After Beijing ended a nearly 14-year ban on imports, tariffs may put pressure on US cattle farmers and meatpackers at ‘fragile time in Chinese market’

The escalating US-China trade war will make it even tougher for US cattle farmers to sell to China, the world’s second largest beef importer, after Beijing ended a nearly 14-year ban on American beef.

China raised tariffs on US beef from 12 per cent to 37 per cent in early July – part of its retaliatory duties on US$34 billion of American goods – dealing another blow to US cattle farmers trying to regain their foothold in the fastest-growing beef market.

While American beef exports to China remain small, in May they reached their highest level since Beijing lifted the embargo on US beef last June, more than a decade after the trade was halted in 2003 over the “mad cow disease” outbreak. Resuming the imports was one of China’s concessions to the US, the world’s largest producer of beef, during the “100-day plan” between the two countries last year – a short-lived attempt to improve bilateral economic ties.

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But now the intensifying trade war between Beijing and Washington may put pressure on American cattle farmers and the “Big Four” US meatpackers: Tyson Foods, Cargill, JBS and National Beef.

The US Meat Export Federation (USMEF), a non-profit trade organisation, said the additional duties had come at a “fragile time in the Chinese market for US beef”, estimating that losses to the industry would exceed US$30 million this year, with hundreds of millions in potential losses in the coming years. It estimated that reopened access to China would have increased the value of beef exports from US$70 million in 2018, before the tariffs, to US$430 million by 2020.

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But the additional 25 per cent tariff would place US exporters at a disadvantage, compared to the 7.2 per cent duty that Australian beef imports are subject to under their free-trade agreement with China.

“After a year of access, importers and distributors are still at a nascent stage of building sales and distribution channels for US beef,” the USMEF said. “Increasing the US beef premium spread over Australian product would further erode sales and usage of US beef.

“Although China remains a small market for US beef, ranking only 14th in export volume in the first four months of 2018, the market holds tremendous potential.”

Still, analysts say the short-term impact on US beef exporters will be limited, given the small import market China represents after the long embargo and challenges from Beijing’s ban on ractopamine, a growth promotant for cattle that the US industry uses in its animal feed. China imported nearly 700,000 tonnes of beef last year, with its major suppliers in countries such as Brazil, Uruguay, Australia, Canada and New Zealand.
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Chenjun Pan, senior animal protein analyst at the Netherlands-based Rabobank, said there would be some impact on specific exporters, but overall it would not be large because of the limited beef exports. The US beef industry still needs to shift its production system to overcome the China market obstacle that comes with its use of ractopamine, she said.

“The whole beef industry in the US has been using that kind of chemical for a long time,” she said. “Since China is just opening the market, they need some time to catch up with the market. Given the time frame has not been that long since the opening of the market last year, I don’t think their production system has been adjusted to meet China’s demand.”

But beef remains an important bargaining chip for China in its trade war with the US, even as negotiations have stalled and the threat of additional tariffs on US$200 billion of Chinese goods looms this month.

“For agriculture-related negotiations, beef is definitely one of the key items that China could use to negotiate with the US,” Pan said.