A tariff war could be felt here

Published 9:06 am Wednesday, March 28, 2018

By Diana McFarland

Managing editor

Trade relations between the United States and China appear to be a moving target, but a threat of import tariffs on U.S. pork could impact Smithfield Foods.

Last week, China warned of a 25 percent duty on pork imports in response to steel tariffs ordered by President Donald Trump.

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While Smithfield Foods declined to comment on the latest trade development, Jim Monroe with the National Pork Producers Council said the threat is a concern because exports are the lifeblood of the American pork industry. {mprestriction ids=”1,2,3,4,5,6″}

Pork exports represent 26 percent of the industry, that is, one in four hogs raised in the U.S. is bound for foreign markets, Monroe said. 

The Chinese pork market is second largest in terms of volume and third for value, said Monroe. 

Foods banked on China’s growing demand for pork in 2013 when it was sold to Hong Kong-based Shuanghui, now the WH Group. The sale, at $4.7 billion, was considered the largest takeover by a Chinese company of an American corporation. 

Foods stated at the time that the Chinese are willing buyers of U.S. pork products and the market was expanding.

Monroe said the American market for pork, while solid, is mature. In other words, there’s not a lot of room for growth in the U.S.

The pork industry relies on trade opportunities outside the United States to grow its business, said Monroe. 

Monroe said it would be speculation to predict how this threat, if turned into reality, would play out.

He did point out that pork exports to China represent a $1.1 billion business, and that about 110,000 jobs in rural America are directly tied to the export market. 

Any loss to that market is a concern, Monroe said. 

Meanwhile, Luis Chein with WH Group was quoted in Reuters last week as saying that the company would use more domestic pork due to low prices, regardless of U.S. tariffs. 

Last year, Foods forged key deals to further cement its market share in China. 

Foods, along with the Montana Stock Growers Association, signed a deal with JD.com, China’s largest retailer, to purchase $1.2 billion in beef and pork, according to a Bloomberg report in November. 

In another partnership, WH Group announced that Foods was partnering with JD.com and Henan Shuanghui Investment and Development Group, which would become an exclusive online sales source for Foods’ pork products in China, according to a Bloomberg report in October.   

There were fears in town about the future of Smithfield Foods after the sale to the WH Group, but the company has remained anchored in town and has maintained an active presence.  

After China’s announcement Friday about possible tariffs on pork, WH Group stock dropped precipitously, while stock for other U.S. meat producers remained steady, according to Bloomberg.  {/mprestriction}