With all the news of tariffs between the U.S., Mexico, Canada and China, the industry may be wondering what impacts they create.
Lance Zimmerman, Senior Animal Protein Analyst of Rabo AgriFinace, shares perspective based on current data.
“At this moment, uncertainty is the main outcome of these tariff discussions,” Zimmerman says. “It is difficult to say how many dollars will be lost as trade tightens across North America and between the U.S. and China. The pain points for these actions will not be equal across countries or commodities.
Zimmerman points out Mexico and Canada are net exporters of beef and cattle into the states, and the U.S. is a net exporter of pork and poultry to Canada and Mexico.
“At first glance, it seems this is potentially supportive to U.S. beef and cattle prices,” he says. “However, if U.S. pork and poultry are more prevalent in the domestic market, that could lead to more downward pressure in those markets, and the additional total protein supplies could weigh on domestic beef prices too.
When it comes to trade wars, Zimmerman says they tend to be a long game. In the interim companies will attempt to absorb the cost before having to pass added taxes onto consumers.
“Relative to pork and beef ingredients, tariffs always expose supply chain vulnerabilities that we didn’t know existed before,” he says. “Globalization has led us to take for granted the number of countries that influence our domestic food production.”
For example, China-sourced amino acids and trace minerals are important to U.S. feed and supplement suppliers for livestock and poultry rations. Colostrum is an item that can cross between U.S. and Canadian borders until it reaches its final market formulation, Zimmerman says.
“Even items like semen and embryos for artificial insemination and transfer have historically moved across North American boundaries relatively frictionless. That all changes for now,” he adds.
How tariffs work
The American company importing the good from Canada, Mexico or China will have to pay the import tax, which is an aspect not being discussed enough. While that seems simple enough, it is just the beginning.
U.S. cattle producers wanting to buy Canadian cattle have two initial moves:
1) they will either buy fewer Canadian cattle or perhaps none at all, and
2) the Canadian market will lower its price to minimize the influence of the import tax on his U.S. buyer.
“Keep in mind that is the initial possibility,” Zimmerman says. “Currency affects cannot be ignored.”
In September 2024, the Canadian Dollar was worth around 75 cents in US Dollars. On March 3, it was as low as 69 cents.
“That is an 8% erosion in buying power,” Zimmerman says. “The Mexico Peso has seen some devaluation too since late 2024, but it hasn’t been quite as dramatic. If the exchange rate is more favorable to the U.S. Dollar, that will lessen some of the tariff influence, but not all of it.”
A recently released Rabobank Global Outlook report showed the U.S. beef industry entering an anticipated rebuilding phase in the cattle cycle. The industry could expect higher prices across all cattle and beef markets in the coming years, requiring producers, processors, and end users to adjust strategies to manage elevated costs and limited cattle and beef availability. While this remains likely, uncertainty due to trade discussions slows down progress, Zimmerman says.
“Institutional risk has been elevated as the new U.S. administration has taken office,” he says. “Whether it is new tariffs, changes to government staffing and funding, or immigration policy, U.S. producers will have to navigate through some short-term uncertainty and potential pain.”
Zimmerman also recognizes it’s possible any of these policies could be temporary.
“No one knows for certain, but these trade actions are different than previous Trump administration tariffs,” he says. “The White House is clear in communicating these are about national security and drug enforcement. If there is marked improvement in those areas, the tariffs can fade. Knowing this, the best thing producers can do is ask questions.”
With uncertainty comes volatility in the markets. Zimmerman suggests producers re-evaluate risk management and marketing plans.
“Producers can limit supply chain risks from these tariffs by talking with their veterinarians, genetics suppliers, fertilizer and seed companies and nutritionists to make sure they have what they need going forward,” he says. “Carrying a bit more inventory in these areas if the prices are reasonable is always a possibility too. Future-proofing operations takes on a bit more importance now in light of some of the recent tariffs.”
Read more: Industry Comments on Retaliatory Tariffs on U.S. Pork and Beef
Trump Delays Tariffs for Goods Covered Under Mexico, Canada Trade Deal
