There was a time when Republicans were against tariffs, mainly because they invoked unintended consequences. And now that the Trump administration has levied many new tariffs, he is proving Reagan, Bush and Eisenhower right. Here are details.
The Drovers website reported Chinese officials announced a 10 percent tariff increase on beef and pork in August. That was in retaliation for U.S. duties on $300 billion of Chinese imports.
President Donald Trump responded. “We don’t need China and, frankly, would be far better off without them.” With the new round, U.S. pork producers face a 67 percent Chinese import tariff.
Tariffs, as I have previously noted, are not paid by the other country, like China in this case. Export tariffs are paid by U.S. companies to the U.S. government, who sell their goods to China. Presumably, they pass the additional costs of tariffs onto the specific Chinese buyer like a sales tax. That buyer then presumably passes the cost on to the Chinese consumer.
Or, the Chinese buyer could decide not to buy U.S. pork and beef at all and, instead, buy from the guy down the street who is our main competitor and who doesn’t pay the U.S. tariff.
In this case, that happens to be one of a few German companies. Specifically, the U.S. exports $4.6 billion of pork, or 16.2 percent of the world’s export supply, while Germany provides $4.4 billion or 15.5 percent of the world’s exports.
Prior to 2017, Germany was the largest supplier of fresh and frozen pork to China, until two of the large German producers had their licenses suspended. Spain then, not the U.S., took over the top spot until the German companies were reinstated and regained their lead. That’s according to The Pig Site. Yes, that’s a real industry website.
As an obvious consequence, U.S. pork producers sold less to the Chinese, so the Trump administration jumped in to help.
In July, the administration announced a $16 billion second round of subsidies for U.S. farmers, to compensate them for income lost because of the China trade war. That, by the way, raised farm subsidies to historical highs, which is another nontraditional stance for Republicans.
Now, the president claims revenue paid by U.S. companies from tariffs on $250 billion in Chinese goods is enough to cover the cost of the bailout. It’s not.
The Trump tariffs raised $20.8 billion through July 10, according to data from U.S. Customs and Border Protection. And yet, the administration has committed to paying American farmers $28 billion, including this last $16 billion round of relief. Not an artful deal.
Closer to home, the U.S. Chamber of Commerce says $478 million of West Virginia exports are targeted for retaliation by China and another $39 million targeted for retaliation by European nations, as a result of the tariff wars.
At least the money is going to a good cause: the family farmers. Or is it? Take the case of the Brazilian meat company, JBS.
A dozen years ago, JBS didn’t own a single U.S. meat plant. Today, it controls nearly 70 percent of the U.S. pork market, along with sharing control of 85 percent of beef production with three other food companies. In fact, today it is the largest meat producer in the world, with 150 international plants. You might know them best by their brand name, Swift Premium.
Specifically, The Washington Post reports, JBS has received $78 million in U.S. government pork contracts funded with the bailout funds — more than any other U.S. pork producer.
How’s their trade with China going?
Being a multi-national producer, JBS benefits twice from the China tariff war.
They collect U.S. bailout money while at the same time selling more pork to the Chinese from their Brazilian subsidiary, which doesn’t face U.S. tariffs.
And that’s an example of unintended consequences traditional Republicans have railed against for years. Target bad actors and bad companies. Don’t apply comprehensive tariffs.