Donald Trump will soon be back in the White House, and while we won’t know until the new year the extent and timeline of his campaign claims being actioned, his proposed trade policy changes are front of mind for Australia’s agriculture industry.
The US is Australia’s largest export market
for beef at the moment, taking just shy of 30% of the product shipped overseas
for the year so far, and the second largest destination for lamb. Trump’s
proposal will also directly impact China and its already shaky economy, another
important trading partner for Australian agricultural products.
The President-elect made claims of putting
in place a 10 to 20% tariff on all imports if elected, with that figure rising
to 60% for products from China.
This could mean increased demand from both
the US and China as the competitiveness from the other declines. Australia’s agricultural
exports to China increased significantly during the last trade dispute between China
and the US in 2018-19. On the other hand, is the likelihood this trade policy
could put more pressure on China’s already hurting economy.
An OECD report (read
more here) found Australia’s economy would be hit second-hardest globally
if these policies were implemented, with South Korea the most impacted. South
Korea remains another vital trading partner for Australian beef.
Looking at beef specifically, Australian
total exports broke the monthly volume record in October for the second time
this year and are now 20% stronger year-on-year for the year-to-date. Volumes
have now exceeded the levels they were at the same time of year in 2015, the
highest calendar year on record. Beef exports to the US have also reached their
highest market share percentage – 29% – since 2015 and are now close to double
the five-year average for the January to October period. This has been driven
by historically high cattle slaughter domestically, and lowering cow slaughter
in the US. However, the much-anticipated herd rebuild in the US has yet to
fully eventuate, as parts of the country continue to battle drought conditions.
Currently, the Australian-United States
Free Trade Agreement means there are no tariffs on Australian beef sent to the
US, and even this year it is unlikely we will get close to the 448,214-tonne
quota. As we’ve just outlined, US demand for Aussie beef is very strong, and
due to America’s unwavering beef consumption, and their own domestic beef
production outlook, Trump’s policies are not forecast to have big impacts on
Australian beef exports. They could hurt the higher value cuts, but it is
primarily cull cow beef which heads to the US market.
On the flip side, a study done by the North
Dakota State University found that if retaliatory tariffs on US goods were put
in place – 60% by China and 10% by everyone else, US exports of beef could lose
US$2.3 billion, and you could assume at least some of that product would go
back into their domestic market (read
more here). However, this could also increase market opportunity for
Australian beef in China, with beef and beef products the third largest US
agricultural export to China. China is currently Australia’s third largest beef
market at 14% share, but year-to-date volumes are 7% below the five-year
average this year. Again, Australia’s higher-priced beef products, and other higher-value
commodities, will feel the pinch if China’s economy suffers further from these
trade policies.
What does it mean?
It is a wait-and-see situation for Australian agriculture when it comes to what Trump’s second term as president will look like, and as we’ve outlined above there are two sides to every coin, with potential trade policies creating both hurdles and opportunities for Australian beef. That said, protectionism in any form has rarely proven to be positive for the global economy, and the pitfalls in theory will likely outweigh the positives if Trump comes good on his trade policies in the context of global trade.
Key Points
- Australian beef exports broke the monthly volume record in October, reaching 130,049 tonnes.
- The US remains Australia’s biggest beef market, with volumes rising 64% year-on-year last month.
- US President-elect Donald Trump is proposing US trade policy changes of up to 20% tariffs on all imports, and up to 60% for Chinese products.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Meat and Livestock Australia; Farmdoc Daily; Steiner Consulting Group, Nutrien Ag Solutions, Mecardo
