with those industries from a traditional “rules-based” paradigm to a “management-based” paradigm, explained Benoit.
“In a ‘rules-based’ system, countries pledge fealty to an academic set of rules while eliminating tariffs and ‘letting the chips fall where they may,'” he explained.
Benoit explained that the cattle industry is a good example of how these two approaches work.
“We have ranchers, Mexico and Canada, have ranchers. And under NAFTA, we established rules and we essentially accepted that ‘as long as we all agree to the rules, if we lose all of our ranchers…oh well, I guess they outcompeted us.’ So we are letting the chips fall where they may,” he said.
However, outside of our free trade agreements, we still have quota, which is the managed trade approach.
“There’s much less appetite left in Congress for ‘let the chips fall where they may’ trade strategy,” said Benoit
Benoit explains how steel and aluminum “broke out of that” type of trade. “Within weeks after President Trump enacted the tariffs, in his first term, he started to negotiate agreements with some countries. He agreed to remove the tariff for Korea, Brazil and Argentine, but implemented a quota of 500,000 kg per quarter,” said Benoit.
“So we’re largely done with rules-based trade on steel,” he said.
He said the United States has also “tightened the rule of origin” on steel, meaning that, since steel can be recycled almost indefinitely, a European country can’t buy Chinese steel that has been melted down and recycled and call it European steel, for example.
As far as the “management-based” strategy rather than “rules-based,” Benoit said that the steel model would be a good jumping-off place for the cattle industry.
“We can’t just have unlimited imports of beef and cattle. Lamb is on its way out because of that ideology. Beef and cattle will follow,” he said.
“So we have to get away from that. My expectation is this administration will consider more quota agreements. It will be the ranchers’ job to make sure beef and cattle are a part of that transition from rules-based to managed trade, he said.
Benoit said many other ag industries are hurting from imports, too, such as fruits and vegetables, and he believes they could be helpful lobbying allies to the cattle industry. Benoit said that for many years, soybeans and corn have “owned the trade file” in ag trade discussions, and because those two industries benefit greatly from exports, many other industries have been sacrificed to rules-based trade to their detriment.
Benoit urges for industry-specific trade strategies, not a blanket trading mentality for “all of agriculture.”
He said even the giant processors can be harmed by imports, and when they are, they yelp for help.
Earlier this year, Cargill, ADM and Bunge pushed President Biden to impose tariffs on “claimed to be used cooking oil” from China that was putting pressure on the oil seed industry.
Additionally, he points out that processors have dominated the conversation in Washington, DC, as opposed to farmers and ranchers.
In order to help congressional representatives understand the ranchers’ viewpoint, Benoit urges producers to the tariff conversation to discuss import quotas. He suggests this conversation piece: “If you ask your Congressman about tariffs and they are hostile, then ask them if they are ok with the last American rancher going out of business, and with America being 100% dependent on other countries for beef. If they say ‘no,’ then ask what is the magic number? How low are you willing to go? The United States currently claims about 28 million beef cows. If you’re not willing to let that go to zero, then what is your minimum acceptable number? Then when you agree to a number, you can start the quota conversation – how do we protect that number of cows in the United States?”
If President Trump were to place quotas on products like Mexican beef and cattle, he could also implement a tariff rate quota which would mean the country or company exporting the product would pay the “out of quota tariff” rate. This is already how commodities like sugar and peanuts are managed.
Some beef organizations are concerned about tariff effects. In an American Ag Network interview, the National Cattlemen’s Beef Association Vice President of Government Affairs, Ethan Lane, spoke to this. His organization has urged for free trade, saying producers will benefit from export opportunities, and that imported beef can help
He said “[President Trump] has a high degree of credibility with cattle producers in the US doing what he said he was going to do. Whether it was withdrawing from TPP, (which) was controversial at the time. That was market access. That was really important to us.
“I think we have to go under this with the idea that that’s still where he is. He’s looking to get the best deal he can for farmers and ranchers. But the tariff thing is definitely concerning. It’s … a tactic that we’re not comfortable with.
“It raises concerns that we’re going to be locked out of some of those other markets. I mean, the reality of that balance is we raise the best beef in the world here. And I’m a shill for the industry, obviously, but it’s also not wrong, right?
“I mean, what we produce in any market, we go on into anywhere in the world becomes the dominant force immediately because nothing tastes like US Beef. So put us in the game and we will. We will expand that footprint and we will dominate. So that’s what we’re looking for, is open those markets for us and give us new places to get our products,” said Lane.
The Beef Checkoff CEO Greg Hanes had this to say about imports in 2021:
“… in order to meet that domestic demand for inexpensive, fast food hamburgers, we need to import beef. Despite what you might visualize imported beef to be, most of the beef we bring into the U.S. is lean trim, not muscle cuts for sale at retail. In conversations I’ve had with industry experts, most estimate that at least 90 percent of our imports are inexpensive lean trim or manufacturing beef that is then ground with fat (something we produce but consumers don’t buy outright) from our corn-fed animals to produce all those fast food hamburgers at cheap prices for hungry American consumers.”
R-CALF President Brett Kenzy, Gregory, South Dakota, is excited to hear President Trump proposing tariffs.
“This is where R-CALF has been all along and I pray this country is returning to common sense,” he said.
“It’s not only unfair to say that I’m supposed to blindly compete with third world countries, it’s common sense to know that’s not logical,” he said.
“I get that we are in a global economy. But I’ll stand for the American cattle producer. Look at how vulnerable we’ve make ourselves. When you become a net food importer, a dock worker strike should terrify you. Does sticking up for America and American food security mean more or less than a global economy?”
“Let’s breathe some prosperity into this industry. There are kids out there who want to work and who know how to ranch, and who want to get started. I’m feeling something I haven’t felt in a long time, I’m excited right now. We can’t bring back the people who have exited the industry, but we can honor them by rekindling this industry and keeping this country fed,” he said.
