Oops! . . . Trump Did It Again

President Trump announced in a social media post Friday afternoon he will allow an additional 300,000 metric tons (MT) of beef to be imported into the U.S. without being assessed the over-quota tariff of 26.4%. It appears the move will only be in effect for 90 days and President Trump wrote that a commitment was made “that this beef will be sold at 25 percent below current market prices.” It’s unclear who made the commitment and reports have said imported beef trimmings were already trading at 25% below the domestic market so the point may be moot. An executive order implementing the action is expected in the next two weeks.

Beef is imported under Tariff Rate Quotas (TRQs) set for individual countries or groups of countries. Under TRQs, a limited quantity of beef can be imported at a reduced tariff rate, 2.0 cents per pound. If the quota amount is exceeded, a higher tariff rate of 26.4% is applied. It is this 26.4% over-quota tariff which will not be applied under the President’s action. TRQs apply to all countries exporting beef to the U.S. except Mexico and Canada, exempt due to the United State-Mexico-Canada Agreement. It has been reported Brazil is the only country which has reached its quota for the year. Thus, Brazil the only country presently which would be affected by the action.  

This isn’t President Trump’s first time at the “beef tariff” rodeo. Last fall he raised the quota amount available to Argentinian beef imports by 60,000 MT. He also exempted Brazilian beef imports from an additional 25% tariff levied on a broad range of Brazilian exports earlier this year. Ostensibly, the moves are attempts to reduce beef prices paid by consumers, particularly ground beef. The latest inflation figures show ground beef prices increased 9% over the past year. The President’s earlier moves haven’t lowered the price of beef. Friday’s announcement won’t either.

Beef imports totaled nearly 3.3 billion pounds through the end of July, up 12% compared to the same period last year. The USDA projects total imports for the year at 6.1 billion pounds, roughly 21% of total U.S. beef consumption. Last year, imports amounted to 19% of consumption. Imports from Brazil, the largest source of imports, and Uruguay are down this year. Those from Australia, Canada, Mexico, New Zealand, and Argentina are higher. The Daily Livestock Report said imports from Argentina were more than double last year’s level, increasing 111% or 71 million pounds. Strong consumer demand for beef and lower U.S. production have led to increased imports. But even with the additional imports beef prices continue to rise.

Cattle groups and agricultural organizations were understandably not pleased with the announcement. The move only adds to the frustrations and uncertainties faced by producers from drought, wildfires, shuttering slaughter facilities, and rising costs. It’s a needless government market intervention that will not achieve its goal but muddies the market for cattle producers. The additional reduced-tariff tonnage amounts to only around 2% of U.S. beef consumption. Too little to change the underlying supply and demand conditions: decades’ low cattle inventory, lower beef production, and steady to strong consumer demand. These factors will remain when the 90 days are up and beef prices at the counter will still be high.