Your Reading List

U.S. cattle hides take a tariff hit

Prime Cuts with Steve Kay

The U.S. beef industry, like other sectors of U.S. agriculture, faces considerable losses because of the tariff wars between the U.S., Canada, Mexico and the European Union. The losses are not as severe as those seen in hog, corn and soybean production. But the tariffs imposed on U.S. beef products exported to China and Canada will cost the U.S. industry hundreds of millions of dollars per year in lost sales.

China in July imposed an additional 25 per cent duty (on top of a 12 per cent duty) on U.S. beef exports to China. This will severely limit exports the remainder of this year, meaning export losses of more than US$30 million, says the U.S. Meat Export Federation. But the real impact is the lost opportunities for export growth over the next couple of years. It estimates that exports to China could grow from the pre-tariff 2018 value of US$70 million to US$430 million by 2020. Lost opportunities over the next couple of years will be in the hundreds of millions of dollars if the tariffs are not quickly returned to the normal 12 per cent, it says.

Related Articles

Canada had earlier (on July 1) imposed US$170 million of tariffs on cooked beef products. It is the U.S.’s largest market for these items so the tariffs will have an impact on some companies’ business. Canada’s beef tariffs were part of a package of US$12.6 billion worth of retaliatory tariffs on a wide range of U.S. goods. How long the tariffs remain in place is anyone’s guess, as the signing of the new United States, Mexico, Canada trade agreement late last month offered no resolution to this particular tariff war.

Now cattle hides have joined a long list of U.S. food and agricultural exports to face Chinese tariffs. A five per cent tariff on all wet blue and raw hides going to China took effect September 24. Smaller skins such as calf skins face a 25 per cent tariff. The tariffs were part of another US$60 billion of tariffs imposed on U.S. exports by China. Its action came in retaliation for the U.S.’s imposition of new tariffs on another US$200 billion of Chinese goods, which also took effect September 24.

China’s tariff on hides might have little impact on U.S. hide prices as prices are already extremely weak. The U.S exports as much as 80 per cent of its cattle hides to China, which is by far the largest importer of hides and skins in the world. But its imports over the past five years have been largely stagnant and recently began declining for several reasons, including weaker global demand for leather.

This and a U.S. cattle slaughter that is up 2.7 per cent on last year had already depressed hide prices. Prices for steer and heifer hides are down 25 to 30 per cent on this time last year and prices for cow hides are down as much as 262 per cent on last year. Lower-grade hides being produced have no value at all. This means another headache for packers. They can’t give them away and hides are extremely difficult to dispose of.

A possibly greater impact on hide prices is that leather products made in China and exported to the U.S. are among the new tariffs imposed on Chinese goods. Products that now have a 25 per cent tariff include luggage, bags, gloves, belts, wallets, furniture and auto seats. In the 12 months to July 31, China exported US$451.5 million worth of leather handbags and $258 million of leather gloves to the U.S. So everything from Gucci handbags to baseball mitts suddenly got more expensive for Americans.

About the author

Contributor

A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

Steve Kay's recent articles

Comments

explore

Stories from our other publications