Major American Foods Affected by Trump's Tariffs (So Far)
This trade war is seriously heating up.
Earlier this summer, when the Trump administration enacted a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum, the message seemed pretty obvious: The U.S. was looking to bolster these industries domestically at any cost. Now, that cost is becoming clearer, as major trade partners (Canada, China, the EU) retaliate with their own taxes on American foods and beverages.
Clearly, this is bad news for farmers (also, brewers and food manufacturers), but what does it mean for U.S. comsumers? In some cases, you might see a price hike on American-made goods (the rising cost of aluminum translates to more expensive canned beer and soda), while in others, prices could go down in the short-term as companies who have been shut out of foreign markets try to move products at home (it's expected that prices may then go back up, as sections of the U.S. food industry downsize in order to accomodate their new reality).
Tariffs on U.S. beef recently reached 10 percent in Canada and 37 percent in China, which means there's a lot of unsold meat sitting in American warehouses right now (more than 2.5 billion pounds, according to the Wall Street Journal).
“It takes about three years for our cows to come to market," Kent Bacus, director of international trade at the National Cattlemen’s Beef Association, recently told CNBC. "So we were basing our production off of the market signals at the time. So we have a lot of product that’s going to come online...There’s a lot of demand for it but trade policies are kind of getting in the way right now."
With so much meat to move, America cosumers could see lower prices at the grocery store, temporarily—Burt Flickinger III, managing director of the Strategic Resource Group, a New York-based retail and consumer goods consulting firm, predicts that prices will fall about five percent initially, and max out at 12 percent.
Back in June, Colorado’s Oskar Blues Brewery—the grandfather of the canned craft beer trend—told the Denver Post that the new aluminum tariff meant that every case of canned beer could cost them about 20 to 24 cents more to produce, resulting in about $475,000 to $575,000 more in annual expenses. Though the brewer didn’t say it would immediately raise prices, that was one of a number of possible implications.
One major brewer that has confirmed they're raising prices is MillerCoors—starting September 17, they'll be charging retailers more for most of its products, including beer in glass bottles and cans, a price hike that will eventually hit consumers, the Chicago Tribune reports.
As other nations work out trade agreements that grant each other more open access to their markets, America's dairy industry is finding itself further isolated in an increasingly competitive global economy. "I could see us getting to the point where we’re dumping our milk in the fields,” Jeff Schwager, the president of Wisconsin cheese production company Sartori, told the New York Times recently. “It’ll be a big ripple effect through the state.”
Mexico is currently America's largest export market for cheese (they buy about a quarter of our cheese products), but that could change soon. Back in April, the country signed a deal with the European Union that's expected to cut tariffs on European dairy products sold in Mexico, as well as trademark certain European cheese names. So, much like you can't call sparkling wine Champagne unless it's from the region of Champagne, France, soon you may not be able to sell Parmesan in Mexico unless it's made in Parma, Italy (the same goes for feta that doesn't hail from Greece, for example). It's hard to sell a block of cheese if it's not labeled according to the name consumers have always used.
North American Food Equipment Manufacturers Association Vice President Charlie Souhrada told the Associated Press that tariffs may raise the price of Henny Penny pressure cookers (the brand Chick-Fil-A uses to make its sandwiches). CBS posits that the fast food chain's prices could go up as a result.
While the pork industry took a hit after Mexico slapped American pig products with a 20 percent tax, China has targeted it especially hard, with multiple rounds of tariffs now totaling over 70 percent, CNBC reports. This has essentially slammed the door shut on U.S. pork imports to China—a big deal, since, according to the Minnesota Post (the state is pig farm central), China has developed a taste for pork belly and picnic (the lower shoulder) in recent years. The country is also a major market for pork offal, and since the tariffs were introduced, U.S. pork producers are now being forced to sell parts like hearts, stomachs, and feet to pet food suppliers for much less.
All of this could lead to more pork products staying in the domestic market, and lower U.S. consumer prices for the time being—meaning, bacon might be cheaper at the supermarket for a little while. That said, the pork industry could be forced to downsize in the next few years if these trade restrictions continue, meaning American pork prices may go up in the long-term.
Even America's most iconic soft drink isn't immune to 2018's trade war. On July 25, Coca-Cola's CEO James Quincey said the company will increase soda prices this year in response to the rising cost of the aluminium it uses for its cans, The Economist reported. Quincey cited the president’s tariffs as “one of many factors” contributing to the decision.
Over 50 percent of U.S. soybean exports go to China, and American farmers are bracing for the financial hit they're about to take. Not only are Chinese buyers cancelling U.S. soybean orders amid the prospect of higher tariffs, Beijing is calling for Chinese farmers to plant more soy in order to make up for the American shortfall, CBS reports.
One scary statistic: According Christopher Hurt, an agricultural economist at Purdue University, on June 1, a farmer with 1,000 acres of corn and soybeans expected a $42,000 return. That has dropped to a negative $126,000.
Whiskey and Bourbon
The E.U. Commission announced that it would be imposing a 25 percent tariff on imports of bourbon and other American whiskey back in July. “Over the past two decades, U.S. spirits exports have increased from $575 million in 1997 to $1.64 billion in 2017,” the Distilled Spirits Council said in a statement. “However, the imposition of tariffs on these products by our major trading partners threatens to seriously impede the export progress that has benefited our sector and created jobs across the country.”