Meat and poultry exports from the U.S. have become initial casualties in President Trump’s trade war as trading partners seek to punish the U.S. “red states” that have higher support for the President.   With China and Mexico’s retaliation duties, 41% of U.S. pork exports are now under punitive tariffs.  U.S. beef to China and processed beef to Canada account for only 2% of total U.S. beef exports.  And China’s poultry duties are a shallow attack as China maintains their 2015 ban on U.S. poultry (HPAI).  Nonetheless, U.S. supplies are rising sharply this year and buyers are constrained.

The Chinese duties have stopped U.S. pork shipments and will slow pork offal.  Canada’s duties are expected to only slightly slow the flow of processed beef imports.  Mexico’s pork duties bear watching;  the U.S. sent 1.8 billion pounds of pork to Mexico last year.  In a way, that trade is “too big to fail” meaning that both sides have no viable options to deal with that big of a surplus/deficit.  U.S. hams to Mexico will continue.  European and Brazilian supplies are not viable as replacement for a few reasons, the main one being that this is temporary.  However Canada could re-direct some hams to Mexico that were previously going to China.  The U.S. 20% duty would give an economic incentive to Canadian exporters.  Canada holds a 10% market share in Mexico’s imported pork market, but we think that could grow to 15%  by the end of 2018 if these duties continue.  That would be enough to pressure U.S. ham prices lower.

A NAFTA deal would end U.S. steel duties and likely end the Canada/Mexico duties.  China is more complicated and likely to continue for a longer-term; negotiations appear slow for now.

The real test will be whether these actions lead to real results.  In reality China has not technically been “open” to U.S. meat and poultry, using a number of measures to restrict or manage trade.  Only time will tell if this is worth it.