Tariffs and How They Could Affect your Food Prices
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One topic we’ve all been hearing about over the past few months is tariffs. Everyone seems to be trying to figure out exactly how the changes to American tariffs will impact the price we pay for items important to our business and personal lives. Earlier this year newly announced increases to tariffs on imported goods has sparked talk of trade wars and an exchange of rhetoric from the US and its trade partners. Although we’re still early in tariff talks there are a number of theories of how they will impact us, many of which are conflicting or the headline doesn’t tell the whole story.
Let’s start with the definition of a tariff. According to Merriam-Webster, tariff is defined as “a schedule of duties imposed by a government on imported or in some countries exported goods”. Earlier this summer the USA enacted a 25 percent tariff on imported steel, and a 10 percent tariff on imported aluminum. As a result major trade partners, such as China, Canada, and the EU, have announced their own taxes on American foods and beverages.
From a number of reports it seems that, at least in the short term, prices of items such as beef, pork, and dairy may be lower in the USA due to less exports leading to more supply. At the same time, the cost of aluminum based items and items packed in aluminum cans are expected to rise here at home.
BEEF: Food + Wine reports 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). The abundant supply should mean lower prices in the foreseeable future.
“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."
Burt Flickinger III, managing director of the Strategic Resource Group, was recently quoted by Food+Wine as saying “With so much meat to move, America consumers could see lower prices, temporarily”, also predicting that prices could fall about five percent initially, and max out at 12 percent.
PORK: 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. China has been a popular destination for US pork exports, but the new tariffs are quickly slowing shipments. Similar to beef, pork production has been built on demand history and slowing exports will create more supply. The excess supply should cause a drop in prices in the USA until the markets level with production.
STEEL + ALUMINUM: With the earlier mentioned increases to Steel and Aluminum tariffs we could expect to see increases in prices of everything from canned goods to kitchen equipment. Prices on aluminum based items such as foil wrap and foil pans could see a rise in prices, impacting every catering kitchen in America.
The long-term impact of the new tariff war is yet to be known, especially if the exchanges of tariff increases are renegotiated. The short-term reduction of beef and pork prices could spike later if production is cut and tariffs are lowered creating more demand than supply.
At SB Value, we stay on top of trends and pricing fluctuations to advise you on the best way to optimize your food and kitchen supply spending through uncertain times.
Sources: Miriam-Webster, Food + Wine, CNBC, The Wall Street Journal
