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USMEF’s Preliminary Analysis of China’s Retaliatory Duties

USMEF has prepared a preliminary analysis of how China’s retaliatory duties will impact the U.S. pork and beef industries.

For U.S. pork, the additional 50 percent duty will mean lower values for key China variety meat items and could translate into industry losses of around $6.80 per head. For May-December, this means losses of about $580 million. Over a 12-month period, losses could reach $860 million. Adding in estimated losses for hams and picnics, the key muscle cut exports to China, could bring losses to more than $9.00 per head, or $770 million in May-December with full-year losses reaching $1.14 billion.

For U.S. beef, the additional 25 percent duty will stifle emerging exports to China and severely limit exports in the remainder of this year, meaning export losses of more than $30 million. But the real impact is the lost opportunities (or in the best-case scenario, delayed opportunities) for export growth over the next couple of years. Progress had recently been made in expanding the list of plants eligible to export to China and U.S. officials are working on gaining eligibility for additional beef items. With these access improvements, USMEF had estimated exports could grow from the (pre-tariff) 2018 value of $70 million to $430 million by 2020.

There has been significant confusion about how China will apply the latest round of duties to be imposed in response to the recent U.S. announcement of a list of products imported from China that will be subject to additional tariffs as a part of the Section 301 investigation. U.S. imports from China valued at about $34 billion will face additional 25 percent duties starting July 6. China’s response on June 16 included a list of products imported from the U.S. valued at $34 billion that will be subject to additional 25 percent duties effective July 6. This list effectively includes all U.S. agricultural exports to China, which in 2017 were valued at $19.5 billion.

On June 25, a new GAIN Report posted by USDA confirmed the industry interpretation that China’s duties on certain U.S. products will be additive, meaning some products already affected by the tariffs China imposed on April 2 — in response to U.S. steel and aluminum tariffs (Section 232 investigation) — will increase again with the next round of tariffs effective on July 6. U.S. pork and pork variety meat are in this category.

According to USDA’s analysis, the duty on the most commonly traded U.S. pork cuts and variety meat will increase from the current 37 percent to 62 percent on July 6.

The calculation is as follows: 12% + 25% + 25% = 62%. The original tariff plus the first round of retaliatory duties (Section 232 response) plus the second round of retaliatory duties (Section 301 response).

The tariff on U.S. beef will increase from 12 percent to 37 percent on July 6.

Exporters with questions may email Erin Borror or call her at 303-623-6328.